Congratulations to the team at Sandforce!

This afternoon LSI Corporation announced that it is acquiring SandForce for $400 million in cash and assumed options.

We are excited for the team at SandForce and proud to have been a part of building a company that is helping to usher in a new era of storage. SandForce delivers solid state disk (SSD) processors that power volume flash memory in both high-end storage as well as consumer applications. The primary advantages of flash memory are that it is much faster, more reliable and consumes less energy than hard disk drives.

Many of our limited partners and investors that have looked at investing at SandForce over the years will likely remember us saying that flash memory is the most disruptive force in storage since the floppy disk drive. We truly believed that when we made the decision to invest in 2006 as we saw the use of flash becoming more ubiquitous in devices like the iPod. We believed that as more consumer devices took advantage of flash, the price of flash would decrease and its uses in enterprise applications would increase. As the price of flash per GB came closer to hard disk drives, more applications would take advantage of all it had to offer including dramatically faster performance.

In many of the investments we make (and other venture investors) the focus of the product or service changes from first concept.  SandForce’s original vision is the same today as it was when we first invested.

We first met the founders of SandForce in early December 2006 and worked together with them to agree on a term sheet just before the holidays.  We agreed to invest $3 million and find another co-investor to invest the other $3 million along side us to get the company through its initial development efforts and prove out the technology. While we introduced it to several investors, most venture investors were completely uninterested in semiconductor investing (with some good reasons) and did not see the market opportunity with flash. Fortunately, Carl Amdahl and the team at DCM saw the opportunity and quickly made a decision to invest.  We signed the initial term sheet with DCM in March 2007. DCM has been a terrific partner at SandForce.

The company really got to work in the spring of 2007 to validate the technology and expanding the team. SandForce closed its Series B financing in February 2008 with some strategic investors who Storm introduced to the company and were early to recognize the potential impact of flash on the market. Storm participated in this round as well. We focused on many strategic partners to help us bring the solution to market including introducing SandForce to Smart Modular which ultimately became our first publically announced customer in late 2009.

Everything did not come easily. We struggled with our development efforts including having to replace our VP engineering twice during our early days which could have been devastating had it not been for strong founders and a committed team of early engineers. We also were slower to deliver revenue. Originally we had planned to deliver revenue in 2008 but ultimately were not able to get product out until 2009. As the company started to clearly show its potential and the market for SSDs became much clearer, SandForce raised its Series C round led by Jackie Yang of Translink Partners in October 2009.  The team at Translink gave the company critical insight into customers and partners in Asia.

The company also went through a difficult transition period in early 2010 as we had to make some changes with respect to management, but we were able to begin to execute to SandForce’s potential in 2010 delivering over one million parts that year. The company has continued to grow and add many key executives and team members which enabled the company to deliver over one million parts in Q3 2011. Storm introduced the company to Sundi Sundaresh in early 2010 as an additional outside board member. Sundi has a tremendous amount of storage experience including most recently having been CEO of Adaptec. SandForce closed its Series D financing in September of 2010 with Eric Young of Canaan Partners leading the investment who clearly saw the vision as well as some compelling evidence from customers.

Storm has certainly done well financially, and we are happy to be able to return more than one-third of our fund to our limited partners. We are grateful for the founders who had the vision and especially grateful to have worked with such a great team that executed so well. While almost five years later, it seems like only yesterday we were busy trying to get our first product out the door. We cannot say enough great things about the team at SandForce. We were fortunate to have worked with so many talented individuals.  We are sure LSI will take the opportunity at SandForce and expand on it successfully with such a fantastic group of people and growing market.

We are just at the beginning of some amazing new markets with flash memory and exciting days are ahead for new applications. As many know, we have been predicting that within the next five years it is likely that the next laptop you buy will have an SSD. Apple proved us somewhat on the right track with the introduction of the MacBook Air. The windows-based Ultrabooks just coming to market all have SSDs. Once you use an SSD in a laptop – you will not want to go back to a hard disk drive – ever.  We would not be surprised if many servers shipped in the next five years begin to have flash drives as standard configurations.

If you need the name of a good SSD – We know a company that makes the storage processor and can point you in the right direction. Just make sure it is SandForce Driven.

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