Press Releases
  Portfolio News
  JGV in the News

     
 

"The Holy Grail of data disaster recovery"

from The Jerusalem Post
by Nicky Blackburn
January 15, 2004

Michael Lewin, founder and CEO of disaster recovery company Kashya, seems to take a slightly different approach to most hi-tech entrepreneurs. Rather than rush his product out because the market needed some kind of solution in the wake of the 9/11 tragedy, he decided to complete the work slowly and steadily in an effort to produce the best possible technology on the market.

It was a gamble. While Kashya was still perfecting its product, other companies – some of them sizable – were already attempting to take control of an increasingly crowded marketplace. The risk may have paid off, however. Few of the current solutions now on the market offer the features that organizations desperately require to transfer their data to remote locations and keep it safe.

That still leaves Kashya with a potential market. All the company has to do now is to prove that its disaster recovery technology, the Kashya Data Protection Appliance, really is what the industry is looking for.

Micah Avni, general partner of Jerusalem Global Ventures, is one who thinks it can. "Kashya is one of the most exciting technology companies in Israel right now," he says.

Kashya originally started life as Kashya Software Solutions, a software company that employed a number of experienced engineers to work on a variety of problem-solving projects for other companies. Using this experience, Lewin and his team built up a clear picture of the problem-points in today's hi-tech industry.

In December 2000, after a number of surveys with high-level technology personnel in Israel and abroad, Lewin decided to focus on one particular field – remote replication of data, or as it is more commonly known today – disaster recovery. Lewin's goal was to build a high-performance dedicated disaster recovery solution, with all the features specifically built around this.

By this stage, the hi-tech bubble had already burst, and investors were looking for companies with solid business plans that could offer significant must-have technology. "Investors did not want companies offering tools that were nice to have, but ones that provided mission critical technology that overcame problems that had clearly not yet been addressed," explains Johnny Stern, Kashya's VP of corporate development, who then worked for investment house, Jerusalem Global.

"We were seeing dozens of business plans every week and the emphasis for us was on quality of people. We wanted to find a team that had something excellent to offer. Kashya had everything."

The first fund-raising round was held in January 2001, and Kashya raised $3.5m. from Jerusalem Global, and Battery Ventures, a sizable sum for a company that was still just at the seed stage. Another $3.5m. were raised in September 2002.

During these years, the disaster recovery market has undergone a transformation. While organizations recognized the need for a back-up system to secure data years ago, it was only in the wake of September 11 that it suddenly became a pressing requirement, as critical an issue to corporations as anti-virus software.

"September 11 was a catalyst," admits Stern. "It did not create the market, but it raised the strategic pressure and was a major reason for it to continue."

To try to satisfy this need, a number of companies began moving into this area, including established players such as EMC, IBM, Veritas, and Hitachi Data Systems, as well as smaller newcomers like Topio, another Israeli company.

Unlike Kashya and Topio, many of the companies now providing disaster recovery technology came with technologies originally developed for the virtualization sector, a market that never really took off, and rebranded them as disaster recovery solutions.

"These solutions are much less effective," maintains Stern. "They use add-on features rather than solutions dedicated exclusively to disaster recovery. We are playing in a market that sounds quite crowded from a marketing perspective, but in actuality is not quite as crowded as it appears.

"There are specific requirements in this field, such as long-distance business continuity, flexibility, and efficient use of bandwidth, and existing products are not answering these needs. If a disaster recovery product does not work 100 percent, then it does not fulfill the requirements of the company. Customers cannot rely on it."

Despite the rise in interest, Kashya resisted the pressure to release its product hastily and carried on with development.

"We didn't see any marketing value in saying we have a product, if we couldn't support a huge percentage of the market," Lewin explains.

Kashya's product was finally released in September 2003, and despite the lag, Avni thinks the company's timing is impeccable. "Kashya couldn't have picked a better time," he says. "It's perfect. They are well ahead of the curve. From what I see, the market for remote application is wide open and brand new."

The main reason for his optimism is new legislation that was introduced in the US. The new regulations make it a requirement for all financial institutions to replicate their data at another site hundreds of kilometers away to protect critical financial and customer data. These regulations are gradually being applied to other institutions, such as healthcare, and are likely to be applied to more in the years ahead.

So far, the financial institutions have not been forced to abide by these rules because, they argue, achieving consistency and recoverability over a long distance with existing technology is technically impossible and far too expensive right now. The government accepts this, and as a result has announced that it will deal with organizations on an individual basis, but adds that this is the direction to which companies must head.

Kasjya then, is well-positioned to take advantage of this new push. For the first time, organizations are actively devoting resources to try to find a data replication solution, while at the same time acknowledging that existing players cannot provide them with the solution they need.

"Kashya is going to be extremely appealing to this entire market," predicts Avni.

The company, which employs 40, also maintains that its product is much cheaper than competing systems.

"Our competitors are very expensive. The cost of owning a disaster recovery solution extends beyond the solution itself. There are hidden costs, such as additional storage, high-end software and hardware, and replication over long distances," says Stern.

Kashya's solution, on the other hand, is an end to end data-protection solution that company management claims is more robust and versatile than other systems. It offers a single solution for an entire organization. It can also handle a variety of different storage systems, so that if a subsidiary in New York is using Hitachi, and another branch in Britain is using another storage system, the information is still stored with the same accuracy and consistency, and level of recoverability, says Stern.

Kashya's solution also only replicates new information, rather than existing information, cutting storage space dramatically.

"An integrator in the UK told us that we have discovered the holy grail of disaster recovery replication," says Stern. "We have the ability to guarantee an accurate and sustained copy of data in real time over a long distance. Lots of customers consider this a mission-critical tool, not just for data recovery, but also because it makes sense procedurally and in terms of cost."

The company has already received a positive response from the industry.

"We have competed face to face with companies, including giants, and won," says Stern.

He gives the example of a European financial services company which recently selected Kashya though it had been buying storage from one of the major established companies in this sector.

"They complained that the company they were using was incapable of replication between Europe and America, was too expensive, and that the service was not consistent," says Stern. "Even though we are early stage and have just brought our product to market, they were prepared to select Kashya over bigger and older companies."

So far, Kashya has been working mainly through beta site installations, but it hopes that these sites will soon be turned into paying customers. The company aims to scale up sales through integrators such as IBM Global services, which have a specific customer base for storage and disaster recovery.

The real sales breakthrough is likely to come this year, according to Lewin, as the market also begins to expand and grow.

"It's always better to be early on the market, but 2004 is a much more exciting year in terms of the market than any so far," says Stern.

If 2004 is to be the growth year, then 2005 has been identified as the year the company hopes to break even.

The Gartner Group estimates that the present market for disaster recovery stands at about $1.3 billion, and predicts that this figure will grow to about $2.8b. by 2005. Lewin believes the potential for growth is huge.

"The market is going to be pushed out. It will grow to include customers who could not previously afford data replication solutions," he says.

Lewin declines to give estimated sales figures, but says that if the company can grab a 5% market share in the next two to three years, it will be phenomenal.

Recently, rumors have spread that Kashya turned down a multi-million dollar acquisition offer from a large US company. Avni denies that any acquisition attempts have been made on the company, but Lewin says: "Maybe it's true, or maybe not, but the bottom line is it's not for us. We have a lot of opportunities, and the chance to grow into a much bigger company. We have something unique that customers want and will pay for right now. The rumors are testament to how good we are."

At present, according to Lewin, Kashya has enough money in the bank to be flexible, and will probably seek a new round of fund-raising sometime during mid-next year, depending on market conditions, and how fast the company wants to grow.

"We have tremendous hopes for Kashya," says Avni. "It's a fantastic company, with a talented team, a good product, and incredible feedback from the industry. We plan to make a lot of money there."


Back to Portfolio News