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Storage appliance maker Storwize Inc. on Wednesday said it raised $19 million in a Series C round of venture capital to support sales and marketing expansion at its new U.S. headquarters in San Jose, Calif., and additional development of data compression products in Israel. Storwize added Lehman Brothers Venture Capital of Menlo Park, Calif., and Bessemer Venture Partners of Israel as new investors (they join Series B investor Sequoia Capital), bringing total investment in the four-year-old company to more than $30 million. Storwize founder and CEO Gal Naor said the new money is expected to be the final private investment in the company, which he predicted will be profitable in 2009. Naor founded Storwize in 2004 to develop products for reducing the cost, storage and power requirements of network attached storage, or NAS, systems by compressing data, and the company introduced its first products in 2006. The company raised an undisclosed amount in a Series A round in early 2006 before a first institutional investment of $9 million led by Sequoia in early 2007. Storwize's products sell for $30,000 to $90,000 and are plug-and-play appliances composed of off-the-shelf components that feature proprietary software for real-time data compression to increase storage capacity as much as fivefold. The products are placed between networks and any type of storage array, and are aimed at providing cost savings not only on storage hardware but also on power, media and IT resources. Naor said the company also is promoting the product as a "green" technology because of significant savings in power usage it can provide in reducing both hardware requirements and air conditioning. In addition to its NAS product, Naor said Storwize will introduce a storage area network product based on the FibreChannel connectivity standard in the second half of the year. Naor said the company began fundraising after establishing its U.S. headquarters early this year, while noting that it was not specifically aiming at bringing in U.S. investors. Bessemer invested through Israeli partner Adam Fisher, but Stewart Gollmer of the Menlo Park office of Lehman Brothers came in as Storwize's first U.S. venture backer. "The goal was to bring in tier one investors with a track record of success and investors that would help us grow to the next level," Naor said. "This third round of financing is further validation of the market recognition we are seeing to our leadership in compression solutions for primary storage." Naor would not disclose a valuation for the new investment, but said it came at a large premium to the company's previous round. Storwize did not use an outside financial adviser in raising the new capital, and the company had legal work on the deal from Mark Kass of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC in Boston. Investors were represented by Goldfarb, Levy, Eran, Meiri, Tzafrir & Co. in Tel Aviv. -- Clifford Carlsen
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