Boston entrepreneur David Friend has cofounded a half-dozen startups over the past 40 years, but he has never had such a tough time raising money as in 2022.
Friend’s current startup, Wasabi Technologies, stores data for corporate clients on its own servers, competing with the three cloud-computing giants, Amazon, Google, and Microsoft.
This week, Friend finally completed seven months of fundraising, having given more than 50 investor presentations, and announced Wasabi had raised $125 million of equity and an equal amount of debt financing to fuel its growth. The equity deal, led by Silicon Valley firm L2 Point Capital, valued Wasabi at more than $1 billion, making it the region’s latest “unicorn.” Other equity investors included Cedar Pine, an affiliate of Cerberus Capital Management, Fidelity Management & Research, and Forestay Capital.
The deal comes even as the plunging stock market and rapidly rising interest rates have tanked much of the tech economy. Funding for Massachusetts private startups fell 30 percent in the first half of the year from 2021. And the market for initial public offerings has dried up almost completely.
“This was the 30th fundraising in my career, and it was definitely among the most difficult I’ve ever had to do,” Friend said in an interview. Friend got his start in the 1970s with a company building synthesizers, with customers including David Bowie, Led Zeppelin, and Stevie Wonder. Later, he ran data-backup service Carbonite before founding Wasabi in 2015.
Friend plans to use the funds to bolster his workforce of about 250 employees, with half currently in Boston. The hiring comes even as some Boston startups, including Hydrow, DataRobot, and Cybereason, have cut jobs this year amid the tighter fundraising environment.
Demand for online storage is continually accelerating. Wasabi’s revenue, which Friend declined to disclose, more than doubled from 2020 to 2021. “I can’t think of any company on the face of the earth that is storing less data this year than they were last year,” he said.
The growing threat of ransomware is the latest trend fueling Wasabi’s business. In a ransomware attack, hackers infiltrate a network and lock up the victim’s data unless a ransom is paid. But if the victim has securely backed up all the data, there’s often no need to pay the ransom. With Wasabi’s “immutable” data storage product, data backed up on its servers can’t be corrupted by hackers.
“Back in the old days, when people stored their data on magnetic tape, they would actually take the tape out of the machine and put it in a cardboard box, and it was really safe,” Friend explained. “We were the first to offer immutability in the cloud... It’s one of our key selling features.”
While Wasabi competes with the largest tech giants, the company’s advantage is focusing on a single product — online storage — and charging less than one-quarter of what its competitors charge. Friend likens the business plan to early tech pioneer EMC, which undercut IBM’s pricing for computer storage hardware to build a huge business eventually acquired by Dell.
“We’re finding people coming out of the woodwork in New England who said, ‘I had my whole career in storage before biotech started to take over,’” he said, as the company continues to hire workers. “We’re happy to have a new cloud-based unicorn in New England keeping the flame alive.”