HCI software maker Maxta shuts down after funding failure

Hyper-converged software startup Maxta has shut down operations after failing to obtain new funding. The vendor will likely go out of business, unless a buyer comes forward.

On Jan. 28, Maxta informed its 60 employees the company was immediately shutting down. Maxta also sent a letter to customers saying "financial difficulties" have prompted a search for potential buyers. For now, Maxta said it will retain a support team to serve customer contracts.

"The future is very unclear to us," Maxta CEO Yoram Novick said in an exclusive interview. "We are trying to do the best we can right now. This is a difficult time for our employees and a difficult time for our customers."

Several Maxta storage customers did not respond to interview requests for this story.

Maxta sought its first investment capital since a $25 million round in 2014. Novick said he thought he was about to close a funding round with a strategic OEM partner in early 2019. As the paperwork was being prepared for final signatures, Novick learned the OEM partner was backing out.

Yoram Novick

"The deal was looking very, very good. It got approvals by both sides, and at the last minute, the other side decided not to continue," Novick said.

He would not disclose how much of an investment Maxta was expecting or speculate on the likelihood of new investors stepping up. Maxta raised a total of $35 million in funding, including a $10 million Series A round in 2013 led by venture capitalist firm Andreessen Horowitz.

The news comes three months after Maxta's AI analytics product upgrade.

Hyper-converged infrastructure (HCI) systems package compute and storage with hypervisor software on an integrated appliance. Maxta entered the HCI market in 2013 with MxSP storage software, which allows customers to build HCI clusters using standard x86 servers with VMware or Red Hat Virtualization. MxSP could be deployed on servers from Cisco, Dell EMC, Hewlett Packard Enterprise (HPE), Lenovo and Supermicro.

Demand for HCI products is growing faster than traditional external storage systems, led by Dell Technologies -- through its VMware vSAN product -- and HCI pioneer Nutanix.

While Nutanix still sells branded appliances and VMware has its Dell parent company as a hardware distribution partner, Nutanix and VMware have similar approaches to Maxta. They sell their software on a wide range of x86 servers through OEM and channel partnerships. VMware's vSAN HCI software is part of its vSphere virtualization application, and Nutanix has a proprietary AHV hypervisor and also supports VMware and Microsoft hypervisors.

George Crump, president of analyst firm Storage Switzerland, said Maxta customers should not give up hope. He said he expects Maxta to file for bankruptcy, and potential acquirers would be able to bid for its assets. That's how DataDirect Networks acquired storage array vendor Tintri in 2018.

"Customers should wait and see how this all boils out," Crump said. "But, clearly, they need to start thinking about a transition plan. This is further evidence for going with hyper-converged software that is built in to the hypervisor. It's really hard to beat Microsoft and VMware at their own game."

Crump said Maxta probably had enough customers to downsize and continue operations while seeking additional investors, "but I think there may have been an element of fatigue [involved], where they just got tired of fighting Goliath and having Goliath always win."

Maxta's downfall follows a shift in the HCI market from startups that dominated the early days to the largest established IT companies. Nutanix has grown from a startup to a billion-dollar annual business and battles VMware and Dell EMC for the market share lead. Server vendors Cisco and HPE are other leaders, although well behind Nutanix, Dell EMC and VMware. Microsoft has also brought out an HCI product.

HPE acquired another early HCI startup, SimpliVity, for $650 million in early 2017. HiveIO acquired the assets of another HCI company, Atlantis Computing, in July 2017. Pivot3 and Scale Computing are survivors among the early HCI startups.