Ron Bianchini and Michael Kazar started Spinnaker Network Solutions, which was acquired by NetApp in November 2003 for $300m. Spinnaker’s flagship product was SpinServer, a clustered file system that allowed 512 servers to provide 11,000 terabytes (11 petabytes!) to appear as a single file system. By many accounts, SpinServer “was a dead product once NetApp got a hold of it”, and many users reported a complete lack of support for the product.

In 2008, Ron and Michael started a new company, Avere Systems. Avere is still in semi-stealth mode, revealing only that they are developing “NAS solutions that would allow enterprises to scale storage network performance independently of capacity.” Rebecca Thompson, VP of Marketing, said they weren’t ready to talk, but StorageMojo did some digging which may help shed some light.

The title of their SNW talk SSD or HDD? How to Get the Benefits of Both with Dynamic Tiering offers some clues.

At the web site they have a picture of what might be a 2-3u rackmount box. So they aren’t a strict software play, although “tin-wrapped” software is something many customers find appealing.

They are also showing at SC09, the supercomputing show. That suggests a focus on bandwidth rather than IOPS as well as the less lucrative research markets.

Avere has already raised a whopping $15m in November 2008 from Norwest and Menlo Ventures, both of which had previously invested in Spinnaker. (Both of these firms list Avere in their portfolio, but this amount hasn’t been disclosed to my knowledge outside of the SEC filing).

Obviously, given their industry experience and past success, it’s not a surprise that Ron and Michael were able to raise a significant sum of money. At the same time, this is a lot of money for a Series A and certainly suggests to me that the idea has a hardware component to it (that is, something more than just off-the-rack NAS storage).

The Register believes that they have “developed a system which attempts to combine the performance of solid state drives with the low cost of hard disk drives in an architecture that dynamically tiers data onto the most appropriate media”. That said, I don’t see much evidence for this beyond what StorageMojo dug up – so that’s probably just a guess, albeit an educated one.

So, what is Avere up to?

Andrew Chen, a prolific blogger and Silicon Valley entrepreneur, had a wonderful post echoing some of the points I’ve made in the past about the serious but often overlooked drawbacks to starting a company in Silicon Valley.

Now that I’ve been here for a few years, it’s clear to me that the Silicon Valley echochamber has its clear negatives as well. Being out of touch with the average American consumer is one obvious negative. Chasing down technological rabbit holes is another.

Andrew goes on to discuss the downside of peer reinforcement from fellow entrepreneurs and engineers. These conversations often “[guide] the decisions of many employees or investors to dive deeply into the ‘hot’ markets” and leads to copycats who “are only in it to exploit the short-term advantages of the market, and some are self-admittedly not passionate about the area they go into.” This, in turn, hurts the company’s long term chance for success.

One thing I’ve noticed about startup cities like Pittsburgh or New York is that many of the startups there are refreshingly innovative. I mean, just look at the list of recent AlphaLab companies – it’s such a broad mix of companies that are really pushing the envelope in their respective areas.

Fundamentally, we all seek external validation for our ideas – but the fact that there’s less peer validation drives those outside of Silicon Valley to seek that validation from customers and from more introspection. Speaking from my own experience, I know this has led us to refine our offering in ways that we probably never would have arrived at otherwise. my own experience, has led us to refine our product in ways that we probably wouldn’t have done otherwise. (Ironically enough, much of this happened while we were in Silicon Valley though).

Of course, that doesn’t mean you can ignore Silicon Valley- after all, we are ultimately competing with it. 

In a previous post, I discussed the paradoxical issue where VCs were generally doing fewer but larger deals despite the costs of creating a successful business being much lower.

Adeo Ressi predicts that this trend will start to correct itself in the second half of 2009.

Venture capitalists have started pumping their remaining capital into hundreds of seed and early stage deals, looking for the next big thing. Dollars invested in these opportunities have already jumped from $893 MM to $1.49 billion between Q1 and Q2 of 2009, and there will be more increases in both Q3 and Q4.

Early stage companies have strong prospects of raising significant capital in a “make it or break it” round. Venture capitalists are offering more cash up-front with fewer chances for follow-on investments. The average early stage deal size jumped from $4.1 million to $5.6 million in the first two quarters of 2009, and this number should increase to around $6 million for the remainder of the year.

If a funded company needs more money without achieving significant market traction, the remainder of 2009 will be difficult. More than 50 percent of venture capital portfolio companies will be left with insufficient capital to operate. Many of these companies will be gutted and put into “life support” mode or sold off to competitors for stock, allowing venture capital firms to maintain inflated portfolio valuations. Any acquisitions that generate precious cash will get pushed through at historically low returns of less than 2x, like the recent story of Mochi Media.

Well, sort of. Early stage is, of course, relative. The fact that these “early stage” deals are 35% larger on average only means the gap between seed and institutional money is widening.

Still, for the viability of the venture capital business, this is probably a good approach. Given the high rate of failure even among well-funded companies, it seems like a better strategy to have $30m deployed over 6-12 companies as opposed to just a handful.

Ultimately, it will be interesting to see how this trend affects VC expectations. On one hand, more money and higher valuations usually come with higher standards for the state of the business. On the other, it’s possible that it may become easier to raise money if the VC firm is committing less money over the life of the deal, even if they are putting more upfront. If a company can truly “make it” without follow-on rounds, this will also mean less dilution for the founders and employees.