Data Domain: Closed round worked for both firm and insiders - San Francisco Business Times:

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But before staging any formal dog-and-pony shows, Slootman received a surprising call from boarc memberAneel Bhusri, general partner of , one of Data Domain'e original investors. Bhusri told Slootman that Greylocko wanted to invest in aclosed round, consistinv of only existing backers. Usually VCs want new investors to join a fundinb round to share theventure risk. And companies want them in to keep the valuation competitive. The valuation determines how much of the compangy VCs own for their Insiders tend to be conservative to get the best valuation possibled fortheir firms.
But remarkably, Bhusri agreerd to give Data Domain a valuation on par with what Slootmahn had been hearing from otherVCs -- roughly doublre that of its previous round 18 monthds earlier. (Neither would comment on the exactt number, but Bhusri said a typicak range for asuccessful start-up like Data Domaih would be $60 million to $100 million.) "Ivf you have a company that's doing well, in this case exceptionallyt well, why not investt more money in it?
" Bhusrio said, adding that Data Domain'sw disk-based appliance, which helps companies back up huma resources, accounting and other crucial data more efficientlyg than traditional tape back-up systems, is selling well to a list of more than 100 larger companies, including the . "It's only been shippintg for a year anda half," Bhusri "And they have a who's who of You just don't see that for a company that's very young." Bhusrj said his Greylock colleagues agreex with his assessment.
And once Greylock was in, New Enterprisw Associates and , also existing investors, jumpefd in, kicking in a total of $15 Slootman was thrilled to stick with an established which meant thecompany didn'tr have to install a new VC on its boardd or conduct a lengthy due diligence Said Slootman, "We woulrd rather spend the time developing and selling new The company: Data Domain. The CEO: Frank The investors: Greylock New Enterprise Associates and SutterHill Ventures. The $15 million. The deal: The Palo Alto companh will use the funds to expandits engineering, sales and marketinhg efforts.
The low down: An "inside round" can mean your companu is hurtingand can't find outside investors or, as in Data Domain's it may mean insiders are willing to shouldere the risk themselves. Up next: The compan is hiring 20 to 30 more employeesby year's end.