Ctera Chairman On New $80M Growth Funding, Plans For AI Intelligence In File Services

‘You want AI to understand the conditions of the data and to act according to the data they provide. So this creates a big opportunity for connecting existing data platforms into AI systems and serving them with all the permission sets and all that. That's the premise of the data intelligence service that we are developing and about to launch soon, which will connect Ctera into AI platforms,’ says Ctera founder and Chairman Liran Eshel.

Expanding The Distributed File System

Ctera, a developer of distributed file systems for cloud file storage and enterprise file sharing across millions of devices, Wednesday unveiled a new $80 million growth investment round from private equity firm PSG.

That funding, said Liran Eshel, founder and chairman of Ctera, will allow the New York-based storage company to continue to grow and expand its AI data services capabilities with an upcoming technology the company calls Ctera Data Intelligence.

The new funding round comes just days after another global file data services technology developer, Nasuni, unveiled a new unspecified funding round that gave the Boston-based company a $1.2 billion valuation.

The investments in companies like Ctera and Nasuni come at the right time for the business, Eshel told CRN.

“Gartner is covering this specific space they call hybrid cloud file segment and said the adoption rate is expected to triple in the next three years from 20 percent in 2023 to 60 percent,” he said. “So it’s a prime time for this segment. And that’s why you see the financial funds making moves both in the Nasuni case and our case.”

Continued investment in AI technology is a must for companies like Ctera given the importance of having the right data available, Eshel said.

“You want users to use AI to only get answers based on the data that they are allowed to see,” he said. “You want AI to understand the conditions of the data and to act according to the data they provide. So this creates a big opportunity for connecting existing data platforms into AI systems and serving them with all the permission sets.”

AI is also a critical component to ensuring that all that file data is secured properly, he said.

Here’s more from CRN’s interview with Eshel.

What is your definition of Ctera?

Ctera is a hybrid cloud data platform. It supports a global file system across the multi-cloud environment with local acceleration and cyber protection for the data. It’s designed for unstructured data. And it serves large organizations that typically have a distributed environment with lots of edge-to-cloud-type deployments where you need fast and secure access to data in multiple locations across multiple clouds.

What kind of customer sets does Ctera serve?

It’s prominently large enterprise customers, global organizations that have distributed use for data. I could name verticals such as collaborative engineering work, media and advertising companies, publishers where they have video editing, health care, hospitals. The U.S. VA [Veterans Administration] is a large customer with more than 200 hospitals and medical centers where we store regulated medical records. Overall, the government sector is a very fast-growing sector for us where there are private clouds, dark sites and military-certified security, things like that. We have projects in more than 30 governments in the world. It’s quite impressive.

One major bit of news in this industry in the last couple of weeks was Nasuni’s big investment funding round, which valued that company at about $1.2 billion. You are in a pretty competitive environment. How does that Nasuni funding impact competitors like Ctera or Panzura?

First of all, you’re correct to say that us and Nasuni and Panzura operate in a similar space. Also, all these companies were founded at about the same time. As you can see, it’s a big technology space, but you don’t have so many younger competitors there because it takes time to mature the technology that can scale. Also, even though it took a long time for these companies to evolve, the market is taking off now. …

Most of the time, we don’t sell against each other. We sell against traditional NAS storage, like NetApp or Isilon, where customers want to move to cloud infrastructure and one overlay software or file system on top of that. So I think it’s a good message to the whole industry that this hybrid cloud data space is here to stay and it’s prime time for this segment of the industry. [Analyst firm] Gartner is covering this specific space they call hybrid cloud file segment and said the adoption rate is expected to triple in the next three years from 20 percent in 2023 to 60 percent. ... And that’s why you see the financial funds making moves both in the Nasuni case and our case. These are big equity funds, and they realize that there’s opportunity in this market right now.

Talk about the new $80 million growth investment from PSG in Ctera and what it means for the company.

First of all, it’s our biggest investment to date, so it’s substantial. And PSG, the company making the investment, is also one of the top 50 equity funds in the U.S. It’s a $6 billion fund. It’s very substantial. The investment allows us to continue to expand our growth and also expand to the area of AI data services, what we call the Ctera Data Intelligence offering.

With the new investment, what’s the total investment in Ctera?

Prior to this, we raised about $100 million.

So the total now is about $180 million. Is Ctera cash-flow-positive yet?

It is.

Any plans for an IPO?

We don’t have. We are looking to build a good company, so I don’t know yet about timing for an IPO. But it’s not something that we will do in the short term. It’s always on the horizon, but not in the short term.

You mentioned the use of AI. Talk about how Ctera uses AI.

There are two things with AI. One is how we use AI. Today, we have cyber protection technology where we use AI to identify ransomware attacks. We have AI built into the product where we can identify abnormalities in the file operations and alert of a potential ransomware attack. We don’t depend on signatures or another company to classify the attacker. We can identify just by the abnormalities in the file operations. So that’s an area where we use AI.

What we call data intelligence is another opportunity where we are actually connecting our data platform into corporate AI systems so they can have the context of the corporate data. The idea is, if you use OpenAI or Copilot, usually they say the data is dated up to a certain date, the date when they trained the model. So they only know up until 2022 or something like that when they closed the model. But if you want to have a true corporate AI, you want it to be updated up to the latest data the organization has. And you also want to keep this data private because you don’t want anyone outside of the organization to access it. More specifically, you want users to use AI to only get answers based on the data that they are allowed to see. You want AI to understand the conditions of the data and to act according to the data they provide. So this creates a big opportunity for connecting existing data platforms into AI systems and serving them with all the permission sets and all that. That’s the premise of the data intelligence service that we are developing and about to launch soon, which will connect Ctera into AI platforms and give the ability to ask questions on your data, to do great workloads, to do classification based on your existing datasets.

Regarding security, why does a company like Ctera need to invest heavily in security when essentially you may be duplicating many of the capabilities that are found in technologies that customers may already be using in their data infrastructures?

This is a very good question. And it’s actually a critical component of any modern data plan. According to Gartner, 100 percent of buyers will want to buy systems that have cyber protection built in. Gartner calls it cyber storage. Any new modern storage system needs to have built-in protection. In the example I gave of ransomware protection, when you are running the metadata system of the file system, you can see things that external systems cannot efficiently monitor. That allows us to be much more efficient in identifying and looking at attacks in real time versus perimeter systems that don’t have access to the data at the core of the storage system.

The second thing is where and how you store the data relates to the architecture of the data. If you go to a cloud service and you don’t know where the data resides, you may have concerns of data sovereignty, such as does it leave the country or not, and who else has access to the data. But if you have an architecture where you can define where datasets are stored, and you can control making data private, you have much more control over your perimeter and your data sovereignty. These are very important things in architecture. And our system allows that. We are the only system in our category that gives you the option for 100 percent private with military-certified security, which is the standard that allows us to be used in military or government or federal environments that require that.

Ctera’s sales model is 100 percent via indirect channels, right?

100 percent indirect, that’s correct.

We have a network of channel partners in every market in every country, and we sell through our partners. They also provide support, depending on the customer type. But we also have several strategic partners, including such infrastructure players as HPE, Hitachi Vantara—which we announced last year—and IBM. These three carry our portfolio on their price lists. They have object storage private clouds, and Ctera is part of their offerings. Every partner of Hitachi Vantara, HPE and IBM can get Ctera as part of the solution that they get from those vendors.

We’re past the halfway mark of 2024. What are your strategic priorities for the rest of the year?

Product innovation around AI and intelligence that we were talking about. We want to launch it in the second half of the year. And support for our customers. First and foremost, our top priority is product quality and customer support, and maintaining the high levels that we have been doing so far. We will continue to do that. So we are expanding our team to provide good service to customers worldwide as our business expands as well. We’re opening new offices internationally. We already have very good coverage in Europe, in all the major countries. We have teams in France, Germany, the U.K., Italy and Spain. We are opening new offices in India now and adding a team in Australia. So global expansion is also high on our list.