Even in Silicon Valley, tech companies that grow to a billion-dollar-plus valuation are rare enough to be called "unicorns." Today, DC's tech scene can claim one. Storage giant EMC agreed to purchase Bethesda, Md.-based cloud enterprise provider Virtustream for $1.2 billion. Virtustream, whose early investors include three local venture capital firms, is the largest tech exit out of Maryland since the $2.7 billion acquisition of Columbia, Md.-based SourceFire by Cisco in August 2013, according to research provided by CB Insights.
Analysts who warn of a contemporary tech bubble usually point to the proliferation of unicorn startups as a clear sign of danger. But for now, EMC’s purchase represents a massive win for the D.C. tech scene.
"As far as the local tech scene is concerned, I think an exit of this size is a very positive development. Big exits create liquidity for entrepreneurs and investors. If some of that liquidity finds its way back into funding other innovative entrepreneurs, then that’s great for the local tech scene as it creates a virtuous cycle,” Militello Capital COO and co-founder Matt Brady told DC Inno.
In both the case of Virtustream and SourceFire, local venture capital investment played a substantial role in the early funding and growth of the companies. D.C.-based NEA and Core Capital Partners along with Bethesda’s Inflection Point Ventures paved the way for SourceFire’s expansion. Similarly, nearby Chevy Chase-based TDF Ventures and Baltimore city-based QuestMark Partners were early investors in Virtustream. Alexandria’s Columbia Parners was also one of two VC firms to invest in the company during its first funding round back in 2009.
"We have been invested in Virtustream since early 2012. Our congratulations and appreciation go out to Rodney Rogers, Kevin Reid and the entire team at Virtustream for their hard work, dedication and focus on building a truly world-class company … It is certainly great for MD,” Partner at QuestMark Partners and Virtustream board observer, Tim Krongard, told DC Inno in an email.
To a certain degree, the influence of this local investment was partially responsible for the company’s growth and ability to create innovative products/services which have now led to its acquisition by a larger corporate entity.
In terms of large-scale, local tech exits, a few companies are responsible for a substantial chunk of recent payouts. These exits and the companies responsible for them include Cvent, which busted through a billion-dollar valuation on its first day of trading in 2013. Opower's $133.3 million IPO resulted in a market cap of approximately $1.2 billion; 2U's 2014 $137.2 million IPO, which brought with it a market cap of $460 million.
Gaithersburg, Md.-based b2b business integration technology company GXS Group was acquired for $1.17 billion by Open Text in November 2013 — but the source of its venture funding came primarily from firms based in New York and California, including Francisco Partners and Norwest Venture Partners .
RT @emc_news: Joe Tucci reflects on the meaning of @virtustream acquisition: http://t.co/K2apA60bMT pic.twitter.com/TEONW7sRH4
— Virtustream (@virtustream) May 26, 2015
EMC also acquired San Francisco-based OpenStack cloud provider Cloudscaling for $50 million in late 2014, Bloomberg reported. EMC's recent acquisition spree should now position it to better challenge Amazon's cloud service, AWS.
