3PAR Hits the Ball Out of the Park

Just what is 3PAR, anyway? On Monday, tech giant HP offered $1.6 billion for the company, besting by 33 percent an earlier offer from Dell that many viewed as overvalued.

The company, based in Fremont, California, specializes in something known as utility computing. Instead of investing huge amounts of money in their own equipment, customers purchase access to hardware and software over a network, consuming it as needed, just like a power or telecommunications utility. The network of shared computing power—known as a cloud—is similar in concept to leasing a vehicle from Zipcar as you need it. If you only use a car once in a while for a few shopping trips, it might be cheaper to lease, cutting down on the expenses of buying, maintaining, and insuring your wheels. And if you drive a lot, the lease option might make sense too, as many car owners can attest.

3PAR is a textbook example of how the venture capital process is supposed to work. Back in 1999, some technologists embraced the still-new idea of cloud computing, or computing as a service, and decided to create 3PAR to serve the high end of the market, the bigger corporations and government agencies that need the most power.

3PAR focused its efforts on something known as utility storage, anticipating that the growth of the Internet and the expansion of bandwidth would lead to an explosion of digital data that would need to be kept somewhere. Storing and managing that data on-site can be expensive, and 3PAR founders reasoned they could get the job done more cheaply for their clients.

Meanwhile, HP and Dell moved gradually toward the idea of utility computing. But neither company developed much of a high-end product of its own. There are few players that can serve the high-end, which is why Dell and HP put such a premium on 3PAR today.

3PAR has been run since 2001 by HP veteran David Scott. In a sense, 3PAR is an example of how big tech companies "outsource" their R&D to startup ventures, often run by enterprising managers from the big companies themselves. The company was funded by venture capital firms Mayfield Fund, Menlo, and WorldView Technology Partners, which profited after the company's IPO in 2007.

Now the market for high-end utility computing is coming of age, and HP is determined to bring the technology back in-house.

So, with world-class brains, initiative, a strong corporate pedigree, and access to capital, tech startups move through the venture food chain.