CNBC Disruptor 50

Is this the tech IPO that changes everything?

Pure Storage FlashArray
Source: Pure Storage | YouTube

Finally an IPO to get the tech world excited.

While venture funding this year has reached levels not seen since the dot-com bubble and private valuations have exploded, the public markets have been largely relegated to the sidelines

Leave it to a storage company to try and break the ice.

Pure Storage, which ranked 16th on the latest CNBC Disruptor list, filed its IPO prospectus on Wednesday, announcing tentative plans to raise up to $300 million. Even at that amount, which is likely to increase, it would be the biggest deal for a U.S. enterprise technology company this year, and certainly the most high-profile name since Box in January.

Read More Meet the 2015 CNBC Disruptor 50 companies

Fitness tracker Fitbit raised $732 million in its IPO, and GoDaddy, which was backed by private equity investors, raised $460 million.

There's much more activity in the late-stage venture market. According to CB Insights, more than 100 companies have raised private rounds of at least $100 million this year.

"We're seeing fewer companies have the need to test the public markets, because they can get so much in the private markets," said Anand Sanwal, CEO of New York-based CB Insights

Pure Storage unveils FlashArray//m
Pure Storage unveils FlashArray//m

In a blog post, First Round Capital's Josh Kopelman called the phenomenon a "private IPO" boom and said that one benefit for companies is that "it removes arbitrary time constraints on growth and profits."

That means all eyes will be on Pure when it finally debuts, likely in the next couple months.

Pure develops flash storage arrays, which are rapidly replacing the old spinning discs that businesses used in data centers. Pure promotes its technology as delivering 10 times the performance of legacy hardware from the likes of EMC and NetApp. It was built for an era of massive cloud applications and big data.

EMC has been fighting back with a product called XtremIO, and was the leader in all-flash arrays as of the first half of 2014, with 22.6 percent of the market, according to IDC. Pure ranked second at 18.3 percent, followed by IBM at 16.7 percent and NetApp at 9.1 percent.

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Pure's revenue more than tripled in the first quarter to $74.1 million from a year earlier and topped full-year 2014 revenue of $42.7 million. Pure's 1,100 customers include Nielsen, Sierra Nevada Brewing and ConocoPhillips.

Unlike its closest competitors in the flash market, Pure is unshackled from struggling legacy businesses. Revenue at EMC increased a meager 3.3 percent in the latest quarter, while IBM and NetApp reported declining sales.

Pure invests heavily to get in the door and then counts on its clients to increase their spending over time. According to the prospectus, as of Jan. 31, more than half of Pure's customers bought more gear within 12 months of first signing up, with its top 25 clients spending on average an additional $4 for every $1 of initial purchase.

Piper Jaffray analyst Andrew Nowinski wrote in an April report that EMC was seeing weakening demand in part due to pricing pressure from Pure, which some channel partners said "is selling at a loss in order to displace EMC."

Elliott goes public on EMC position: Faber
Elliott goes public on EMC position: Faber

Like so many hypergrowth enterprise companies in recent years, Pure has depended on big financing rounds to fuel its expansion. In April 2014, the company raised $225 million at a valuation of more than $3 billion, in a round led by giant mutual fund company T. Rowe Price. In total, Pure has raised $470 million.

The company's research and development spending more than doubled to $31.7 million in the latest period, while its sales and marketing expense almost doubled to $48.3 million. That all added up to a quarterly net loss of $49.1 million, representing two-thirds of revenue.

A spokesperson for Mountain View, California-based Pure declined to comment because of the quiet period, but EMC is under no such restraints. Based on Pure's revenue, its market share is lower than expected, said Josh Goldstein, vice president of EMC XtremIO, in an e-mailed statement.

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"The magnitude of both Pure's losses and lower market share than originally reported is surprising -- a real eye opener," he said. "We are outselling competitors, even when those competitors work to buy the business at a loss."

Pure also has to contend with the burden of recent history.

Box has tumbled 38 percent since its opening-day pop in January, while Hortonworks and New Relic are trading just above their debut prices from December. Xactly went public in June, and has yet to show gains for new shareholders.

Pure Storage CEO Scott Dietzen and co-founders John Hayes and John "Coz" Colgrove.
Source: Pure Storage

They're all software businesses that have virtually nothing in common with Pure, except that they sell to enterprises and lose money.

High-speed storage businesses have been even more troublesome for public investors. Violin Memory has been disastrous, and Fusion-io sold for less than its IPO value. Nimble Storage, which makes a hybrid storage product, has lost value since its day-one bump in 2013.

Rather, Pure has to hope that it's perceived more like a Workday or ServiceNow, which have handsomely rewarded investors since selling shares to the public in 2012, despite also racking up big losses.

Read MoreWorkday: From venture darling to venture capitalist

"When you look at the companies that have done relatively better in the public markets, they're the ones who had proven unit economics and credible models," said Sanwal. "For those burning cash with the promise of lifetime value, public markets haven't been as kind."

Pure has at least one thing on its side: personnel. Among its six outside board members are Aneel Bhusri and Frank Slootman, the CEOs of Workday and ServiceNow.