FalconStor Moved To The Blue Lagoon, And Is Poised For Growth Because Of It

August 10, 2026 Timothy Prickett Morgan

Way back in the Dot Com boom, when FalconStor was founded, it was one of the early innovators of what we have come to know as software-defined storage and software-defined networking as well as disaggregated storage. These terms were not even coined until a decade after FalconStor was doing it in its first product, called IPStor, which is the foundation of the various products that the company still sells today.

Like many companies, including IBM itself, FalconStor had some self-imposed business issues and financial challenges over the years – IBM in the late 1980s and the early 1990s, FalconStor in the 2010s – but both IBM and FalconStor brought in new management and created a more focused strategy to reinvent their companies and get them generating more predictable revenues and to put them on a path toward profits.

At FalconStor, that reinvention starts in September 2013 when Hale Capital Partners injected $9 million in capital, in the form of convertible preferred stock, and the venture capital company took over the board of directors and put another $3 million in February 2018. In between those funding rounds, in August 2017, Todd Brooks was hired by FalconStor as its chief executive officer. This was when many hard decisions were made, including moving the company from Melville, New York, just down the road from Computer Associates, to the technology hotbed of Austin, Texas as well as trimming the workforce to get costs in line with revenues.

Brooks has been a chief executive officer or managing director of startups or mid-sized software companies for most of his career. Significantly, he was vice president of customer success at project management software maker Artemis International, which is what brought Brooks to Austin. ESW Capital owned Artemis, and the venture capital firm moved Brooks over to be general manager of Trilogy Vertical Solutions, a lead generation and aggregation software provider in the automotive industry. Brooks rose through the ranks to become vice president of operations and then chief operating officer at Trilogy, and in October 2012, ESW Capital moved him over to be chief operating officer of Aurea Software, also based in Austin and a provider of customer experience software. In September 2015, Brooks was named chief executive officer of Update Software AG, a customer relationship management software maker based in Vienna, Austria that is tucked under Aurea. After two years in that role, Brooks became an operating partner at Razorhorse Capital in Austin, which invests in SMB and enterprise software companies around the world, and moved back home to Austin. A year later, the FalconStor board tapped him to be CEO at FalconStor and turn the company around.

“We are not we’re not the first company to have gone through this type of evolution, where at one point the company was high flying, then something happened, and then either they recovered or they didn’t,” Brooks tells The Four Hundred. “We have worked hard over the past several years, but we also feel really fortunate to have made it to the other side. There were some structural things that were broken, and there were some markets we were focused on and some product directions that were no longer good for FalconStor, and it took us some time to figure that out. We had to be really careful and strategic about where pointing our efforts, because we were still pretty much in every market that the company was in when it was $100 million company back in the 2000s. When I started in 2017, we had eight offices around the world. Now, we have one in Taiwan and everyone else works remotely. And after all that restructuring, we realized that we could not go burn $10 million a quarter on trying to find some new product to develop. We had to look at what we already had and figure out how to differentiate.”

So in 2019, when FalconStor was figuring out how to best leverage its technology and its people, what it had was a well-regarded virtual tape library product, StorSafe, and a strong OEM partnership with IBM and a customer base that was largely focused on IBM i, AIX, and Linux running on IBM’s Power Systems machines. This is where, as Brooks puts it, FalconStor has “strategic advantage.” So Brooks and his team decided to go all in on Big Blue’s system platforms, in a strategy that FalconStor calls Blue Lagoon.

This graphic illustrates the advantage of living in a lagoon like the one in Bora Bora:

“With Bora Bora, you have got the big island in the middle, and a barrier reef that goes pretty much all the way around the island,” explains Brooks. “And inside the barrier reef is this nice, beautiful, calm blue lagoon. That’s where we live. Outside the barrier reef is the Big Bad Ocean, and if we try to do something that’s outside the blue lagoon, there are sharks, there is bad stuff out there, and we might get eaten. So we need to stay in the blue lagoon.”

At about the same time, FalconStor decided, as many software vendors had after the rise of utility-style pricing on cloud computing, to switch from perpetual software pricing plus software maintenance to subscription pricing. This has an obvious and dramatic effect on revenue and profit streams, but it does tend to level out the lumpiness in sales over the long haul and deliver a more annuity-like revenue stream. Like the one IBM famously has for its venerable mainframes, which have perpetual licensing but which all customers opt for monthly or annual rental agreements.

In 2022, FalconStor refreshed its partner agreement with Big Blue, and since that time has been tailoring its products for Power Systems platforms, with plenty of attention, as you know, for the IBM i platform in particular. As part of that deal, FalconStor became the default backup target in the Power Virtual Server (PowerVS) cloud based on Power Systems that is part of – and yet distinct from – the IBM Cloud. In January this year, FalconStor launched its Habanero offsite data protection service, and only a few weeks ago the company rolled out its Cloud Clean Room service to prove that backup recoveries, upon which so many IBM i shops depend for disaster recovery, actually work.

You can see the effect of the new product launches over the past several years if you average out the ups and downs in the blue quarterly FalconStor revenue line shown in the chart below:

The decline caused by the switch from perpetual licensing to subscriptions is over, and importantly, revenue is on the rise.

“In Q4 of last year, we grew revenue 17 percent,” says Brooks. “That was good. We saw that our base of recurring revenue was now contributing at a meaningful level, and now we can build off that. As recurring revenue grows, it just gets better and better. In Q1, we announced that revenue increased 73 percent, which was helped by one large deal that we secured in Asia/Pacific, but still even without that large deal, it would have been super interesting. In Q2, for which financial figures were just released, revenue was up 27 percent year on year, and our hybrid cloud annualized run rate was up 91 percent in the trailing twelve months, following 89 percent growth in Q1 2026 and 61 percent at the end of 2025.”

Significantly, first half 2026 revenues are up 50 percent to $6.9 million, and first half net income was $798,828 compared to a net loss of $466,135 in the first half of 2025.

Not only is FalconStor the backup target in the PowerVS cloud, but it is also the backup target in Kyndryl Cloud Uplift (what used to be SkyTap), and IBM Power for Google Cloud from Pellera (the merger of Converge Technologies and Mainline Systems that is owned by HIG Capital). Brooks also says that FalconStor has more than two dozen managed service providers that have standardized on StorSafe or are in the process, and most of them are moving off of Dell’s Data Domain archiving systems because they want software-defined storage and they want it running on Power Systems. FalconStor has over 1,000 Power Systems shops using its various products, and that base is growing fast, too, and driving revenues.

“The flywheel is starting to turn a little quicker,” says Brooks. “We would love to spin that like crazy. It’s not spinning like crazy yet, but we’re getting there. And that is opening up new opportunities as more and more customers are choosing FalconStor.”

This content was sponsored by FalconStor.

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