Data centers raise more dollars

The data center industry, which went from red-hot in the late 1990s to ice cold in the early part of this decade, appears to be heating up again.

Since late last year, companies developing software and hardware deployed in data centers have raised more than $100 million in venture funding. The investments in data center companies range from early to expansion stage funding rounds.

Jim Watson, managing general partner at CMEA Ventures, says that the recent push to invest in data center companies comes as many are developing improved technologies to more efficiently serve and store data and to reduce power consumption. He says that energy usage has become the second largest cost, after labor, at data centers.

Data centers account for an average of 35% of overall IT budgets for companies surveyed in a report published in March by Digital Realty Trust, a data center operator. Also, the survey found that 84% of companies with data centers plan to expand their operations in the next one to two years.

CMEA co-invested with Redpoint Ventures late last year in a $15 million Series A round in Schooner Information Technology, a developer of server technology that Watson says requires 70% less power than current equipment.

Schooner, which had been operating in stealth mode until month, makes an appliance that uses flash memory to “eliminate a lot of spinning parts in a server,” Watson says. He says the company is currently in talks with IBM about a potential partnership.

The investment in Schooner wasn’t the largest funding round to close recently. Last week, Fusion-io, a developer of network storage technology used in data centers, announced that it closed a $47.5 million Series B round. Lightspeed Venture Partners, led the round, and was joined by Series A investors New Enterprise Associates, Dell Ventures and Sumitomo Ventures.

Other companies that have raised recent rounds include:

• SEPATON Inc., a developer of backup applications for data centers, which recently raised $15.5 million in a Series F round. New investor Focus Ventures led the round while JVP, Menlo Ventures, Valhalla Partners and HarbourVest Partners also participated. The Marlborough, Mass.-based company develops tools, which the company says enable companies to back up and restore petabytes of data without disruption to their existing infrastructure;

• CloudSwitch, a stealth mode company which develops technology enabling cloud computing services, which raised $7.42 million January from Atlas Venture and Matrix Partners;

• And Engenera, a provider of software and appliances for configuring and maintaining servers in data centers, which raised $12.2 million in January. The funding brings the total raised by the company to $204 million. Backers in the latest round include Spectrum Equity Investors, American Capital and Pharos Capital Group.