Building 500-square-foot modules that act like fully functional data centers is capital-intensive work, so when a company like IO Data Centers raises money, it raises a lot. On Wednesday, the company announced a $90 million round led by New World Ventures that follows a $56 million round in 2008 and a $105 million round in 2011.
IO Founder and CEO George Slessman told me during a phone call on Tuesday that the company raised the latest money in order to capitalize on a huge opportunity. One industry group estimates that companies will spend $105 billion building and managing data centers in 2012, and Slessman thinks IO can address a significant portion of that spending, especially as it relates to costs around designing, building and generally operating facilities.
IO’s modular data centers include their own cooling units and backup power and can go pretty much anywhere a customer has room to put one. The company also has developed its own data center operating system software, which lets users analyze, automate and manage their data centers with a fine-tooth comb using a rather slick interface. The goal is to cut down on excessive data center build-outs to account for future needs, wasteful cooling practices and unintelligent resource management.
The approach has garnered a respectable number of big-name customers, including, most recently, Goldman Sachs. The investment bank decided to deploy IO modules as its primary means of capacity expansion in the future, meaning its days of designing and building data centers are over.
IO also has a managed hosting and colocation business, which began as traditional raised-floor space housing servers in cages but is now primarily comprised of the company’s modules. However, Slessman said, in the relatively short term, “well over half our revenue will come from product sales where people are buying it and putting it on their site.” Because of regulatory and other needs, many companies simply will never host the majority of their applications.
Slessman said about half of its latest investment will go toward R&D and expanding its footprint deep into the Asia, Australia and the Middle East (the other half will go in the bank). Already, IO is planning to launch hosting locations in numerous locations throughout Europe, South America and Asia. I was told during a visit to the company’s Phoenix headquarters in April that is has developed a manufacturing model that can be easily repeated from location to location so modules aren’t being shipped around the world.
But IO isn’t able to raise so much money just because it costs so much to invent and build modular data center technology. Everyone — including the mainstream press — is now paying attention to data center efficiency, and any technology that cuts down on the amount of energy a data center uses should be at least somewhat appealing to investors and customers. For example, Calxeda, an Austin, Texas-based startup that’s building enterprise-grade computing fabrics out of out of low-power ARM processors, announced a $55 million investment round on Monday.