Intel heads Virtual Iron's latest funding round

Intel heads Virtual Iron's latest funding round

Intel Capital, the venture capital arm of chip giant Intel, led Virtual Iron Software's latest financing round to secure $US8.5 million in funding for the virtualisation software startup, the two companies announced Monday. In addition, Virtual Iron and Intel have signed a non-exclusive collaboration agreement.

The financing in the form of Series C funding comes from new investor Intel Capital as well as existing investors The Goldman Sachs Group, Highland Capital Partners and Matrix Management's Matrix Partners.

This isn't the first time Intel has invested and partnered with a virtualisation software company. The chip giant and Intel Capital announced a similar arrangement with SWsoft, the maker of Virtuozzo server virtualisation software, in June.

Virtual Iron previously raised a total of $US20 million in its Series A and B funding rounds in 2003 and 2004 respectively.

To date, Virtual Iron has only used a fraction of the money it has raised. "We've been extremely cash efficient and have spent the majority on product development," chief marketing officer at Virtual Iron, Mike Grandinetti, said.

Virtual Iron intends to use the money to further develop its VFe virtualisation software as well as hire more engineers and marketing staff and build a sales organization, according to Grandinetti. The firm employs 51 staff.

Previously known as Katana Technology, the company was founded in March 2003 by Scott Davis and Alex Vasilevsky. The firm unveiled its new name, Virtual Iron, in January of this year and previewed its VFe software in February.

VFe currently runs on Linux operating systems from Red Hat and Novell, but Virtual Iron is also planning to release a Windows version of its software in the middle of next year, according to Grandinetti.

Virtual Iron differentiates itself from other players in the virtualization market by offering software that can manage a datacenter's server, storage and network virtualisation, Grandinetti said. "What we're doing is why Intel's so compelled to work with us because we truly provide data center virtualisation," he added.

The collaboration agreement with Intel is giving Virtual Iron insight into the chip giant's product roadmap as well as early access to its technologies including Intel Virtualization Technology (VT), according to Grandinetti. "There's also the sheer marketing muscle Intel brings to the marketplace," he said.

However, he stressed that Virtual Iron positions itself as "completely agnostic" when it comes to what chips, servers or software customers are using. The company already works with Intel rival, AMD and Grandinetti said Virtual Iron expects to announce a more formal partnership with AMD at some point in the future.

Virtual Iron has also been working to enable users of its software to manage other virtualisation environments in the server space, namely open-source Xen and community-sourced ESX Server from EMC's VMware subsidiary, Grandinetti said.

Grandinetti pointed out the company's Series C funding also includes the option to raise an additional $US2 million with a strategic go-to-market partner, a way for the startup to more aggressively market and sell its software.

Virtual Iron has six customers for its software so far drawn from financial services, manufacturing and federal government, according to Grandinetti.

As part of its investment, Intel Capital investment manager, Lucy McQuilken, will take an observer's seat on Virtual Iron's board of directors. As an observer, McQuilken can sit in on board meetings but doesn't have a vote.

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