Hot Data Center Startup Vapor IO Raises First Round of Funding

While venture capital funding for startups focused higher up the technology stack – companies that make IT automation or cloud management software, for example – is common, it’s relatively rare for a company focused squarely on the physical aspects of the data center to announce a funding round.

Vapor IO, which came out of stealth earlier this year with a radical new design of the data center rack and sophisticated rack and server management software, has closed a Series A funding round, led by Goldman Sachs, with participation from Austin’s well-known VC firm AVX Partners.

Tom Jessop, a managing director at Goldman, is joining Vapor’s board of directors, and so is Chris Pacitti, general partner at AVX.

The Austin-based company hasn’t disclosed the size of the round, but its founder and CEO Cole Crawford said he was “very happy with the number.”

Not disclosing the size of a Series A is a philosophical choice for Crawford. “Everybody has an opinion about it: either you took too much or too little,” he explained.

Vapor is an attempt to disrupt the data center infrastructure industry at the rack level.

Instead of traditional rows of racks and straight data center aisles, Vapor’s hardware product, called Vapor Chamber, is a cylinder where six wedge-shaped server racks are arranged in a circle. Servers take cold air in from outside of the cylinder and push hot air into a column in the center, from where it is sucked out at the top.

The company claims the design is more space- and energy-efficient.

Vapor’s software stack includes an open source server hardware management system OpenDCRE, which aims to replace the old standard Intelligent Platform Management Interface. Based on OpenDCRE is Vapor’s commercial data center management software product called Vapor Core.

Having Goldman’s Jesson on the board is especially important for Vapor. Goldman has global reach, and Crawford hopes the startup will benefit from those connections, in terms of both hiring talented staff and in terms of meeting new potential customers, he said.

AVX is a fund recently formed by Pacitti and his partners from Austin Ventures, a tech VC firm that dominated the Austin market in the dot-com era but whose dominance declined in the 2008 recession and never quite bounced back, according to the Wall Street Journal.

AVX is Pacitti’s new fund that leverages AV’s network and reputation to go after mid-stage startups, so Vapor, being an early-stage startup, is an exception.

In a statement, Pacitti explained that while AVX typically focuses on new companies that already have some early revenue traction, Vapor is “so well positioned and promising that we gladly make an exception.”

One of the reasons he cited was having Crawford at the helm. Crawford has been involved in projects that have made massive impacts on the data center industry.

He participated early on in the creation of OpenStack, the open source cloud infrastructure software that has become the primary alternative to building clouds using VMware’s technology. Crawford also held several senior leadership roles at the Open Compute Foundation, which oversees the Open Compute Project, Facebook’s initiative that aims to bring benefits and philosophy of open source to hardware and data center design.

On his part, Crawford said Pacitti was a “legend,” and that it was rare for a company to raise money in Austin without talking to Austin Ventures.