Hosting.com Gets $2M for Colo Expansion

Hosting.com said Friday that it has completed a $2 million round of funding with CapitalSouth Partners, LLC, and will use the money to expand its colocation business. The financing will allow Hosting.com to deploy custom-built micro-data centers of 2,000 to 20,000 square feet inside its five data centers.

Hosting.com is a regional data center firm based in Charlotte, with facilities in Boston, Louisville, San Francisco and Irvine, Calif. The company says it has benefited from companies shifting their data center expansion from company-built facilities to third party colocation.

"We are receiving more calls from enterprises looking to save capital and improve their operational efficiencies by avoiding data center builds," said Jonathan Erwin, VP of Sales and Marketing at Hosting.com.

"With today's economy, businesses continue to outsource their IT infrastructure to save money and focus on their core competencies," said Darren G. King, CEO of Hosting.com, who said his company's services "have never been in higher demand."

CapitalSouth's investment is in the form of mezzanine debt, which combines subordinated debt with warrants that can be converted into equity. Some accounts suggest mezzanine debt is becoming a more popular financing tool for small to medium-sized businesses during the current credit crunch. Mezzanine debt is typically unsecured, and carries a higher interest rate as a result.  Mezzanine lenders usually look for long-term growth and cash flow.

"Hosting.com is growing tremendously on an annual basis, and the economic downturn should fuel their continued success," said Kenneth Berryman, Director of CapitalSouth-Louisville. "Even in today's tough credit market, successful private equity investors are eager to put their money to work in great companies. CapitalSouth invests significantly in companies that have strong competitive advantages and proven management teams, and Hosting.com fits both criteria."