Virtualization Startup Seals $12M

U.K. chip startup VirtenSys emerged from the shadows and clinched $12 million in Series A funding today, as the market for PCI Express-based I/O virtualization slowly cranks up. (See VirtenSys Secures $12M.)

VirtenSys, which is still in stealth mode, will use the funding to launch virtual switch hardware sometime next year. "It's a PCI Express-based switch with I/O virtualization features," explains Tony Palmer, the VirtenSys CEO. "The money is to complete our first product development and start generating our first revenues."

While Palmer's keeping specifics of his company's technology under wraps, he claims the startup already has lined up one "tier one" OEM that produces storage and networking products and a "tier 2" partner in the shape of a server interconnect vendor.

VirtenSys is one of a number of I/O virtualization specialists, including firms such as PLX and NextIO, developing small form factor PCI Express-based technologies that can be deployed in server and storage systems. (See PLX Tests PCI and PLX Unveils 64-Bit 66MHz PCI Bridge.)

But it is still very early days for this market, according to Jag Bolaria, senior research analyst at the Linley Group. "That stuff is so new," he says, explaining that standards for PCI Express virtualization are still being finalized.That said, the analyst feels there is demand for this type of technology, even if actual products are still few and far between. "There's certainly an opportunity -- there will be a good five to seven years of growth in this space," he says.

Palmer himself believes that despite some user skepticism about vendor virtualization hype, 2007 will be a good time to bring his switch technology to market. (See Users Search for Virtual Reality.) "I believe that the market is getting more educated about what virtualization can do for you," he says.

Vendors are touting PCI Express-based virtualization as a cheaper alternative to the likes of Ethernet, arguing that the technology offers a straightforward way to link PCI-based server blades with networking and storage devices. "Having a commodity technology like PCI Express lets you do I/O virtualization in a cost efficient manner," says Palmer.

Over at the Linley Group, Bolaria admits that there are potential cost benefits to the technology. "If you're connecting between a host blade and an I/O blade in a blade server, then it could be cheaper," he says.

But PCI Express-based I/O virtualization is no silver bullet, according to the analyst. Whereas the technology could be effective for connecting a single host system to multiple blades, its weakness become apparent when users attempt to connect multiple hosts. "PCI Express doesn't have the means to pass the messages between the processors [on the host systems]," he explains.Still, VirtenSys seems determined to make a stand. Over the coming months, Palmer is planning to grow VirtenSys' workforce from around 30 to 40 employees. This, he explains, will involve new engineering hires at the firm's headquarters in Cheshire, U.K., and the recruitment of sales staff at the startup's U.S. office in Palo Alto.

The firm is also planning to expand its U.S. operation. "We're looking at other parts of the U.S., explains Palmer. "We will also, at some point, be looking at the Far East."

But VirtenSys will need to boost its funding levels if it wants to make its long-term presence felt, according to Bolaria. "They probably need about $20 million before they can really make it," he says.

VirtenSys' first round was led by Scottish Equity Partners (SEP), Celtic House Venture Partners (CHVP), and GIMV.

James Rogers, Senior Editor, Byte and Switch