Investing in Efficiency

Data center efficiency is attracting the attention - and the cash - of venture capitalists. Yesterday Rackable Systems, which makes power efficient rackmount servers, said it received a $1.5 million investment from PTI Ventures, just a month after securing $21 million in funding from Parthenon Capital. The company's story provides a case study in how bucking conventional wisdom can pay off.

Rackable was founded in 1999, amidst the Internet boom. Back in the "build it and they will come" era, data center builders were focused on speed to market, rather than efficiency of the equipment. Nonetheless, Rackable decided to build servers that made efficient use of space, power and cooling and could be managed remotely.

Launched at a time when it seemed anyone with a dot-com and an idea was getting VC funding, Rackable's business plan was built on "bootstrapping" - growing with its own cash and resources. Now, venture capital is scarce, data center efficiency is hot and Rackable has access to funds.

Rackable's attractiveness is in large part due to its customer list, which includes Yahoo, Google, Webex, Electronic Arts, Sony America, Lawrence Livermore National Labs, UCSC/Human Genome Project and Deutsche Bank.

What has sold those clients on Rackable, as well as the VC community? The company says it products can "significantly reduce total cost of ownership by reducing up front purchase cost, reducing deployment times, and reducing ongoing maintenance expenses for HVAC, power, and data center labor."