Is The Funding Drought Over?

Is the long financing drought over for data center providers? The funding spigot may never again resemble the deluge of the dot-com era, but we're seeing more cases in which web hosting companies are getting substantial capital injections. On Monday alone, there two notable new funding announcements.

Savvis Communications announced $20 million in new funding from Constellation Ventures, a unit of Bear Stearns, which will receive 8 percent of the company in return.

The same day, British data center provider IXEurope announced 7.5 million pounds (that's about $11.5 million U.S. dollars) in fourth-round funding from Bank of America and European Acquisition Capital. Company executives say this should be enough to see the company through to profitability sometime next year.

These announcements come on the heels of Inflow's June 13 announcement of $35 million in new private equity financing, Terremark's June 19 closure of $5 million in funding from a group of Spanish investors, and Egenera's June 27 unveiling of $44 million in venture funding.

It's been quite a while since this sector has seen such a rapid series of funding announcements. While it's a little early to break out the party hats, it's yet another sign of the ongoing transition from consolidation to rebuilding. We've got a way to go yet.

But there's a growing shift in investor sentiment. A decision to fund a data center service provider is no longer dismissed as "good money after bad." Investors perceive opportunity among the companies that have survived the ongoing telecom/Internet crash, and are betting substantial sums of money that these providers will perform in the near future.