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Friday, August 10, 2007 - Page updated at 12:00 AM

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Venture firms give startup a vote of confidence

Seattle Times technology reporter

Without dropping a huge pile of cash, four high-profile venture capital outfits are making a major statement about a local startup company's entry in a fast-growing field of software that promises to save businesses billions.

They're investing $6 million in illumita, founded last year by four University of Washington computer scientists to commercialize their research into virtualization technology.

"It really is a game-changing technology," said Brad Silverberg, formerly a top Microsoft executive and a founder of Ignition Partners, which joined Madrona Venture Group, Bezos Expedition and Washington Research Foundation in the financing round to be announced today.

Virtualization is the same technology pushing VMware, a California subsidiary of EMC, toward one of the most-anticipated initial public offerings of the year. The company is expected to go public at $27 to $29 a share early next week.

But let's pause for a moment and figure out what virtualization is.

Picture a corporate data center full of nondescript server computers whirring away, day and night. Each one has an operating system and applications that host Internet sites, route e-mail, handle databases or other tasks.

Traditionally, most corporate IT departments will run only one application on each server. They rightly fear that running multiple applications simultaneously causes a greater risk of crashing — not OK for mission-critical programs. The one-server-to-one-application model may be more stable, but it's terribly inefficient, with only 5 to 15 percent of an IT system's computing power being used at any given time, analysts said.

Virtualization software divides a computer into multiple individual "virtual" machines, each of which has its own operating system and is largely insulated from others running on the same server. Each virtual machine can host its own application, allowing huge efficiency and reliability gains.

Estimates vary, but analysts say virtualization can yield up to a sevenfold boost in server productivity, saving companies on hardware purchases and power costs.

"From a business perspective, virtualization ... allows a company to really maximize the performance of their servers and, therefore, their IT investments," said Charles King, principal analyst at Pund-IT.

Several companies are providing virtualization software both for servers and desktop computers, including Virtual Iron, XenSource — another Ignition investment — and Parallels, a subsidiary of SWsoft based in Renton. In addition, large IT services companies such as Accenture are helping companies implement virtualization in their data centers.

"I think that's where you're going to see a lot of need for tools that will assist the services providers" and make remote tech support and virtualization easier, said Matt Healey, an analyst with IDC. He expects the virtualization services market, not including the software, to grow from $5.5 billion in 2006 to $11.7 billion in 2011.

While illumita is keeping the details of its patented technology close to the vest, company President Steve Brodie said it centers on "the concept of virtualization over the Internet, so basically allowing people to effectively leverage virtualization on remote resources over the Internet."

The technology stems from the graduate research of David Richardson, who is the company's chief scientist. He worked with UW Computer Science Department Chairman Hank Levy and professors Brian Bershad and Steve Gribble — the other co-founders.

Ignition's Silverberg gave the UW's technology transfer office high marks for improving the process of spinning companies out to the business community. In the 12 months ended June 30, the UW helped create 11 startup companies, according to preliminary figures released Thursday. That's up from 10 the year before and only three in 2005.

Brodie said illumita will benefit at least as much from its big-name investors' networks as from their money. The cash will allow the startup to double its staff of 10, further develop its product and push forward with sales and marketing.

Silverberg, who will join the company's board, and Matt McIlwain of Madrona have already helped with recruiting and introductions to advisers and potential customers.

"We've been working with a lot of early customers to validate the solution," Brodie said, adding that nine companies, which he declined to name, are testing the technology. "Having Brad and Matt on board really helps us get those intros into those organizations."

Participation from Amazon.com CEO Jeff Bezos raises the possibility of a partner in the Internet shopping and services giant, he added.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2007 The Seattle Times Company

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