Austin chip startup Calxeda raises $55 million

American-Statesman Staff Austin chip startup Calxeda Inc. has raised another big investment round — $55 million this time — in a move that signals its low-power server technology is winning approval from potential customers. The four-year-old Austin company is an early mover in developing server technology derived from basic designs created by ARM Holdings, the leading designer of chips for smart phones and other mobile products. New investors are Austin Ventures and Vulcan Capital, an investment company started by Microsoft Corp. co-founder Paul Allen. Earlier investors who participated in the new round are: ARM Holdings, Advanced Technology Investment Co., Battery Ventures, Flybridge Capital Partners and Highland Capital Partners. The company's total investment to date is more than $103 million. The 100-employee company will use the funds to accelerate its hardware and software development for future chip generations and to expand its sales effort. The company expects it could grow to 200 employees, most of them hardware and software engineers, by the end of 2013. "This significant infusion of capital will accelerate the existing trajectory we've been on for the past four years," said co-founder and CEO Barry Evans. "Businesses need a more efficient solution for the Web, cloud computing and big data. That is what Calxeda is now delivering and this funding will enable us to go bigger and faster." The company says tests on its chips show as much as a ten-fold improvement in energy efficiency compared with "commodity servers" based on technology from Intel Corp., which supplies most of the chips for servers. Calxeda officials say they expect computer makers will begin selling servers with Calxeda's first-generation 32-bit chips by the end of this year. The company expects that 64-bit versions of its chips will be in production by 2014. The 64-bit chips are expected to have broader commercial appeal. Last fall Calxeda announced a collaboration with server maker Hewlett-Packard Co. on a new program called "Project Moonshot" to develop a new class of low-power servers. Analyst Patrick Moorhead with Moor Insights & Strategy said the new investment round is a sign that prototype systems based on Calxeda chips have been tested successfully by potential major customers. "They are beyond the research phase and they have proven that their technology does what they said it was going to do," Moorhead said. The Oppenheimer & Co. securities firm estimated this year that the low-power segment of the server market could expand to $4.5 billion in revenue by $2016. Clark Jernigan, a venture partner with Austin Ventures, praised Calxeda's progress. "In the time since we first met Calxeda they have executed exceptionally well and the market has begun to embrace disruptively power-efficient data center architectures," Jernigan said. The company, he said, "has demonstrated solid customer traction across several key end user segments and we are very excited to join their already impressive investor group." Steve Hall, managing director of Vulcan Capital, said he was "impressed with the innovative approach and the completeness of Calxeda's vision. Calxeda thinks like a solutions company, aligning their technology to solve the bigger challenges. They aren't just chip guys." While the Austin company has been an early player in developing low-power server technology, plenty of other companies have joined the pursuit of the emerging market that Oppenheimer & Co. estimates could grow to $4.5 billion in revenue by 2016. Competitors include Intel Corp., which is developing low-power Atom processors aimed at the server market and Advanced Micro Devices Inc., which bought SeaMicro Inc. last spring and announced it will develop low-power server chips to work with SeaMicro's technology. Other potential challengers include Marvell Technology, Qualcomm and Samsung Electronics Co., the memory chip giant, which has created an Austin engineering design team that is believed to be working on low-power server chips.