Ebullient Continues Hot Streak, Snags $2.3M For Computer Cooling Tech

Data centers are hot.

One of these buildings typically houses thousands of computer servers, some of which may be owned or rented by cloud storage services like Dropbox, Box (NYSE: BOX), and the Web Services division of e-commerce giant Amazon (NASDAQ: AMZN). Processing bits nonstop causes these servers to heat up; in order to keep them from overheating and shutting down, data center operators must counter the rise in temperature. One option is putting these facilities in colder climates like the Arctic Circle, as Facebook (NASDAQ: FB) did in 2013.

Facebook is worth more than $250 billion, though. Most companies lack the cash reserves of the hugely popular social network, and have processing requirements that are orders of magnitude lower. For them, it often makes more financial sense to bring the cold to their servers, not the other way around, says Tim Shedd, co-founder and CEO of Ebullient, a Madison, WI-based startup that develops liquid-based systems for cooling computer components.

“We design the system from the outset so that a data center in Death Valley does not need air conditioning on the hottest day of year,” Shedd says, adding that temperatures can exceed 130 degrees Fahrenheit in that region of California.

On Friday, Ebullient said it raised $2.3 million in a funding round that should help the startup continue the momentum it built over the past year. Co-founder and general counsel Nick Boyarski says that figure is likely to jump to more than $3.5 million later this month, and includes approximately $1.1 million in convertible debt funding raised a year ago.

In a press release announcing the new financing, Ebullient said the round was led by “a private investment group with ties to Aspen, CO,” with some past investors in Ebullient participating as well. Sixteen investors took part in the round, according to a regulatory filing. All four names listed on the document are Ebullient co-founders, according to the startup’s website.

Shedd says the money will help fund operations through mid-2017, as the company shifts some of its focus from research and development to adding clients.

“We spent the last year developing product, getting product ready for market, [and] getting the support structure in place,” he says. “Now, we’re ready to sell.”

By “sell,” Shedd really means “keep selling.” He says five customers, including one in Poland, have either purchased or committed to buy systems from Ebullient, which launched in 2013. All of those sales were made since October, he says.

The startup also plans to expand its staff, which Shedd says currently comprises six full-time and three part-time workers. He says the goal is to hire up to five new employees by March, and expects they’ll work in areas like sales, marketing, and finance.

With Ebullient’s patent-pending cooling systems, a liquid flows through tubes to copper plates mounted directly on processors. The fluid is able to undergo a “phase change” by boiling into a vapor—the term “ebullient” means boiling—which Shedd says allows more heat to be captured. The heat is then carried through a tube to the roof of the building and released into the surrounding air, while a heat-exchanging device cools down the liquid so it can repeat the process. (Ebullient isn’t the only company selling liquid cooling systems for data centers.)

Unlike water, the liquid would not harm computer components in the event of a leak, Shedd says.

Shedd says targeting specific internal parts is a more effective approach to cooling servers than simply exposing them to cold air, the practice at many data centers today.

“We’re getting heat from the exact location where it’s generated,” he says. “Instead of trying to cool the space, we’re cooling just the devices. That’s precisely why we’re more efficient and can be cheaper.”

Installing one of the company’s systems costs about $600 per server, Shedd says, though customers who place large orders may end up paying less. He says a facility that swaps out its existing cooling equipment for Ebullient’s is likely to recoup its investment within three years. Nearly one-third of a data center’s annual operating budget can be spent on cooling, he says, making it an important concern for the people who manage these buildings.

Looking a few years into the future, Shedd says a strategic sale could be a possibility for Ebullient, or it may opt to raise millions more to keep building the company independently.

“We want to get ourselves to the point where we’re attractive either for an acquisition or for a venture capital round, so we can accelerate to a large exit in the 2020 or 2021 time frame,” he says. “This is the capital we need to get to that next inflection point.”

January 15th, 2016

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