SynapSense lands IBM pilot project
Aug 17, 2007
Sacramento Business Journal
A Folsom startup, developing technologies that could cut energy use in data centers, has quietly embarked on a pilot project with one of the world's biggest players in the data-center field -- IBM.
The companies have been working together for only about 30 days, but if all goes well, the project with International Business Machines Corp. could throw open a door to a global market for SynapSense Corp. Some IBM partners even become acquisition targets for the computing giant.
The opportunity beckons at a time when SynapSense is close to wrapping up a new round of venture capital financing. The new cash would go to expand the company's sales and marketing team and to lease bigger offices, said board chairman Corley Phillips, who also is co-founder of local investment fund American River Ventures.
Phillips wouldn't say how much SynapSense is raising.
SynapSense was founded in spring 2006 by Pete Van Deventer, a 10-year veteran of Intel Corp., and Raju Pandey, a computer scientist at University of California Davis. It's already drawn backing from VC investors. American River put $1.25 million into a first round of financing in May 2006, with Nth Power of San Francisco adding $500,000 and DFJ Frontier of West Sacramento kicking in $250,000. None of those investors would discuss details of the new cash push.
The startup has developed wireless sensors that can be linked together with software; the system is based on wireless network research conducted at UC Davis and could be used to run a more "green" data center. The sensors monitor dozens of variables, such as temperature, humidity, motion and air flow. That allows data center operators to identify spots where server computers run particularly hot, allowing them to make adjustments for improved efficiency.
IBM (NYSE: IBM) this year said it would commit $1 billion annually to develop more energy-efficient data centers. As part of its "Project Big Green," the company's Venture Capital Group is looking for the next clean-tech startup success stories -- companies that could help its customers reduce energy needs.
"SynapSense looked like it certainly fit that bill," said Drew Clark, director of strategic insights for IBM's Venture Capital Group in Menlo Park.
Rising demand for less power use
Although IBM's relationship with SynapSense is new, Clark acknowledged that if all goes well, the opportunities would be global.
"Certainly, IBM operates a very large network of data centers," he said. "The prospect of being able to deploy this across IBM is very compelling."
SynapSense is just one of many startups at which IBM is taking a closer look as it builds a pipeline of bright, new companies it hopes to turn into business partners. Some partners sell to IBM, while others provide products and services that it can combine with its own offerings to customers. IBM doesn't have any financial investment in the startups, but may offer help with sales and marketing or other support.
Since IBM established its Venture Capital Group in 2000, the company has gone from working with 20 firms funded by venture capitalists to establishing more than 1,300 partnerships with VC-backed startups since 2004, said Kaveri Camire, global communications manager for IBM.
Revenue generated through business partnerships, including those with green startups, account for one-third of overall IBM revenue, Camire said. The Venture Capital Group also has had a major impact on IBM's software acquisitions, having influenced half of them in the past couple of years, she said. "We never acquire a company without having a prior working relationship with that company."
Clark said SynapSense is not a full-fledged green partner yet, but he said landing a pilot project in a major IBM data center in Gaithersburg, Md., a Washington, D.C., suburb, is a "significant win for them."
The results so far, Clark said last week, are very promising. "The manager I talked to this morning sounded very confident that the company is delivering what they said they would."
IBM is vetting whether SynapSense's product -- the wireless sensor network pulled together by "smart" software -- is easy and quick to deploy and can help data centers operate more efficiently.
So far, so good. "It's very easy to get these systems up and running and to build their 'dashboard' and monitor systems in short order," Clark said. "We're very pleased with the speed of deployment and customizing to this environment."
Bright future? No comment
If a successful pilot becomes a successful partnership, opportunities for SynapSense could go beyond deploying the sensors across IBM's own data centers to include developing products and services for IBM's customers.
Clark declined to talk about what could be in store next for SynapSense, or when.
"I'm sure both sides are very excited about a way to move forward," he said. "It depends on a lot of things that I can't comment on."
Data centers already typically monitor conditions using technology, but what's been missing, Clark said, is a way to gather enough data to actually reduce energy consumption. Energy use is a major cost for data centers; a 1-megawatt data center can rack up a $17 million electric bill over 10 years. As demand grows for data services, power-hungry centers could strain already-tight power supplies in some cities.
SynapSense chief executive officer Van Deventer declined to comment on the pilot program with IBM, citing a nondisclosure agreement. He also declined to discuss revenue or how many employees SynapSense has.
Van Deventer said SynapSense is working with "quite a few" other large corporations. He declined to name them, adding that he has nondisclosure agreements with all of them.
"There is so much market opportunity for wireless and wireless instrumentation," he said. "This is a very, very early point in the curve for all of (the industry players)."
DFJ Frontier managing director Scott Lenet said SynapSense feels like a Silicon Valley startup.
"You have Pete out of Intel, Pandey out of UCD, and you have two institutionally backed VC firms cooperating together to fund this deal, and people at SARTA (Sacramento Area Regional Technology Alliance) are excited about it," he said. "It's an IT deal, a clean-tech deal, and it looks like it's going to grow quickly."
There's a "buzz" at the Folsom office, Lenet said.
"People are packed in there," he said. "There's a special energy. People are working hard, they're staying late."
Phillips said while SynapSense is focused now on the data center market, the company has the ability to expand its sensors into other markets, too. "They have good fundamental technology that has a broad applicability," he said.
IBM could be the kind of big partner that creates opportunities for SynapSense.
"A small company has a limited amount of resources," said Gopan Madathil, president of the technology networking group TechCoire. "For a small startup to form a partnership with a big corporation with a large footprint really opens up doors for them. ... If SynapSense does well, that is really powerful."
It could mean big dollars for SynapSense, Madathil said.
IBM is one of the biggest owners and operators of data centers in the world, with power-hungry operations covering about 8 million square feet. A contract to deploy sensors in all of those centers would be worth $30 million to $40 million, Madathil estimated.
Wireless sensor network technology deployments will result in more buildings using less energy, needing less maintenance and producing lower carbon emissions, according to ON World Inc., a San Diego firm that conducts research on wireless markets.
A recent study by ON World concluded that by 2011, global revenues for wireless sensor networks in commercial buildings will be $2.6 billion.
Twenty-five percent of commercial building energy reduction will be attributed to wireless sensor networks in 2013, worth $7.4 billion in global energy savings, the study states.