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Virtual Iron secures $20 million

Virtual Iron has plenty of competition, but the sever virtualization company says it's valuation increased in a new round of funding.

Virtual Iron, a start-up aiming to commercialize the open-source Xen virtualization software, has raised $20 million.

The investment include Highland Capital Partners, Matrix Partners, Goldman Sachs, Intel Capital, and SAP Ventures, the Lowell, Mass.-based company said. Total funding for the company now has reached $65 million, the company said Monday.

Virtual Iron had "dramatic growth" over the last 12 months, and the new funding round was at a higher valuation, the company said. It didn't release particulars, but did cite IDC statistics saying that spending on server virtualization is growing at 60 percent per year and that Virtual Iron is growing faster than the overall market.

Virtual Iron also grown internationally, with 40 percent of revenue from outside North America, and has distributor deals with Avnet and Tech Data.

Virtual Iron competes chiefly with virtualization powerhouse VMware. However, it looks like the company has its sights set more on the host of second-tier alternatives, including Citrix Systems' XenSource, Microsoft's forthcoming Hyper-V, and Parallels' forthcoming Parallels Server.

"Virtual Iron is the only competitor to VMware in the market that has the features to support the high-value use cases for virtualization such as dynamic workload management, fault tolerance, and disaster recovery," said David Skok, a general partner at Matrix Partners.