Denver-based Faction Doubles Down on Expansion After $6M Round

For Faction, a Denver-based company that offers private, public, and hybrid cloud computing services, running over budget has been a good thing, according to CEO and founder Luke Norris.

Faction exceeded its revenue and growth targets for the year—and likely will again next year—partly because the company has added more customers than it expected, Norris says. But before customers can use and pay for its services, Faction must spend money to buy and install its cloud computer infrastructure, which has led the company to sell equity and debt to compensate, Norris says.

Faction announced a $6 million debt and equity financing round this month. Existing investors Meritage Funds and Sweetwater Capital provided the equity financing, while Ares Capital provided the debt funding. Ares invested in a similar $9 million round in 2014 alongside Sweetwater and Meritage.

“We’ll continue to expand in 2016, geographically,” Norris said in a telephone interview. “We’re also looking to expand through acquisitions, roll-ups of small organizations in new markets for us. For the next couple years, I want to hit 50 percent year-over-year growth targets.”

Faction changed its name from Peak in February 2015 as part of a corporate rebranding, as Faction has also focused the pitch of its services based around flexibility. It offers customers who want private cloud services a way to buy units of its offerings—incremental gigabytes of RAM, gigs of CPU, and gigs of storage that the company calls blocs—rather than in bulk, Norris says. The company has seven nodes for its network spread across the U.S. in Denver; Seattle; Santa Clara, CA; Chicago; Atlanta; New Jersey; and New York; and one in the United Kingdom.

“Typically in a private cloud situation, if you have dedicated resources, you have to take down 100 percent utilization of that dedicated resource to you because there’s going to be nobody on it,” Norris says. “We have figured out a way to parse that up, in a way that customers can actually buy it in very small discrete units, much in the way they would buy or consume public cloud or shared resources.”

In addition to that parceling method, which Norris says is patented, the company has developed patented methods of helping its customers connect with its networks, he says. The company, which was founded in 2006 as PeakColo, gets most of its business from selling its offerings to service providers who either build unique products on top the Faction infrastructure, or white-label its infrastructure under the name of their brand, Norris says.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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