Fast-growing demand and increasing competitive market dynamics has spurred deal activity to infrastructure-as-a-service startups hoping to take on Amazon and other incumbents.

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The market for cloud computing infrastructure-as-a-service is heating up. Ranging from Amazon Web Services and Verizon Terremark to a host of smaller startups, IaaS providers aim to deliver hosted, on-demand, scalable infrastructure resources (server, storage, and network infrastructure) to facilitate computing, storage and connectivity.

In our earlier research, we looked into deal activity trends around platform-as-a-service (PaaS) startups in the cloud computing industry. And while the PaaS ecosystem is seeing a decline in venture funding amid growing M&A consolidation, deal activity to the cloud computing category known as Infrastructure-as-a-Service (IaaS) has seen a steady increase. PaaS offerings differ from those of IaaS in a significant way. Whereas PaaS companies give control of both underlying infrastructure resources and the application development platform to the customer, IaaS vendors manage only the underlying infrastructure level.

IaaS adoption is growing as enterprises increasingly turn to a cloud-based IT model to reduce their cost and time expenditures. The sector’s fast-growing demand and increasing competitive market dynamics (as evident by the number of new players entering the market and shift in market concentration) is gaining interest from venture investors.

Over the past four quarters, 34 IaaS-related companies (which range from IaaS platforms to IaaS management tools) received $341M of funding across 45 deals. On a year-over-year basis, deal activity has jumped 50% while funding has ticked up 5%. As shown in the chart below, deal activity to IaaS companies has increased consistently over the past three quarters while funding activity has remained relatively stable. Recent deals in the space include Virtustream’s $40M Series D round and Zimory’s $20M round led by Deutsche Borse.

Interestingly, over 1/2 of the IaaS deals over the past two years have taken place at the mid-stage (Series B and Series C), while early stage deals (Seed and Series A) took 29% of deals. Among the firms to recently receive mid-stage funding are Cloudscaling, backed by Trinity Ventures and Juniper Networks and Intel Capital-backed Virtustream which raised both a Series C and Series D round since the start of 2012.