VMWare’s IPO in 2007 marked a watershed moment in the virtualization space. Since then, the virtualization market has grown immensely with venture capital investments encompassing a wide range of virtualization technologies within storage, networks, desktops and databases. And M&A interest around the growing base of virtualization startups is heating up as well.
Since the start of 2012, there have been more than 20 acquisitions of virtualization-related companies. While year-over-year exit activity has fallen 8%, the exit trend is still up materially since 2011 as evidenced by the spike in activity below.
Interestingly, while VMWare built its business by dominating the server virtualization market, the growth in exit activity appears to be driven by strategics picking up network virtualization startups including VMWare’s $1.26B acquisition of Nicira Networks, Oracle’s acquisition of Xsigo and Brocade’s acquisition of Vyatta. The chart below highlights exit activity in the software-defined networking space, which has taken just over 1/4 of virtualization exits between Q1’12 and Q3’13. (related: Big Exits Spur $416M in VC Financing to Software-Defined Networking in the Last Year).