Cloud services startup Midokura has completed a $17.3 million Series A funding round to build out MidoNet, its network virtualization product.

The company is also promoting co-founder and CTO Dan Mihai Dumitriu to CEO to leverage his technical background in marketing the service. He takes over for Tasuya Kato, who is moving to the Chairman position.

Innovation Network Corporation of Japan (INCJ) led the round, with NTT’s DoCoMo Innovations and NEC’s Innovative Ventures Fund participating as well.

“The financial support of Innovation Network Corporation of Japan and other key backers validates our strategy, as well as the work we’ve done over the past three years developing our industry leading product MidoNet, and will enable us to accelerate our product engineering, the establishment of partnerships, and the growth of our customer base,” Mihai Dumitriu said in a statement.

Midokura describes its product, which is integrated with Rackspace’s OpenStack, as an “overlay-based network virtualization technology” for Infrastructure as a Service (IaaS) clouds.

midonet 730x398 Midokura nabs $17.3m to scale up its cloud network virtualization service

The company got its start in Japan in 2010. The team was originally focused on implementing Amazon Web Services in Japan, but they pivoted to work on virtualization after realizing that network was effectively broken without it. Midokura’s Chief Strategy Officer Ben Cherian described it as transforming IaaS into a “really big router”.

For an in-depth look at MidoNet, check out these posts from Ivan Pepelnjak and Brad Hedlund.

Cherian says the new round of funding will take Midokura to the “next level” and make its product even better.

MidoNet launched in Beta last October and is scheduled to hit general availability later this year. Cherian said this year will be a proving year for the Software-Defined Networking (SDN) market. The company plans to build itself up this year before making a big push in 2014.

Cherian indicated that the market is still fairly early in understanding Midokura’s particular breed of network virtualization, but he’s confident that things will change quickly.

While the market might not be fully educated, there does appear to be plenty of interest. Nicira, a startup also working on an SDN solution, was acquired by VMWare for more than $1 billion. If it succeeds at scaling, Midokura has an excellent shot at being one of the top players as the cloud virtualization market matures.

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