Dean Nelson prefers an analogy borrowed from the sharing economy: his company, he says, operates like Airbnb for servers.
The comparison might raise eyebrows among infrastructure purists, but it captures something essential about Cato Digital, a Milpitas, California-based startup attempting to carve out space in the increasingly crowded bare metal cloud market by doing what the hyperscalers won't. Signalbase reported that the company raised $6.7 million in a seed round, though this remains unverified—Cato has not confirmed the figure and no SEC filing or formal announcement could be located.
What Nelson, the company's CEO, has confirmed is the underlying thesis: there's untapped value sitting idle in data centers across the country. According to the company, refurbished servers, including second-life NVIDIA DGX2 GPUs, can find new purpose in underutilized facilities with stranded power capacity. The result, according to the company, is computing delivered at roughly half the cost of major cloud providers.
It sounds almost too straightforward, which is perhaps why Cato Digital—formerly known as Virtual Power Systems—has spent the past few years proving the concept works in practice.
The startup's M9 software handles the orchestration, managing power distribution across workloads and allowing customers to select lower availability tiers when they can tolerate the tradeoff. In exchange, they get reduced costs and a smaller carbon footprint. Sustainability appears central to the pitch. Cato joined the Infrastructure Masons Climate Accord in April 2022 and has consistently positioned itself around second-life hardware and clean energy.
The company's first deployment went live at Hudson Interxchange in New York City in March 2023, with AI platform Neu.ro serving as an early customer. A year later, Cato landed what may be its most distinctive deal yet: becoming the first customer of EdgeCloudLink's hydrogen-powered data center in Mountain View. According to a LinkedIn post by Nelson in August, the facility had maintained 100% uptime over a year of off-grid hydrogen operation—a claim that, if accurate, would mark a noteworthy milestone for alternative energy in mission-critical infrastructure.
The broader market context offers some reason for optimism. Grand View Research pegged the bare metal cloud market at $13.6 billion in 2026, with projections suggesting a compound annual growth rate of 21.4% through 2033. Whether Cato can capture meaningful share remains an open question. The company faces competition not just from established players but from a wave of startups chasing similar efficiency plays.
Still, there's something compelling about the underlying bet: that in an industry obsessed with building bigger and newer, there might be opportunity in making smarter use of what already exists.
