The investment follows a series of cash infusions Sigma and Highland, based in Boston and Lexington, Mass., respectively, have advanced to the company to expand its $13.5 million Series B round of March 2005 from $13.5 million to a final tab of $31.5 million.

ExaGrid has raised $65 million overall, and the company expects the new money to take it to profitability.

ExaGrid chief financial officer Paul Bernard would not disclose a valuation for the deal, but he said that following the long series of insider investments, the new round won a better-than-double pricing from previous investment. The company did not shop the deal widely, but it spoke to a number of investors with inbound interest in the round before negotiating a term sheet directly with Lehman.

The new investment validates a switch in strategy the company made in late 2004 before raising its second round to focus on the fast-growing but still latent demand for systems to allow companies to easily shift secondary storage systems from tape to disk media. ExaGrid had initially designed systems for both primary and secondary storage and introduced products in 2004, but it decided at the end of the year to retool to offer specialized backup systems.

The decision set the company back about a year, but Bernard said demand was strong after the company launched its second-generation product in the first quarter of 2006.

ExaGrid makes systems using off the shelf components that allow midtier customers to manage backup data using faster, more reliable and more secure disk-based systems for about the same price as legacy tape systems. The company aims its products at customers that maintain backup data on site on their own servers, and he said average initial sales are about $55,000 per customer, with recurring revenues on software licensing.

The company's system operates on a grid-based architecture, which takes advantage of multiple computing resources and allows for greater scalability, while reducing data duplication.

Bernard said he believes the market for shifting from tape systems to disk is still early, but that the shear demand for greater backup is driving sales. He said that both business and regulatory factors are driving adoption, with greater need to back up primary data storage systems quickly without disrupting enterprise applications, and by the need for retention and easy access for regulatory compliance with the Sarbanes-Oxley Act and greater demands of the Health Insurance Portability and Accountability Act of 1996.

Brian Paul, a managing director with Lehman, said the investment fits the firm's focus on companies with established product validation and customer traction in emerging markets. He added that the product's scalability and features for reducing duplication are important factors as customers move from tape to disk for backup.

Bernard said ExaGrid used no outside financial adviser for the round. It had legal work on the deal from Brian Lenihan of Choate Hall & Stewart LLP in Boston. Gregg Griner of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP in Waltham, Mass., represented the investors.