Rackspace Hosting, backed by Norwest Venture Partners and Sequoia Capital, Friday inched closer to entering the tumultuous public markets Friday by setting the price range for an auction-style IPO expected on the New York Stock Exchange the week of August 4.

 The 10-year-old company is plowing ahead with the deal despite unforgiving market conditions and this week’s GT Solar debut that has cratered in its first two days of trading on the Nasdaq Global Market.

U.S. venture capitalists have witnessed one of the toughest exit markets in memory with not a single venture-backed initial public offering in the second quarter.

GT Solar, a private-equity-backed maker of manufacturing equipment for solar producers, priced its IPO in the middle of its range, but was battered once the shares began trading on the public markets. After opening at $16.50 on its first day of trading Thursday, GT Solar lost 11.6 percent to close at $14.59. On Friday, the carnage continued, with shares plunging $2.32, or 15.9 percent, to $12.27 in late morning trading.

Should the 15-million-share Rackspace deal price at $14, the middle of its projected range of $12 to $16, it would raise $210 million, including $162.6 million for the company, or $187.4 million for the company if the underwriters exercise their over-allotment option. The company said proceeds are expected to go toward accelerating growth and paying down debt.

In 2007, Rackspace, based in San Antonio, Texas, recorded net revenue of $362 million, a 62 percent increase over the prior year’s $224 million. Net income, however, retreated to $17.8 million from $19.8 million on higher interest expenses and sales, marketing, general and administrative expenses.

The trend toward “cloud computing,” in which businesses and individuals use online applications and storage rather than rely on desktop applications is expected to benefit Rackspace’s Mosso subsidiary, acquired in 2006.

Norwest, which owns 16.5 million shares, or about 16 percent of the total, and Sequoia, which owns 11.8 million shares, or 11.4 percent, don’t plan to sell any shares in the IPO, though their positions will be slightly diluted to about 14 percent and 10 percent.

Lead underwriters on the offering are Goldman, Sachs & Co., Credit Suisse and Merrill Lynch.  Also participating are W.R. Hambrecht, Jefferies & Company, Cowen and Company, RBC Capital Markets, JMP Securities, Signal Hill Capital Group and E*Trade Securities.

Unlike traditional IPOs, where the price is determined after the underwriters gauge the market interest, Rackspace will use an auction process, which will let buyers set a price at which the share inventory is cleared. If the bidder sets a price too low, they will get no shares, but if their price is at or above the clearing price, they will get shares at that price. For instance, if a bidder asked for 100 shares at $14 per share, but the auction price was $13 per share, the buyer would get 100 shares for $1,300.