Venture Investing: Clouds Reign

By Stan Gibson  |  Posted 2008-10-01 Print this article Print

Cloud computing is a hot area for investors and startups, but Wall Street may not be buying the hype.

Cloud computing lightning is beginning to strike investors.

"It's an incredibly hot area for venture capital funding right now. Because this is such a significant shift in IT infrastructure, there's a desire to get into it early," said an entrepreneur who asked not to be named and who is planning to launch a cloud service in the next 12 months.

Some startups are bootstrapping themselves while others are obtaining funding in varying amounts.

PAAS (platform as a service) provider 10gen garnered $1.5 million in July from Union Square Ventures. Also in July, Engine Yard, which offers a cloud-based Ruby on Rails platform, signed $15 million in funding from New Enterprise Associates, with participation from and previous investor Benchmark Capital.

In June, Charles River Ventures and Menlo Ventures co-led an $11.37 million investment in ParaScale, a provider of cloud-based storage. RightScale secured $4.5 million in first-round financing from Benchmark Capital in April 2008. RightScale provides tools for developers to create applications for Amazon Web Services.

Elastra, a provider of cloud computing middleware, has received a total of $14.5 million from Hummer Winblad, Bay Partners and, according to Elastra CEO Kirill Sheynkman. "We're software that lets you design, deploy and manage applications in private and public compute clouds," said Sheynkman, adding that Elastra is particularly focused on enabling organizations to move existing applications to a cloud infrastructure.

Coghead, a PAAS provider on Amazon Web Services, has received $12 million in funding, according to company officials.

While venture capitalists may get the cloud concept, there are signs that Wall Street may not. Rackspace, a Web-hosting company that is investing in Mosso, a cloud computing capacity management provider, saw its August IPO open at $12.50 per share, only to drop to near $10 per share at the end of the first day's trading and languish in that neighborhood since then.

"There's so much hype around [cloud computing] now," said the entrepreneur who asked not to be named. "There's the feeling that it could only disappoint." 

Stan Gibson is Executive Editor of eWEEK. In addition to taking part in Ziff Davis eSeminars and taking charge of special editorial projects, his columns and editorials appear regularly in both the print and online editions of eWEEK. He is chairman of eWEEK's Editorial Board, which received the 1999 Jesse H. Neal Award of the American Business Press. In ten years at eWEEK, Gibson has served eWEEK (formerly PC Week) as Executive Editor/eBiz Strategies, Deputy News Editor, Networking Editor, Assignment Editor and Department Editor. His Webcast program, 'Take Down,' appeared on He has appeared on many radio and television programs including TechTV, CNBC, PBS, WBZ-Boston, WEVD New York and New England Cable News. Gibson has appeared as keynoter at many conferences, including CAMP Expo, Society for Information Management, and the Technology Managers Forum. A 19-year veteran covering information technology, he was previously News Editor at Communications Week and was Software Editor and Systems Editor at Computerworld.

Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel