Cloud Computing Is Growing Up, and Venture Capitalists Are Feeding It

Cloud computing
Cloud computing

Nothing like a nice liquidity event to spark venture capitalist interest. Last week, on-demand-software giant (CRM) acquired a software startup called Heroku for $212 million in cash. The startup, which provides a sandbox for software developers to build and publish Ruby-on-Rails applications (a programming system popular for fast Internet development), was only three years old and had raised a mere $13 million. So, the Salesforce buy provides a very nice exit for its investors and founders.

That's par for the course these days as cloud computing goes from buzzword to reality. And venture capitalists seeking promising startups at relatively moderate prices are flocking to put money into the next Heroku.

I recently wrote about Standing Cloud, a startup that seeks to make it much easier for small businesses to use the cloud, and its $3 million fund-raising round early last week. Then on Dec. 9 another cloud-focused startup, Factual, announced a $25 million funding round. Factual creates a platform that pulls in hundreds of thousands of datasets from all across the Internet in myriad categories and allows software developers to use those constantly updating datasets as an on-demand service. This is a fundamentally different cloud-based approach to aggregating data used to create things like popular online local directory listings.

Factual founder Gil Elbaz built the software that Google (GOOG) acquired and uses to underpin its AdWords system, the business that accounts for the majority of the search engine's profits. Factual counted among its backers the venture capital firm Andreesen-Horowitz, the fund whose founders have extremely deep expertise in enterprise computing and founding things like Netscape.

Constantly Adding New Layers

Another astute venture capitalist, Mark Suster (who sold his last company to, sums up the underlying reason for the rapidly expanding interest in cloud computing. Granted, some of this is just because it's growing very quickly, but Suster also explains that the ecosystem around this area is slowly building layer upon layer of functionality in a mechanism similar to what happened with personal computers and later with data centers and Internet applications.

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At first the cloud was a bare-bones computing repository, initially offered by online bookseller Amazon (AMZN). Then came tools that would allow an info-tech manager to more easily control and configure virtual servers in the cloud. Next came additional layers of control with companies like Standing Cloud providing one-click deployment of commonly used applications. Then there's Salesforce itself, which is not only a buyer of cloud computing firms but also an industry player in its own right.

The company, built by Oracle (ORCL) alumni Marc Benioff, launched its own cloud-based database system,, which acts as a highly distributed, highly secure virtual database platform. (People have been running databases in the cloud for some time, but they tended to run on one or several virtual machines -- the equivalent of a single server in the real world).

The buzz about the cloud may be getting louder but also more realistic as the entire concept morphs from an abstraction with just basic functionality to something that becomes far more useful and, more important, easy to use.

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