12 cloud computing companies to watch

As venture capital market returns to healthy levels, investors flock to cloud startups

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Venture capital investment has rebounded in recent years to healthy levels and one segment of the technology market that's basking in this is cloud computing.

Investments in cloud computing companies rose from $2.1 billion in 2010 to $4.2 billion in 2012, and according to Dow Jones VentureSource’s numbers from 2013, $3.4 billion more was invested through the first three quarters of the year.

“We’re at the early stages of the impact cloud computing will have on the broader market,” says North Bridge Venture Partners’ Michael Skok, who estimates that the cloud has penetrated less than 10% of the roughly $300 billion software market. “That makes people very bullish.”

cloud computing investing

Startups are forming up and down the cloud stack, from optimizing infrastructure services to offering development platforms. There are applications served from the cloud and new classes of apps that could not have been made without the cloud. Network World has scanned the universe of cloud computing startups founded within the past few years and built this non-exhaustive list of companies (listed in alphabetical order) that give a glimpse of what’s to come in this fast-growing market. (Watch a slideshow version of this story.)

+ MORE AT NETWORK WORLD: Previous cloud companies to watch (from 2012) | Network virtualization, SDN and data center companies worth watching +

CloudLock

Company: CloudLock

Focus: Provides security on top of Google Apps and Salesforce.com by ensuring that sensitive information is encrypted and being handled correctly.

Management: CEO Gil Zimmerman was entrepreneur-in-residence at VC firm Cedar Fund before co-founding CloudLock. Before that, he held positions at Sun and EMC. Co-founder Tsahy Shapsa is formerly of Sun and Network Appliances.

Founded: 2007, but rebranded in 2010

Based: Waltham

Funding: $28.2 million

Investors: Cedar Fund, Ascent Venture Partners, Bessemer Venture Partners

Fun Fact:Co-founders Shapsa and Zimmerman served in the Israeli Defense Forces, and Shapsa served in the Israeli Prime Minister’s office as a security team leader. Now, both executives run networking events in the Boston area for Israeli- startups.

The cloud fundamentally changes the security paradigm: Instead of having potentially sensitive information on your own premises behind a firewall, it is now on your provider’s cloud. The key to being comfortable with that model is knowing that your most sensitive data is protected, and that’s where CloudLock focuses.

The company provides data security, encryption and auditing services for workloads, specifically those in the Salesforce.com and Google clouds.

“It’s all about knowing where the crown jewels are stored,” Shapsa says. Once policies are created to instruct CloudLock about what it is looking for, it can identify that information and let users know whether or not it is encrypted, where it is located and who has access to it.

CloudLock can, for example, scan Google Drive and identify all of the credit card and Social Security numbers stored in the cloud to ensure they are encrypted properly. CloudLock uses APIs from the services it is protecting to provide the services, as well as proprietary, custom-made tools. CloudLock itself is hosted on Amazon Web Services and Google Compute Engine. The company runs all of its computations, scans and analysis through AES 256-bit encryption itself, and CloudLock works without opening or reading or storing the content of any documents or sites to ensure security of its customers.

Cloud Munch

Company: CloudMunch

Focus: Application lifecycle management software for devops and agile development processes.

Management: Co-founder and CEO Pradeep Prabhu is former VP and head of SaaS at Infosys. Co-founder and CTO Prasanna Raghavendra was head of engineering in Infosys’s SaaS practice.

Founded: 2011

Based: Seattle

Funding: $1M seed round

Investors: Svapas Innovations

Fun Fact: CloudMunch has a completely distributed workforce across the globe with no central office. All employees work from their home and the company manages its operations using its own technology.

Devops codifies the idea of software developers and infrastructure operations workers cooperating, though getting them to do so can be more easily said than done. CloudMunch has created application life-cycle management software aimed at smoothing this approach.

“Developers are adopting an agile model for building web, mobile and customer facing apps,” CEO Prabhu. “But when the time arrives to hand the app off to the operations side after the development is done, they run into multiple challenges.”

CloudMunch works across a variety of public and private cloud or infrastructure platforms, from Amazon Web Services to Windows Azure to OpenStack. PaaS tools like Cloud Foundry or AWS’s BeanStalk are even supported. By having developers and operators both on the CloudMunch system, it allows developers to track and create the software in a collaborative process, but also gives the ops team insight into what resources are needed to run the application. That allows infrastructure to be provisioned from an application-centric point of view, according ot CloudMunch.

The company is looking to break into the enterprise market, specifically targeting companies that are developing web, cloud, mobile, big data and customer-facing applications that need to be continually tested and modified.

CloudPhysics

Company: CloudPhysics

Focus: Uses a SaaS platform to deliver big data analytics to optimize how data centers run

Management: Four co-founders: CEO John Blumenthal was formerly director of product management for VMware’s ESX storage stack and before that he worked at Veritas Software. CTO Irfan Ahmad was also a VMware engineer, while VP of Operations Jim Klechner was with Currenex and Chief Scientist Xiaojun Liu worked at Google, Salesforce.com and Sun.

Founded: 2011

Based: Mountain View

Funding: $12.5M

Investors: Kleiner Perkins Caufield & Byers, the Mayfield Fund, Mark Leslie, Peter Wagner, Carl Waldspurger, Nigel Stokes, Matt Ocko and three VMware co-founders Diane Greene, Mendel Rosenblum and Ed Bugnion

It’s not an uncommon story: A smart employee works at a successful company and has an idea of how to improve a product or solve a problem that the company’s customers have… but that the company can’t or doesn’t want to undertake.

For five years, CloudPhysics CEO Blumenthal worked on VMware’s market-leading ESX hypervisor. In doing, so he ran into customer after customer who had trouble determining just how many virtual machines could be crammed into a server. The answer always seemed to be: It depends.

“It was an unsatisfying answer for me,” he recalls. “The dynamic nature of virtualized infrastructures constantly changes the answer. In essence, the idea of planning for capacity is not a static activity; it’s an ongoing process.” Blumenthal and CloudPhysics are using big data to answer complex questions about how systems are and should be running.

CloudPhysics’ users download a virtual appliance that attaches to their virtual infrastructure and aggregates data from thousands of users. By looking at this massive amount of data, CloudPhysics searches for patterns of good and bad things. The SaaS recommends configurations for maximum performance, conducts root cause analysis of problems that arise, and helps operations professionals determine the effectiveness of a measure before it is taken, such as whether a solid state disk should be cached or not.

Numerous companies offer resource optimization services for applications, including those in cloud environments. But none has been focused solely on the hypervisor layer, which is where CloudPhysics gets all its info.

North Bridge Venture’s Skok says virtualized environments have put new strains on systems, which has led to a market opportunity for analytics to optimize them. “With these guys coming out of VMware, they have a unique insight into what to look for,” he adds.

cloudvolumes

Company: CloudVolumes

Focus: Application virtualization and management software

Management: CEO Raj Parekh is a founder of Redwood Ventures and previously held CTO and VP-level positions at Sun. Co-founder and CTO Matthew Conover is a former technical director at Symantec, while fellow co-founder and VP of Products Shaun Coleman was director of product management for Citrix XenDesktop.

Founded: 2011

Based: Santa Clara

Funding: $23.5M

Investors: TiE Angels, Kumar Malavalli, Sanjog Gad, Rob Thomas, Bill Crane (former VP Engineering LinkedIn, VP Engineering Proofpoint)

Fun Fact: CEO Parekh is a serial entrepreneur, who in 1998 founded Redwood Venture Partners, which has invested more than $250 million across 30 companies. He sits on the boards of more than 15 companies, including as chairman at some.

In a world of so many applications, it can be difficult for IT shops to keep up with them all. “Shadow IT” -- or the issue of employees using cloud applications without IT knowing about it -- can be a huge security and logistical challenge. Enterprises need a way to control or rein in these rogue apps while still allowing employees to be productive, and that’s where CloudVolumes comes in.

The company’s software offers a way of managing anything that sits on an OS across an organization. CloudVolumes essentially virtualizes everything above the operating system, abstracting away the applications from the hardware and networking. “Once you uplift the app, you have the ability to have complete control over it,” Parekh says. By “ungluing” the application from the OS, it allows the application to be deployed across one or hundreds of machines, all while still giving IT control over the application. Virtual desktops are one of the company’s most popular use cases thus far.

When CloudVolumes is installed, the software captures the critical information an application or database needs in order to run, and creates a volume with it. That volume can then be attached to any, or many virtual machines. Applications can be made available to one user, or to thousands, in a few clicks within an administrative console.

Analyst Paul Burns at Neovise says there is no shortage of companies virtualizing various layers of the stack, from the compute, storage and now even the networking layer. But CloudVolumes’ approach has him intrigued. “Just as you can ‘mount’ a remote server to make its files available through your local file system, CloudVolumes lets you mount an entire application stack to make it available on the local machine,” Burns says. “This makes it really easy to deploy entire application stacks on the fly, to either desktops or servers. You simply mount the desired application stack and the applications are available. You no longer have to install or patch applications on each server or desktop, which can be time consuming and error prone.”

The company is gaining attention from some of the biggest players in the industry. In the past year CloudVolumes has signed partnerships with Citrix and Dell. Earlier this year, CloudVolumes made its software available to run in VMware virtual environments.

Digital Ocean

Company: Digital Ocean

Focus: Public IaaS

Management: The team came from hosting company Server Stack, including CEO Ben Uretsky and VP of Marketing Mitch Wainer.

Founded: 2011

Based: New York City

Funding: $40.4M

+READ MORE AT NETWORK WORLD Startup Digital Ocean lands $37M to take on Amazon in the cloud +

Investors: Andreessen Horowitz, IA Ventures, CrunchFund, TechStars

Fun Facts: Digital Ocean was born out of the TechStars startup accelerator program, which provides seed funding via more than 75 venture capital firms and angel investors. The named Digital Ocean is meant to be a play on words: The company’s compute services are named Droplets, like those formed from the water in the ocean and that make clouds.

Some investors believe that the infrastructure as a service (IaaS) market is already saturated. Not only does Amazon Web Services sit atop the market, but big players like Microsoft and Google have set their sights on IaaS, too. So how can a startup like Digital Ocean possibly compete?

The company’s founders and management team point to the fact that they used to run a managed hosting provider, so they know a thing or two about infrastructure. Digital Ocean’s cloud architect held the same title at IaaS company GoGrid. Plus Digital Ocean is very focused: It’s targeting developers and its goal is to be the simplest-to-use cloud on the market.

Digital Ocean also competes aggressively on price. It offers a base-level virtual machine image for less than a penny per hour ($0.007 per hour), although it does only come with 512MB of memory. By comparison, AWS’s lowest-cost micro instances start at $0.02 per hour.

Since launching its service to the general public in January 2013, Digital Ocean has grown its customer base to 100,000 users.

According to Netcraft, which monitors cloud usage, Digital Ocean added more new accounts on a month-over-month basis in November and December than even AWS. So, perhaps the IaaS market isn’t fully settled just yet after all.

Docker

Company: Docker

Focus: Based on an open source project, Docker offers an alternative approach to virtualization to apps developers via containerization technology.

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