CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Maybe "cloud-computing" hasn't lost its VC luster

While at least one venture capitalist noted recently that simply calling your start-up a "cloud" may not be enough anymore, Gamiel Gran of Sierra Ventures enthusiastically embraces the term.

I spent a little of Easter weekend preparing for Under the Radar, in which I will be one of several industry veterans judging some of the latest start-ups pitching their cloud-related businesses. (If you are interested, there are still VIP tickets available.) The conference organizers have told me that both the start-up and venture capitalist interest has been very high, and that registrations are actually higher this year than they were last year. Cloud computing remains an excellent draw, it seems.

In reviewing the companies I will be judging this year, it feels like the term "cloud" covers way too much ground to be useful in a venture pitch. In fact, a few weeks back I wrote a post that built on a conversation I had with venture capitalist Lars Leckie of Hummer-Winblad Venture Partners, in which I asked whether "cloud computing" has lost its VC luster.

It's possible I'm being a little too harsh on the term, however. Soon after writing that post, I exchanged e-mails with good friend and sometimes mentor Gamiel Gran, vice president of business development at Sierra Ventures. I asked Gamiel what he thought of the term "cloud computing" as it is applied to start-up pitches.

His response, frankly, surprised me. Far from being a confirmation that the use of the term has gotten out of control, Gamiel embraces "cloud" for all it's worth (and it's worth multiple trillions of dollars in Sierra's estimation). He is excited about the opportunities that cloud computing presents for new businesses, and wants to see more of it--lots more of it.

Here is the complete text of Gamiel's response:

James, here's some random thoughts on cloud that I hope you find useful...the bottom line is we like it a lot... the term cloud is a catalyst for broader thinking of innovation, innovation dislocates the incumbents, and unlocks new variations of opportunities ... who couldn't love all of that. But with any near term you have to make sure you understand one's point of view, and the value of what's being offered. As a venture firm, our job is to hear pitches from entrepreneurs of all types... if cloud inspires more ideas then we love it

Cloud is a great term - it offers a visual that's extensible in nature and one in which almost anything can fit into. Turns out this is also a problem. As a venture firm focused on early stage, market changing technologies, we are Sierra Ventures hear the term 'cloud' in nearly all emerging IT related pitches we see. But putting the hype aside - we would like to hear more!!

We believe that there is indeed a major, multi-trillion dollar IT transformational wave occurring...and that we have only begun to see innovative solutions. Virtualization was the hype of the last couple years, and successfully opened up a new of way of thinking for server utilization. It of course uncovered a number of other opportunities and problems. When I speak with CIO's of large IT organizations, they tell me that they have 'fully' leveraged virtualization, BUT have only 15-20% of their application resources deployed within virtualized application containers. They know they aren't done - and that there are better ways to build, deploy and manage the resources they are responsible for today... and they are looking for tools across their entire IT infrastructure stack to further optimize on IT cost both operationally and as well from a capital standpoint. These CIO's are asking for more innovation here - but they practical and high impact needs - marketing hype won't make it over the increasingly tough justification hurdles they must reach to get budget for new projects. Cloud must be practical and serve current needs.

Cloud is a great term - as I said before, it is inspiring the customer to think differently, it creates new perspectives that uncover holes - holes for the network layer, the security layer, storage, and client side efforts. You could visualize applications that are designed to be cloud-ready, where application usage is easily metered, and systems and monitoring tools could follow-the-moon, and where the application logic dynamically provisions resources, and can leverage arbitration and pricing algorithms for best terms among competing public and private cloud networks... this vision is a reality for some companies ... and a dream for others who will require more evolved solutions and tools before jumping into a cloud.

So, keep the cloud ideas coming, more is merrier! Just make sure they solve real customer problems, that they are grounded in use case definitions that consumers can easily comprehend and put a business case around.

Gamiel doesn't go into detail about how one should differentiate themselves within the cloud market, but if I were pitching my business, I probably wouldn't simply hitch my star to "we are cloud" as a differentiator. In fact, I'd probably work very hard at clearly defining the aspect of cloud computing that my product addresses.

So, among other things, I'll be interested in seeing how the Under the Radar participants describe their cloud computing market segments, then define themselves--all within six minutes.

This is going to be fun!