$7.4 million for CloudSwitch, Which Aims to Make Cloud Computing Safe for the Enterprise

Better late than never?

Two Boston-area venture capital firms just put the finishing touches on a $7.4 million A round for Bedford, Mass.-based CloudSwitch this week. It's the first investment in a pure-play cloud computing start-up here in Massachusetts that I'm aware of. Matrix Partners incubated CloudSwitch in its offices for much of 2008, and Atlas Venture joined in the funding round.

The company was founded by Ellen Rubin (CEO) and John Considine (CTO), both of whom had earlier worked at other Matrix portfolio companies. Rubin had headed up marketing for Netezza, leaving last February following the company's 2007 IPO; Considine had worked at Pirus Systems, acquired by Sun back in 2002.

Rubin isn't saying much about what they're up to, other than that they're developing software to help enterprises manage cloud computing services. "I don't want to say much for competitive reasons, but we're working with partners and customers now, and building out our offering," she told me today. She said they'll be ready to divulge more in the spring. The company has about ten employees, and office space in Bedford.

Rubin says they're hiring, but there's no listing of jobs on the company's one-page Web site. Rubin says they're working with recruiters, and talking with folks who're part of the founding team's network.

"I've been paying attention to cloud ideas for about 18 months," says David Skok of Matrix. "John [Considine] is a storage guy, but I kept saying, 'Go look at what Amazon is doing. It's totally amazing.' He came back with a cloud idea, and I introduced him to Ellen. Then we spent a lot of time working with them to shape a defensible idea."

Axel Bichara is the Atlas Venture partner who'll take a seat on the board. Also on the board at CloudSwitch are Jit Saxena, CEO of Netezza, and Andy Palmer, a serial entrepreneur who has been involved with Bowstreet, Vertica, Infinity Pharmaceuticals, and Byledge.

The only previous mention of the company I've been able to find is this quick name-check from GigaOm.

Friday Morning at Matrix Partners

I had a chance to sit down with David Skok and Nick Beim this morning at Matrix Partners in Waltham. We covered a lot of ground...but I was especially interested in some of the higher-level perspectives that David and Nick served up.

David says that when people think about disruption, they often think about technology disruption: cell phones replacing land-lines, or minicomputers replacing mainframes. "But what's more often happening now," he says, "are business model disruptions." He mentioned two in particular: companies offering software as a service are gnawing into the revenues of companies that sell software by-the-seat, and companies built on open source technology are taking share from companies with proprietary technology. David, of course, is investing in open source, and he says he has investments in two new SaaS companies that are still in stealth mode.

Nick, whom I bumped into yesterday at the Y Combinator Demo Day, is an investor in TheLadders.com, based in NYC, and Care.com in Waltham.

"There has been lots of attention given to viral sites that work, like YouTube, MySpace, Facebook, and Flickr," Nick says. But how many sites are out there with plans to "go viral" that no one has ever heard of?

If you look at who's actually making money, Nick says, some of the more interesting businesses are being built around lead-gen, product comparison sites, and online subscriptions. (He's especially a fan of TripAdvisor, the Needham site that is basically a lead-gen engine for online travel agencies.) As examples of the last category, he mentioned a few companies I hadn't heard of...like Bag Borrow or Steal and Steve Case's Revolution Places, as well as a few I had, like Zipcar, Netflix, and MyFamily.com.

Before I left, I tweaked Matrix a bit for not having a partner who blogs. There's a disruption happening here, too: not a technology or business model disruption, but a networking disruption.

I think the old model of venture capitalist, which I'm sure can still be successful, waits for the entrepreneur to figure out how to network her way to them: who can introduce me, how do I make the connection and get that meeting? The new model was on display Thursday at Y Combinator: VCs like David Hornik and Fred Wilson (of CA and NY, respectively), whose blogging helps weave them into the entrepreneurial community and makes them more accessible. People know what they're thinking about because they blog it -- and that gives them an opening to say, 'I know you've been blogging about X, and we're building a company in that space.'

I wonder if, over time, that may give them access to more deals of the Facebook type, where a founder is in college or just out, has no connections to the Waltham VC community, may not know any entrepreneurs who can make introductions, but happens to bump into one of these blogging VCs at an event.