$8 Million More of 'Under the Mattress' Money for CloudSwitch

Here's an item that'll spark some jealousy in any entrepreneur who finds it tough raising venture capital in the current climate: CloudSwitch has raised a second round of $8 million in venture capital funding, led by new investor Commonwealth Capital Ventures. This follows a first round of $7.4 million that was first reported here on Innovation Economy in January.

I spoke to founder and VP/products Ellen Rubin late on Friday, as the company was moving into new office space in Burlington. (The funding news was under embargo until this morning.) The company now has 18 people, including new CEO John McEleney (formerly CEO at SolidWorks), co-founder and CTO John Considine (formerly of Sun and Pirus), chief architect Fred Oliveira (who formerly worked on EMC's Atmos cloud offering), VP of product management George Moberly (ex of EMC and BladeLogic), and VP of engineering Sean Henry (formerly of RSA.)

"We weren't really actively looking for money," Rubin said. "But there was a fair amount of pre-emptive interest at attractive valuations. Having John McEleney join was the catalyst. He's pretty well-regarded, and had a phenomenal track record at SolidWorks. He knew the Atlas and Matrix guys [who led CloudSwitch's first round], and has known the guys at Commonwealth for a long time." Eliot Katzman is the partner at Commonwealth who will join CloudSwitch's board; Matrix and Atlas participated in the new round. CloudSwitch's objective is to help make the low costs and flexibility of cloud computing services safe for enterprise use.

"This is one of those funny situations," Rubin told me. "We'd just raised the A, and we weren't going to be looking for more money until well into 2010. This is just money to have, so we can focus on getting the product out the door. You just put it in the bank and let it sit there."

Nice situation to be in...

$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.

Tabblo Founder Antonio Rodriguez on East v. West

Antonio Rodriguez, the founder of Tabblo, gave a talk to the Stanford Alumni Club of New England today, which focused on the headwinds that consumer companies can sometimes face in our region. I didn't get to see it in person, but thankfully, Antonio has posted the notes of his talk on his blog.

An excerpt:

The hardest part of embarking on a consumer Internet startup here in New England is finding wealthy veins of talent to mine out of big companies that provide relevant experience sets. From my non-technical entrepreneur friends I often hear about how hard it is to find class-A engineers that know "web stuff," and we ourselves at Tabblo had a very hard time finding good direct marketing talent that understood how factors like viral adoption could be weaved into a coherent user acquisition plan.

HP acquired Tabblo in March of this year, for an undisclosed sum. Matrix Partners backed the company.

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.

Buzzwire launches: Yet another attempt to improve the video experience on cell phones

Local firms Spark Capital and Matrix Partners put $4 million into Buzzwire, a new start-up launching today (in "beta," of course.) The company's goal is to make videos viewable on a wide range of cell phones -- until, that is, they start cozying up to particular providers. (You can also create playlists on their Web site of videos you want to watch later, and share them with other users, which is a cool feature.) Buzzwire has offices in Denver and Bedford, MA.

The coverage:

- Boston Herald
- Wired News
- MoCoNews
- Xconomy
- And the press release.

Both Wired and Xconomy note something strange about Buzzwire's strategy. It'll at first be available on any 3G phone, but in the future may be limited to certain mobile operators. From Wired's piece:

For now, Buzzwire is free to use on any internet-enabled phone with an unlimited data plan. However, the company plans on eventually locking the service down to certain carriers -- an unfortunate strategy for users, despite its popularity with entrepreneurs and cellphone service providers.

PodTech has a video interview with Buzzwire CEO Andrew MacFarlane.