CloudBees Buzzes With $11M in New Cash as Verizon Cloud Rises

If you put your ear to the cloud, you just might hear a faint buzzing sound—the sound of a startup working with a telecom giant to disrupt an industry.

CloudBees, a software startup based in Woburn, MA, said today it has raised $11.2 million in Series C funding led by Verizon Ventures, the VC arm of New York-based Verizon Communications. Previous investors Matrix Partners and LightSpeed Venture Partners also participated in the round, along with new investor Blue Cloud Ventures. CloudBees, which has grown to 50 employees, has raised $25.7 million since its founding in 2010.

An $11 million C round is nothing to sneeze at, especially in these parts. But the real story is what CloudBees and Verizon (NYSE: VZ) are trying to do in the field of cloud computing—and what that might mean for the future of the enterprise cloud, as well as telecom companies.

Last month, CloudBees announced a separate partnership with Verizon, whereby the startup’s software—a platform for developers to build, test, and deploy Java applications—was made available on Verizon’s new cloud service. “Verizon Cloud” was announced last fall and offers pay-as-you-go storage and computing power, as a direct competitor to Amazon Web Services, Google Compute Engine, Microsoft Azure, and other big cloud services.

You might not think of Verizon as a viable competitor to Amazon, Google, and other Internet giants. But Verizon has top wireless and networking infrastructure, a huge subscriber base, massive distribution via homes and devices, and gigantic annual revenues ($100 billion-plus) and profits ($20 billion-plus) to bankroll some big acquisitions. So if a Web company like Facebook wants to buy WhatsApp for $19 billion and cut into the carriers’ mobile-messaging business, well, let’s see what the telecom giants do to strike back in the cloud.

Quick history lesson: Verizon originally got into cloud-based services by buying Terremark for $1.4 billion in early 2011. It acquired Boston-area startup CloudSwitch later that year and integrated it with Terremark. That startup team has since helped build up Verizon’s cloud infrastructure, and CloudSwitch co-founder John Considine now serves as Verizon Terremark’s chief technology officer.

Meanwhile, CloudBees has known the ex-CloudSwitch team for years—they shared an investor in Matrix Partners, among other things. So it’s not surprising that Verizon would work with CloudBees (perhaps it’s more surprising that we’re not talking about another acquisition yet). It’s also unsurprising that the startup would end up meeting with Verizon Ventures and getting an investment.

“The two things are related, but not completely,” says Sacha Labourey, the founder and CEO of CloudBees, who’s based in Switzerland and was formerly at JBoss and Red Hat.

Labourey, a self-professed latecomer to cloud computing, sees plenty of opportunity for a startup to work with big companies to bring software development more fully into the cloud. Verizon’s cloud environment, for one, is still in its early stages. “It’s going to evolve over time,” he says. “The space is definitely heating up and maturing.” (See, for example, the big Pivotal effort from EMC and VMware.)

CloudBees has matured as a company too. Labourey says his startup has been shifting its marketing message away from being a pure platform-as-a-service toolbox—some people can’t even spell PaaS, he jokes—to focusing more on use cases and the “continuous delivery” software development model. That means tightening feedback loops around coding, testing, and deployment such that “your code has to be ready at all times,” he says, instead of working in 12-to-18-month release cycles.

The company’s customers now include banks, energy companies, social media companies, and car manufacturers—another sign that cloud-based software is eating the world, one industry at a time.

And CloudBees is trying to keep expanding its user base in a big way. When I last took a deep dive into the startup’s strategy, I pegged it as trying to disrupt the Oracles, IBMs, VMwares, and Red Hats of the world, in terms of those entrenched companies’ middleware products for developing cloud applications. But now, with its partnerships with Verizon Cloud and Verizon Ventures, it looks like CloudBees is trying to make itself known—and indispensable—to a much wider range of Internet companies. As we’ve seen with some recent Web acquisitions, that could mean the sky’s the limit.

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