New Cash for VMTurbo, CloudHealth Highlights Big Disruption in IT

Software for cloud-computing infrastructure and data centers is evolving fast. Two financing deals announced Wednesday for Boston startups underscore an important trend: there’s still a huge opportunity to challenge enterprise IT giants in the cloud.

VMTurbo has raised $50 million in a Series D round from Iconiq Capital and previous investors Bain Capital Ventures, Globespan Capital Partners, and Highland Capital Partners. The company, which was started in 2008, has raised about $75 million to date. VMTurbo makes software that helps businesses control the performance of their online applications and the efficiency of their data centers—basically making sure everything runs fast and reliably. The company has 250-some employees.

Meanwhile, CloudHealth Technologies has picked up a $12 million Series B round from Scale Venture Partners and previous investors .406 Ventures and Sigma Prime Ventures. The round brings the company’s total funding to around $20 million. CloudHealth’s software helps companies manage their cloud-computing environments and optimize business costs. The startup has 30 people and is looking to double in size this year, CEO and co-founder Dan Phillips says.

VMTurbo’s customers include banks, healthcare companies, software companies, and universities. CloudHealth started out selling its product mostly to tech companies—its users include Acquia, Brightcove, and Gazelle—but recently it has seen enterprise companies grow to 40 percent of its customer base.

As more corporate data and services move to the cloud, the big guys in enterprise IT are struggling to keep their edge against nimbler startups building software for cloud-first systems. The giants still have scale working in their favor, but upstarts with strong technology can exploit niches in “traditional” fields like networking, storage, and virtualization.

“The biggest brand names in data centers are changing,” Ben Nye, VMTurbo’s CEO and co-managing partner at Bain Capital Ventures, told me last summer. He noted that traditional IT vendors like IBM, HP, Dell, and NetApp were all seeing declining revenue growth in the sector. “The cloud game is going to be very interesting,” Nye said. “We are in the second inning, and that takes into account Amazon.”

In the past year, Boston-area cloud infrastructure companies Stackdriver, Cloudant, and Backupify have been acquired by Google, IBM, and Datto, respectively. Other local companies in the sector, broadly speaking, include CloudBees, Cloud Technology Partners, ClearSky Data, Kinvey, SimpliVity, and bigger players like EMC and Carbonite.

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