Skytap, With New VC Bucks in Tow, Takes on Big Boys in the Cloud

A couple of weeks ago, we reported on Seattle startup Skytap’s $7 million funding round. It’s one of the Northwest’s bigger venture deals of the year, and the company is a pretty interesting play in the cloud computing space, so I figured it was worth a closer look. Especially given all the hubbub about cloud strategies these days, from the likes of big players such as Amazon, Google, EMC, and Microsoft—all of whom should probably pay attention to this little startup in Pioneer Square which has just over 20 employees.

Skytap was co-founded by University of Washington computer science professors Brian Bershad and Hank Levy in 2006. (Back then, it was called Illumita.) The company got seed funding from Madrona Venture Group, WRF Capital, and Bezos Expeditions, followed by a $6 million Series A round from the founding investors plus Ignition Partners in 2007. The original concept was a way to deliver “virtual machines” over the Web. It was a new idea then, but the market has already matured in just three years, and now everyone and their brother is offering some sort of cloud-computing application that lets you access processing power or data storage over the Internet. So, like most successful companies, Skytap has had to adapt to keep its edge.

In fact, the company says the original patent filed by the UW professors only covers about 15 to 20 percent of what Skytap does now. In the last four months, the company has filed a much broader patent that covers 50 to 60 percent of its current offering. I recently talked with chief executive Scott Roza and director of product management, Ian Knox, to hear about Skytap’s latest technology and the significance of its new funding round, which came from Madrona, Ignition, and WRF Capital.

“It’s a pretty challenging market to raise money in. The venture community is looking at the impact of the economy on companies in their portfolios,” says Roza, a former vice president at HP/Opsware and iConclude who joined Skytap about a year ago. “Most of the venture guys, if they were going to invest in 20 companies, they’ll likely invest in 15. Most are doing fewer new deals, preserving capital for companies in their portfolios.”

Roza’s original connection to the firm is through iConclude. That’s where he got to know Skytap board member Sunny Gupta, iConclude’s co-founder and CEO, and Matt McIlwain of Madrona, who invested. (The company was bought by Opsware for $65 million in 2007.) As for his current investors Ignition, Madrona, and WRF Capital, Roza adds, “They’re extremely committed to Skytap, and they’re excited.”

That’s because Skytap’s latest technology lets companies manage … Next Page »

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