Cloud Software Startup Opscode Adds $19.5M to Fuel Growth

More money is pouring into Seattle-area enterprise computing startups. Today’s exhibit is Opscode, a cloud-computing software provider that just scored $19.5 million in new venture financing.

The funding round, led by Bellevue, WA’s Ignition Partners, will help Opscode grow its engineering team, which already has a branch office in Raleigh, NC. Previous investors Battery Ventures and Draper Fisher Jurvetson also participated.

Opscode created the open-source-based Chef line of software, which allows IT professionals to set up their cloud-computing resources—and change them more or less on the fly—with a ton of different options.

That’s a valuable service for IT departments because the world of business computing has changed rapidly in the past few years. Where a few huge vendors once stood with end-to-end services, now hundreds of players of all sizes are offering new and novel ways to slice up the various IT tasks that a business might face. This also comes as the amount of computing power and storage required to run a business explodes in the face of ever-increasing amounts of data.

That big change for big business means, as you might guess, a big opportunity. “I look at the space and, if you add all the revenue in this space broadly defined, its well north of a $10 billion market,” says Hill, who joined Opscode last year as CEO.

One of the key selling points of Opscode’s Chef software is that it’s open-source, so there’s a community of IT experts developing new ways to use the tools. That means an IT pro can potentially find a ready-made blueprint to make Chef do just what they want from the community, which contributes what Opscode charmingly refers to as “cookbooks.”

Opscode started seeing revenue from its premium-level Hosted Chef service in 2010. Last year, it made a bigger play for the enterprise by introducing Private Chef, a customizable version of the software that plays to big-business IT managers who need to keep their critical data within a corporate firewall.

Hill wouldn’t give any idea of revenues, but the company says it has paying customers in the hundreds. Private Chef has seen roughly its first dozen installations, and the number of raw downloads of the software and contributors to the company’s open-source community is climbing high enough that Opscode is gearing up for its first users conference this spring.

“We’re building a company that really is going to be something,” Hill says. “The timing seemed right to go out and look for capital.”

Of course, in a rapidly developing industry, smaller players always run the risk of being elbowed out by the big guys—get lucky, and you get partnered with or purchased by one of the major cloud-computing players like Amazon or Microsoft. Get unlucky, and you’re potentially an off-brand provider.

Hill says a couple of things are working in Opscode’s favor on that front. One is that its software is built to plug into a wide array of services and providers, allowing IT professionals to build cloud services and change them as new services or products enter the market.

Another is the sheer amount of time it will take to consolidate the cloud market and sort out who will be the dominant players. “We’re a long way from any consolidation,” Hill says. “I think we’re probably a couple of years into what’s going to be an eight- to 10-year cycle.”

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