March 12, 2013, 2:54 PM — When we requested suggestions for cloud startups to evaluate in order to come up with the CIO.com Top 10 list, we received more than 150 nominations. After reviewing the nominations and getting your input, we narrowed the list down to the 10 most promising.
The Top 10 mixes track record with potential. Some startups, such as Aryaka Networks and HyTrust, are more established and have long lists of customers wins. The list also includes more recent startups that are included more for their potential than their current status in the market. Several of these newer companies are helping determine just how the cloud computing market will evolve. They include dinCloud, Nebula and SaaS Markets.
The process for this roundup was a little different than in the past. After the nominees were narrowed down to 25, the list was posted at Startup50 and then we let readers vote. After more than 4,500 votes were cast, we finalized the top 10 list. However, voting was weighted at only 25% of the overall score. Equally important were pedigree of the management team, VC funding and just how pressing the pain point is that the startup addresses. Yet, most of the top vote-getters ended up in the final roundup (7 out of 10).
We want to take the Top 10 list a step further. In a week or so, these startups will be reordered and ranked (they are in alphabetical order now) based on voting, funding, strength of the management team and several other factors.
You can vote for your top startup now.
If you feel some startup was snubbed, you also have the option to write one in. If any of the write-ins get enough support, we may expand this list by one or two and include them when we release the final rankings.
As votes were tabulated votes, some companies, such as Nebula, are included here despite it not being on the original list of 25 nominees. Other impressive startups that weren't in the initial batch of 150 include RiverMeadow (cloud migration), InverCloud (PaaS) and Oxygen Cloud (cloud storage and collaboration).
We also learned of a few stealth-mode startups to keep an eye out for, such as Symbolic IO (storage). On paper at least, there's an impressive batch of startups getting ready to emerge from stealth-mode soon.
With those caveats out of the way, here are 10 Hot Cloud Startups you should watch (in alphabetical order).
What they do: Help companies migrate server applications to the cloud.
Headquarters: Andover, Mass.
CEO: Greg O'Connor. He previously served as founder and president of Sonic Software, acquired in 2005 by Progress Software.
Founded: September 2010
Funding: $10 million in angel funding from BDC Venture Capital, Covington Capital and private investors.
Why they're on this list: Moving applications from traditional IT systems to the cloud isn't easy. AppZero encapsulates an application and its dependencies in a "virtual application appliance," without a virtual machine (VM). The result is an application that is flexible, "hypervisor-agnostic, cloud independent, and fast." Current customers include Pabst Blue Ribbon.
AppZero also staged a solid push in Startup50 voting, winning the overall competition with 17% of the vote total. Why does that matter?
What voting proves to me is that the startup is focused enough on marketing and PR to effectively get its message out. It also shows that the message resonates well enough to entice third-parties to support it. If you think this is trivial, you're forgetting that plenty of technically superior startups have failed over the years because they failed to connect with prospective customers.
Market Potential and Competitive Landscape: Gartner predicts that the cloud Infrastructure-as-a-Service (IaaS) spending will exceed $72 billion, (42% CAGR) by 2016. Competitors include dinCloud, Eucalyptus, RingCube, Nebula and Rackspace.
What they do: Provide cloud-based WAN optimization and application acceleration services.
Headquarters: Milpitas, Calif.
CEO: Ajit Gupta, who previously founded Speedera and served as its President and CEO until it was acquired by Akamai for approximately $500 million.
Founded: November 2008
Funding: The company has raised $45 million in three rounds of funding. The most recent round was a $25 million Series C led by InterWest Partners, with participation from Presidio Ventures, a Sumitomo Corporation Company, and existing investors Nexus Venture Partners, Trinity Ventures and Mohr Davidow Ventures.
Why they're on this list: WAN optimization is typically too costly for the middle market. Aryaka zeroed in on this problem and determined that the best way to drive down costs and democratize the technology was to deliver WAN optimization as a service.
Aryaka first built a delivery network comprised of globally distributed POPs. Enterprise locations connect into the Aryaka network over existing Internet links (or using a direct L2 connections) to one or more POP. Provisioning can be accomplished in minutes -- rather than days or weeks as with hardware-based solutions.
To boost application acceleration, Aryaka runs TCP optimization technology, as well as bandwidth scaling and application-specific proxies. Aryaka also provides access to Internet-based SaaS and cloud services, which help customers avoid middle-mile congestion problems that Internet-based connectivity solutions experience.
Moreover, Aryaka has a solid management team. CEO Ajit Gupta Founded Speedera and sold it to Akamai for $500 million. The management team has a solid track record in the traffic acceleration space. Aryaka also finished second in Startup50 voting with more than 12% of the total.
Market potential and competitive landscape: According to IDC, the WAN optimization market should have topped $1.3 billion by the end of 2012. There are some major incumbents in this market, though. Riverbed owns about 50% of the market, while Cisco, F5, Blue Coat and Silver Peak are all formidable foes.
That said, the IT market as a whole is slowly moving away from box-heavy infrastructures -- the delivery model of the above providers -- and to services. Moreover, the middle market is grossly underserved by existing solutions, and even many large enterprises are reluctant to deploy hardware at branch offices, which will greatly benefit from a service like this.
What they do: Develop cloud-based videoconferencing tools that bridge various available services.
Headquarters: Mountain View, Calif.
CEO: Krish Ramakrishnan, who formerly served as CEO for Topspin, which was acquired by Cisco in 2005. At Cisco, he served as GM of the Server Virtualization business unit.
Founded: November 2009
Funding: The company has raised $48.5 million from New Enterprise Associates, Accel Partners and Norwest Venture Partners.
Why they're on this list: Today, various videoconferencing systems do not interoperate. Cisco videoconferencing units don't talk to Polycom which don't talk to Google which don't talk to Skype and so on. Imagine if this were the case with telephony. If you were a Sprint customer, you could only talk to other Sprint customers. If you wanted to talk to someone on AT&T or Verizon, you'd need to download special software.
Blue Jeans leverages the cloud to turn videoconferencing calls into a "meet me" service, where each party dials into the videoconference from whichever system they prefer to use. The end point hardware becomes irrelevant -- kind of like how the handset is irrelevant when placing a call.
On its roadmap, Blue Jeans intends to eventually take users from the audio-only calling market and shift them to video calls. Customers include Facebook, Match.com, Foursquare and the Sierra Club.
Market potential and competitive landscape: According to Wainhouse Research, the videoconferencing infrastructure market represents a $700 million/year market. However, this is a crowded space. In addition to incumbents like Polycom and Cisco, cloud-based newcomers, such as Join.me and FuzeBox, will challenge Blue Jeans. That said, Blue Jeans is the only tool I'm aware of that stitches an array of conferencing services together.
What they do: Develop cloud-based data integration tools.
Headquarters: Chicago, Ill.
CEO: Mike Sands. Prior to joining BrightTag, Sands was part of the original Orbitz management team and held the positions of CMO and COO.
Funding: They've raised $23 million to date from Baird Venture Partners, EPIC Ventures, I2A Fund, New World Ventures and TomorrowVentures.
Why they're on this list: Today, if a Website owner wants to work with multiple third-party services (e.g. Google Analytics, ad networks, social, etc.), they have to conform to an outdated construct of putting the vendor's code (or "tag") on every page of their Website that they want to track. In doing so, the site owner is not in control over the data collected, they introduce site performance issues with more code being pushed through their consumers' browsers, and they create silos of data across each vendor's service, not to mention creating privacy issues with regard to data collection practices.
BrightTag intends to simplify how Websites connect to their partners by providing a single point of integration for any data-driven service. The company's platform replaces traditional "tag-centric" methods of connecting sites to marketing services with real-time, direct integration through the cloud.
Clients include Yahoo! Japan, Gap, Macy's, Levi's, Bebe, Tommy Bahama, Crate & Barrel, JetBlue Airlines, Orbitz, Starwood, US Cellular, Transunion and Allstate.
Market landscape and competition: This market is new enough that there aren't good market estimates on it. Google, Adobe and IBM offer competing tag container solutions.
BrightTag argues that most competing solutions on the market are "tag containers." As browser-based tags continue to proliferate -- either fueled by the advent of tag management solutions or from continued industry growth -- both data collection and the site users' experience become slow and unstable.
BrightTag cloud-based service eliminates vendor tags altogether and connects data directly. There are no "tags" in a point-of-sale system or a mobile app or email. According to Web analytics firm BuiltWith 30% of the top internet retailers have employed a tag management system and of those 43% are using BrightTag.
What they do: Develop tools that provide visibility into cloud and CDN performance, and then help users act on that information.
Headquarters: Portland, Ore.
CEO: Marty Kagan, who previously served as vice president of engineering for Jive Software.
Founded: Q4 2009
Funding: They landed a $7 million Series A round in mid-2011 from Madrona Ventures Group and Advanced Technology Ventures (ATV).
Why they're on this list: Let's face it, the roadblock for many cutting-edge cloud services, especially those using rich media, is the poor performance and unpredictability of the public Internet. Cedexis' mission is to improve "the Web experience of billions of Website visitors each month by providing visibility into the performance of clouds and CDNs."
Cedexis Radar is a free community that crowd-sources visibility into cloud and CDN performance from the end user perspective. It has global reach and is updated over 1 billion times a day.
Cedexis Openmix is a paid Cloud SaaS offering that uses Radar, and other real-time data, to dynamically route Website and Web application traffic around outages and service degradations.
The newest product, Cedexis Fusion, is a Big Data tool that aggregates third-party data, including pre-built integrations for New Relic, AppDynamics, Akamai, Level3, Edgecast, ChinaCache, SoftLayer and many others, to further improve the availability and performance of customer Websites and Web applications.
Customers include Mozilla, Dior, Nissan, Volkswagon, LeMonde, France Television, Yves Roche, NBC News, Accor Hotels, EuroDisney, L'oreal, and Via Michelin.
Market landscape and competition: According to Gartner's 2012 Magic Quadrant for Application Performance Monitoring, the APM market should have hit $2.14 billion by the end of 2012 (a 9% increase over 2011). Meanwhile, Markets and Markets believes the CDN market will grow to from $2.1 billion in 2011 to $7.4 billion by 2017.
Competitors include CA (through its Nimsoft acquisition) and Zenoss.
What they do: Help small- to mid-sized businesses migrate and provision desktops, servers, storage, networking and applications to a Virtual Private Data Center.
Headquarters: Los Angeles, Calif.
CEO: Kevin Schatzle. Prior to joining dinCloud, he was President of Allied Digital Services' U.S. subsidiary.
Founded: January 2011
Funding: The company has secured an undisclosed amount of angel funding.
Why they're on this list: Most enterprises know they should virtualize their infrastructures, but they struggle with where and how to start. According to dinCloud, virtualization and cloud computing aren't just about hosting servers alone, or giving customers virtual machines in the cloud. They are about business provisioning and helping businesses transform their physical environments to virtual ones.
dinCloud's software enables the rapid migration/provisioning of desktops, servers, storage, networking and applications to a Virtual Private Data Center. Customers can control as much of this infrastructure as they want through an online cloud orchestration and management platform, dinManage.
High-profile partner Microsoft says that it worked with dinCloud to help save a financial services customer 50% on IT spending. In this case, dinCloud hosts 250 virtual desktops, 30 virtual servers, and provides second site back up in the cloud.
Named customers include LANDesk, Grant Thornton International, King's Hawaiian and National Asset Direct. dinCloud also finished fourth in Startup50 voting with 8.5% of the vote total.
Market landscape and competition: Gartner predicts that the cloud Infrastructure-as-a-Service (IaaS) spending will exceed $72 billion, (42% CAGR) by 2016. Competitors include AppZero, Eucalyptus, Nebula, RingCube and Rackspace.
What they do: Develop virtualization security tools.
Headquarters: Mountain View, Calif.
CEO: John De Santis serves as CEO. Eric Chiu co-founded the company and is its president. De Santis was formerly chairman and CEO of TriCipher, a software security infrastructure company acquired by VMware in 2010. After the acquisition, he served as VP, Cloud Services for VMware. Chiu was previously VP of Sales and Business Development for Cemaphore Systems.
Founded: April, 2009
Funding: HyTrust has raised $16 million from Trident Capital, Granite Ventures and Epic Ventures, as well as strategic corporate investors such as Cisco and VMware.
Why they're on this list: Virtualized and cloud infrastructures create new security, control, management and compliance challenges for IT staffs. Organizations take big risks when they move to the cloud or rely on virtualization when critical applications and sensitive information are not properly secured.
The HyTrust Appliance delivers access control, enforcement of policy across virtual infrastructures, hypervisor hardening, and audit-quality logging among other features. By addressing these requirements, HyTrust is able to provide organizations with the control and visibility required for them to virtualize Tier 1 applications, meet corporate governance requirements, and avoid costly downtime or other possibly more serious business disruption.
Customers include AIG, U.S. Army, Northrop Grumman, Pepsi, McKesson, Home Shopping Network, Federal Reserve Bank of Chicago, UC Berkeley, State of New Mexico, and Denver Museum of Nature & Science.
Market landscape and competition: The cloud security market is incredibly crowded, but HyTrust has carved out a solid niche by focusing on hypervisor vulnerabilities. Competitors include Altor Networks (now Juniper) and Catbird.
What they do: Provide OpenStack-based appliances that let businesses deploy and manage private clouds.
Headquarters: Palo Alto, Calif.
CEO: Chris Kemp, who was previously CTO for IT at NASA, where he also co-founded the OpenStack project
Founded: April 2011
Funding: In September 2012, the company raised a $25 million Series B round led by Comcast Ventures and Highland Capital Partners. Kleiner Perkins, William Hearts II, Maynard Webb, Scott McNealy, Innovation Endeavors participating and Google's first three investors (Andy Bechtolsheim, David Cheriton and Ram Shriram) also participated.
Why they're on this list: OpenStack is shaking up the cloud infrastructure landscape, serving as the main open-source alternative (sorry CloudStack) to VMware. CEO Chris Kemp co-founded OpenStack while he was at NASA, and along with Rackspace, Nebula is a key driver helping to make OpenStack a viable alternative to closed cloud systems.
NASA and several other government agencies use OpenStack for their own private clouds. Nebula delivers its private cloud solution as an appliance.
Market potential and competitive landscape: Cloud market predictions are all over the map (Forrester predicts that the global cloud computing market will grow from $40.7 billion in 2011 to more than $241 billion in 2020, while Deloitte predicts that cloud-based applications will only replace 2.34% of enterprise IT spending in 2014 rising to 14.49% in 2020, while also pushing down costs in the process). We do know, though, that the cloud deployment and management market will be large.
This sector is a land grab as of now, but there is a ton of competition already, including VMware, AWS, Citrix (CloudStack), dinCloud, AppZero, Eucalyptus, Rackspace, OnApp, Piston and many others.
What they do: Provide cloud services, including IaaS, CDN and storage services.
Headquarters: London, U.K.
CEO: Ditlev Bredahl. Before founding OnApp, Ditlev led UK2 Group's hosting companies as Managing Director and CEO.
Founded: July 2010
Funding: To date, OnApp has raised $20 million in two rounds of funding. The latest B round of funding was led by UK private equity firm LDC.
Why they're on this list: If you're a traditional hosting provider, you have either already transitioned to being a cloud provider or you are scrambling to do so.
OnApp's mission is to remove the entry barriers to the cloud for Web hosts, telcos, ISPs, MSPs and other traditional service providers. OnApp developed a turnkey system that enables service providers to create their own cloud services, using their existing servers or data centers, with no up-front software investment required.
The OnApp Cloud platform takes care of all core cloud management/orchestration functions, such as cloud deployment, VM management, failover and autoscaling.It also includes the capabilities lacking from most enterprise-focused private cloud platforms, but which service providers absolutely depend on, such as support for different utility and plan-based billing models; the ability to bill for every hardware resource in your cloud; and user management, limits and permissions.
The latest version of the OnApp Cloud platform includes a built-in SAN, a global CDN with video streaming support, DNS management, autoscaling, load balancing and a range of other features. Customers include PEER1 Hosting, GMO, UK2 Group, Dediserve and eApps. OnApp finished third in Startup50 voting with 9.6% of the total.
Market landscape and competition: OnApp is targeting a public cloud IaaS market currently estimated at $6.2 billion, according to Garter, and a CDN market estimated at $2.5 billion, according to Markets and Markets.
Competitors include Boomi and ScaleUp Technologies. With its recent service upgrade, OnApp now also competes with CDN providers.
10. SaaS Markets
What they do: Provide the cloud-based infrastructure that enterprises can use to launch mobile app and SaaS stores.
Headquarters: San Mateo, Calif.
CEO: Ferdi Roberts, who previously held senior executive positions at Yahoo, Cisco, and Ariba.
Funding: They have not disclosed funding details.
Why they're on this list: As BYOD becomes more common and as the "appification" trend continues unabated, enterprises must find ways to approve and control these apps. SaaS Markets intends to address this problem by giving enterprises the tools they need to launch their own app and SaaS stores.
App qualification is managed by the SaaS Markets Application Partner team, which runs SaaS applications through a series of rigorous tests. MarketMaker, the SaaS Markets platform, includes a search engine to make it easy to find all relevant apps, and evaluate and test them side-by-side in terms of capabilities, interface, features and cost.
Currently, SaaS Market also offers more than 1,300 pre-qualified SaaS apps for tasks that range from managing social media outbound messages to project management to cash flow management to security.
Customers include the Montana Chamber of Commerce, Association of Washington Business, Park City, UT Chamber of Commerce and Auburn, WA Chamber of Commerce.
Market landscape and competition: Forrester Research is projecting the SaaS software market to increase 25% in 2013 to $59 billion, a 25% increase. In 2014, Forrester projects the market to total $75 billion. Competitors include App47 and AppCentral.
Startup Voting, Criteria and Weighting Why does startup A earn a spot on the list and Startup B not earn a place. While it's a largely subjective process, we've put some criteria in place to add as much objectivity as possible. With early stage startups that barely have product out the door, even following a decision tree won't make this subjective process objective. But it's a start.
Here are the criteria used when evaluating startups, and the approximate weight given to each: 1. How serious is the pain point the startup addresses, and is it something people (or orgs) are really willing to pay for? 2. If the startup is releasing a social media tool, mobile app or free cloud app--or anything free--is there a roadmap in place to monetize it? How realistic is it? 3. How unique is the offering? 4. How high is the barrier to entry for other competitors? These top four, all about products and positioning, are weighted at about 25%. 5. What's the pedigree/track records of the management team/founders? (15%) 6. Have they raised funding? If so, how much and from whom? (15%) 7. Do they have any early customers in place? Extra points for on-the-record customers. (10%) 8. How well did they do in the voting? Being able to mobilize a voting base helps prove that they know how to get their message out and take marketing and PR seriously. (25%) 9. What does their future product/service roadmap look like? (5%) 10. Where are they located? (Startups based in Silicon Valley, Boston, Austin, NY, etc. earn more points than startups in the hinterlands for a number of reasons, including access to capital and talent.) (5%)
Read more about cloud computing in CIO's Cloud Computing Drilldown.