What’s Special about the Joyent Funding Round?
There is nothing special about small companies or startups getting funding, other than the obvious vindication of the opportunities in cloud computing. In fact, such funding stories have been the focus of several articles here (See the latest one: Cloud Computing Startups Raise Big Money: UPDATE 8). However, there’s something different, and in my opinion, special, about the $85 million round of funding closed by San Francisco cloud services provider Joyent (http://www.joyent.com/).
What’s special about this round of external financing is not the amount (which, by prevailing standards, is quite impressive) or the fact that Joyent had raised $25 million earlier. What differentiates this event from others of its ilk is the involvement of a client – Telefónica Digital, the growth arm of global telecom giant Telefónica, the third-largest in the world. In my opinion, when a client has enough confidence in a young company (Joyent is seven years old) to put its money not only in a business relationship but also in the growth story, it speaks volumes about the company’s and its management’s capabilities.
Therefore, it’s not hard to understand the latter’s enthusiasm at these developments. “You need to think of this as almost a Star Alliance for the cloud…..I think in two to three years, you’ll see a company that’s global continuing to mature … We’ll continue to grow this Star Alliance of the cloud,” commented Dave Young, CEO of Joyent, speaking to Portfolio.com. For those who don’t know, Star Alliance is the world’s first and largest airline alliance, with 27 members at current flying 600 million plus passengers in 189 countries around the globe.
In other words, Joyent envisions a growing relationship with Telefónica. And it seems that the latter holds similar beliefs. As Matthew Key, CEO of Telefónica Digital, said, “Joyent’s technology fits perfectly with technologies developed in-house and our cloud services model, and enables us to provide more competitive offerings to a broader range of customer segments.”
When venture capitalists invest in a startup, they do due diligence; however, it’s just one of several investments in their portfolios. However, when a client invests in a service provider, it is different. After all, it’s a company they are already working with, and will do so in the future. Tying in their own future with the provider’s suggests a tremendous vote of confidence in the latter’s abilities.
Now, Joyent has set its sights high – taking on the might of Amazon, which Young regards as his top competitor. In fact, he is confident of unseating one of the biggest (and oldest) players in cloud computing. “For God’s sake, it’s a book and grocery store. I admire them for the pioneering of what they’ve done. But I don’t believe they’re going to be a long-term player,” he said. Jeff Bezos can expect a battle on his hands.
By Sourya Biswas