Which venture capital firms are “eating their own dog food” and consuming cloud services, asked Paul Kedrosky of a panel of VCs who invest in web infrastructure. You can just wave your hands if you’re running your firm on the cloud, he said. Let’s just say the hands did not go flying up. Nary a panelist would admit they are not using products from good old Microsoft.
“It’s a function of the age of the partner in the firm,” offered Peter Fenton of Benchmark. The issue is, IT is always afraid losing control and not being able to provision and manage, said Ping Li of Accel.
What the VCs did agree on is that they see opportunity to invest in infrastructure companies, especially — and here’s the kicker — if they’re not capital intensive. So in essence, most of them want to invest in companies that run on top of Amazon.
Some opportunities for investment? Security and liability issues in the cloud, said Navin Chaddh of Mayfield. Security and identity management issues, agreed Li. Analytics, said Jim Smith of MDV-Mohr Davidow Ventures. Benchmark is looking for companies that make services more like Google and Facebook, the “consumerization of technology,” said Fenton. But “if you’re doing things that require tens of millions of dollars to achieve success, it could be a suicide mission,” he added.
Where there might not be an opportunity, said Fenton, is in companies that sell to Amazon, which is bringing the margins down in Wal-Mart-like fashions. “Selling to service providers is a tough business,” agreed Li.
One open question is how open source will affect the cloud. It’s an effective way to get out in the marketplace and acquire customers. And it also might be the best way to compete with giants like Google, Microsoft and Amazon, said Automattic’s Matt Mullenweg on a previous panel. Open APIs and delivering apps in app stores is an opportunity to make money, said Renu Raman of Tallwood Ventures. The “freemium” model — in which the core is not open source but the basic version is out there — shows promise, said Chaddha.
Video of the panel is here:
Photo by James Duncan Davidson.