Engine Yard Raises $19M in New Funds

logo-engineyard.pngEngine Yard, a San Francisco-based startup that makes Ruby on Rails automation and management products, has raised $19 million in its third round of venture capital funding from the likes of DAG Ventures, Bay Partners, and Presidio Ventures (a Sumitomo Corp. venture investment company). Previous investors including Benchmark Capital, Amazon.com, and New Enterprise Associates also invested in this round. With this round, the company has raised a whopping $37 million in total funding. The big question is, what will the company do with this new cash?

With this latest investment, Engine Yard will scale the Engine Yard Cloud to meet enterprise requirements, build support offerings for JRuby development teams, and continue to invest in open-source projects. “Engine Yard has made a number of important moves over the last 12 months to become a dominant platform for cloud computing,” Peter Fenton, general partner at Benchmark Capital, said in a press release.

Fenton sees Engine Yard as the key catalyst that would help scale Ruby on Rails and move into the enterprise. He sees similarities between Java in the late 1990s and RoR today. In the ’90s, many argued Java wouldn’t scale, and the same arguments are made today about Ruby on Rails.

When we first wrote about the company back in early 2007, it was focused almost entirely on small web startups. Many startups are shying away from the company because they feel that Engine Yard is more than what they can afford. Perhaps this diversification into large enterprises is a better move for the nearly 3-year-old company, which recently lost a marquee client, GitHub, to Rackspace (s RAK). Big corporations can cut larger checks than a startup as well.

In a conversation, Fenton argued that developers don’t really write to operating systems anymore and instead focus on developing for frameworks. Just like BEA Systems (acquired by Oracle) rode the web wave in the web 1.0, Engine Yard wants to be the outsourced application server platform for Ruby.

“Developers wrote to App Servers in the late 1990s and early part of this decade,” he said, pointing out that Engine Yard can do the same for developers now, and have them write to this middle layer without thinking about the complexity. Engine Yard will have to work hard to realize this big idea — it needs to graft a lot of DNA into its existing team in order to scale to the level of BEA.