Why CloudSwitch Is Gaining Momentum and Resisting VCs

Updated: Hot cloud computing startup CloudSwitch today released version 2.0 of its flagship product, CloudSwitch Enterprise, which helps companies move enterprise applications to the cloud with a few clicks of the mouse. The new features should help in the company’s quest to become an integral part of customers’ IT environments, but my conversation with CEO John McEleney and Founder/VP Ellen Rubin focused on the company’s future plans and how it’s bucking the seeming trend toward grabbing as much venture capital as possible.

Regarding version 2.0, Rubin says the goal is to make the product more than a one-time experience of porting applications into the cloud and moving on. Whereas version 1.0 let customers port applications into the cloud while maintaining the look and feel of in-house administration, as well as internal policies, version 2.0 lets customers develop applications within the CloudSwitch environment and launch them natively in the cloud. It also lets them utilize advanced networking techniques and apply public IP addresses to customer-facing applications, which Rubin explained will save customers’ data centers from overwhelming load should an application experience heavy traffic.

Going forward, McEleney says that CloudSwitch, which currently lets users work within Amazon EC2 (s amzn) and Terremark (s tmrk), “will support multiple clouds,” including Windows Azure (s msft), Savvis (s svvs) and OpenStack (s rax). As Rubin added, certain clouds in certain geographies might be better suited for particular workloads, so choice is key to making CloudSwitch Enterprise the most valuable tool possible. CloudSwitch will support Windows Azure Virtual Machines Roles, the IaaS capability announced during Microsoft’s Professional Developers Conference in October.

We also spoke about funding, or, rather, CloudSwitch’s relative lack thereof. The company is among the most-promising cloud computing startups around, having won the Launchpad competition at our Structure 2010 event and already boasting a number of large, even Fortune 500, enterprises as customers. Still, CloudSwitch has raised only $15.4 million and closed its latest round in June 2009. This is in stark contrast to other popular cloud startups, some of which have raised between $30 million and $50 million. RightScale just closed a $25 million round in September. Update: On the other hand, Heroku had raised just $13 million before selling itself to Salesforce.com (s crm) for $212 million last week.

According to McEleney, it’s not that his company can’t get more money, but rather that “[t]here’s still plenty of gunpowder left.” Although he says selling CloudSwitch’s product is a bit more resource-intensive than selling SaaS via a freemium model (a la New Relic), CloudSwitch still runs its business as efficiently as possible, and it has money coming in from deep, and large, customer engagements. Its investors are there if CloudSwitch needs an injection of capital to spur growth, but McEleney just isn’t keen on diluting its valuation. After all, he joked, it’s not like CloudSwitch is valued as high as Groupon, where tens of millions are merely a drop in the bucket.

If it keeps up its momentum, CloudSwitch might not need to raise another round. Large vendors have been furiously buying cloud startups over the past year, and few have received the accolades that CloudSwitch has. Further, its hybrid nature fits many systems-management vendors’ strategies of keeping applications primarily on-premise but easing the transition to the cloud when necessary. IBM (s ibm), CA (s ca), Dell (s dell), Red Hat (s rht) and BMC (s bmc) all seem like legitimate potential buyers, possibly within the next year.

Image courtesy of Espresso Addict.

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