Here’s how venture capitalists are thinking about cloud computing companies and technologies – GeekWire

Cloud computing is changing the technology world and creating opportunity for hundreds of new companies so how are investors thinking about which ones to put their investmentbehind?

Three Seattle-area venture capitalists Frank Artale of Ignition Partners; S. Soma Somasegar of Madrona Venture Group; and Sheila Gulati of Tola Capital spoke on stage Wednesday at the inauguralGeekWire Cloud Tech Summit about the state of the cloud computing industry and opportunities they see for related technologies and startups.

The panelists all agreed that its an exciting time for cloud technology and that this isonly the beginning.

We are early in this game, and its a game that is fundamentally changing how computing happens, Gulati said. Cloud is the new operating system.

The discussion, moderated bySeattle angel investor Charles Fitzgerald, ranged from the most attractive cloud-related areas of investment to how Seattle is becoming the cloud capital of the world.

Heres a quick rundown of their insights, which have been edited for brevity.

S. Soma Somasegar, Madrona Venture Group: In the last six to 12 months, we have been investing in a fair amount of what I call cloud-native, next-generation cloud infrastructure-related startups. Its everything from serverless computing, to the world of containers, to event-driven functions. There are a bunch of things people can go solve in a startup environment.

As you move the stack, there is still a lot of value that people can think about delivering at the application level. We get excited about what we call intelligent applications. Its not just predictable behavior from an application, but one that can learn from the data you have access to and continuously learn from thatand do a better job for customers. There are lots of enterprise use cases that are possible.

Sheila Gulati, Tola Capital: A lot of the opportunities for venture capitalists these days is up-stack, as you take advantage of the incredibly rich platform elements and the ability to develop and deploy more seamlessly and more easily.

But also, the real benefitthat the cloud gives you is that data ownership, that data predictability, that comparabilitybetween your different customersbecause youare running all of thatdata in cloud and then able to do very business-appropriate, business-useful comparisons. Its incredibly invaluable. Our last investment was in the insurance software space. Its specific to a vertical, its adding value. You have the industry incumbents really betting on this company in order to take forward the learnings and the benefit of cloud, mobile, and data-centric computing for their industry. We also like serverless.

Frank Artale, Ignition Partners: One of the things we look at, relative to cloud, are applicationsthat could not exist were it not for what the cloud brings, from an application perspective. That may include low cost access to things like cognitive services; low cost access to elastic compute and storage; networking; availability. Its all of these things that to build on-premise would just be too expensive to even go after. Enablement is always a big word for us.

Gulati: As you take each layer of traditional IT spend and map it out, cloud revenue is eating different layers of the stack. Cloud vendors are coming out with services that replace a lot of thetraditional, massive businesses. As venture capitalists, its important that we think of everything we do in the context of, lets makesure we understand how thisworks.

Artale: With the public cloud, now that it has become a trusted infrastructure as opposed to a technical curiosity, well see a similarpattern with enterprise IT that we saw inthe late 90s when hypervisors first came into existence. You saw a lot of lighter duty, older workloads being moved into virtual machines, and virtual machines being collected on backs of servers for cost efficiency. You could do more with less hardware, you havesome software, and you can run more apps.One of the first orders of business for enterprises of all sizes will be to identify existing on-premise applications that are candidates to make that move. People call this lift and shift, or modernization.'

Somasegar: Hybrid cloud will be around for at least the next 10, 20, 30 years. Not everyone can move everything they have on premise to the public cloud overnight. Its going to take time. People also need to take time to get comfortable to feel like they have the right levels of security and data protection. It takes time to get that level of trust. And even then, there will be extreme situations, whether government related or industry-specific, where youll want some stuff on premise. Hybrid is how I think the world will operate for at leastthe next two or three decades.

Somasegar: Its definitely changing for the positive. I was at a dinner last month with venture capitalists and the whos-who of the Silicon Valley ecosystem. They were saying that theyve never seen so many Silicon Valley VCs come together in one place and were wondering whats happening here. Its a testament to people getting exciting about whats happening in Seattle and how they can be apart of it.

Weve also seen, at least in the past year, a tremendous amount of interest in terms of whats happening in Seattle and the startups here. We host people from Silicon Valley a couple times a week because they want to come here and understand the ecosystem. They know something great is happening and they want to participate more.

And as much as we get excited about Seattle being the cloud capital of the world, its not just cloud computing. There are many other areas where we have a tremendous amount of innovation here, between the bigger companies and the startups. We are the No. 1 or No. 2 in what I call the hot technology trends. All of this together makes us better and better each day that goes by.

Gulati: Its fine to call Seattle Silicon Valleys little sister, but its not true.Everyone is moving up here; everyone is opening an office up here. Theprevalence of more cloud computing happening here than in any other city in the world does change the game.

Artale: If you look at the movement, one thing people do notice is the amountof real estateleasesthat are being taken by mid-cap, large-cap, even startups from the Bay Area. Weve had companies move here from the Bay Area. There is great access to not just software development talent, but people want to be close to the epicenter and thinkers in cloud computing.

We also find that we are much more concentrated geographically here. Silicon Valley stretches from San Francisco down to south of San Jose thats about 75 miles and many hours sitting in a car. [In Seattle] we are concentrated, so there is good promise around that.

The other thing is that, at least for high value software development talent and programmanagement and marketing functions, people tend to stay in their jobs longer here. They dont go work some place for two years and find the next hotly-funded startup and move on. There tends to be more durability of teams. From my perspective, that is super important. Its something that is very attractive to businesses of all sizes.

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Here's how venture capitalists are thinking about cloud computing companies and technologies - GeekWire