Goldman Sachs just poured $45 million into a company picking up Amazon's slack
Source: Matt Weinberger

Goldman Sachs just led a $45 million investment round into Skytap, a 10-year-old cloud computing provider based in Seattle. Amazon Web Services is, far and away, the cloud computing market leader, but Skytap has found success by focusing exclusively on helping big businesses modernize their software. This is anticipated to be Skytap's final funding round before an IPO in the next 18 to 24 months. thor culverhouse skytap ceoAmazon Web Services is the big behemoth of cloud computing, followed by Microsoft Azure and Google Cloud.

The economies of scale of cloud services mean that it's very difficult for any new players to compete unless they have the global reach and resources of those tech titans.

Difficult, but not impossible, especially if you zero in on an underserved part of the market. Take, for example, Skytap, a 10-year-old cloud computing service provider based in Seattle.

Skytap started as a project out of the University of Washington. It focuses exclusively on helping huge companies update their existing, old-school software for the modern age. By devoting all its energies to that one corner of the market, Skytap believes it can thrive even under Amazon's shadow.

"It doesn't make sense for us to go head-to-head with Amazon in their areas of expertise," Skytap CEO Thor Culverhouse said.

Skytap already has name-brand customers including GE Healthcare and NBCUniversal. And investors are on board too.

The company just announced a $45 million round of funding led by Goldman Sachs. That brings its total funding to over $100 million. If all goes according to plan, the investment will start an 18-to-24 month countdown to an eventual IPO, Culverhouse said.
Competing with Amazon

Amazon Web Services got its start by focusing on winning over individual developers and small startups, including Slack and Airbnb, and reaping the benefits as those companies grew and expanded their usage. To that end, Amazon — as well as chief rivals Google and Microsoft — prides itself on supporting the most up-to-date developer tools and methods.

By contrast, Skytap's sales pitch is it offers a cloud computing platform that's designed to behave like an old-school, legacy data center, making it easier for enterprises to bring their existing large-scale applications to the cloud. And once those applications are in the cloud, the company can offer customers a slew of benefits, Culverhouse said.


Andy Jassy, AmazonAmazon

Similar to AWS, Skytap allows customers to easily add or remove computing capacity in line with their needs. And its support for trendy technologies like Docker software containers allows customers to slowly but surely modernize their software.
So far, so good

Skytap is starting to catch on with customers. The company's second-quarter revenue this year was three times higher than in the same period last year, Culverhouse said, although he declined to disclose the actual numbers. Contributing to the company's growth has been a resale arrangement with IBM, where Big Blue provides Skytap technology to its own customers.

As it ramps up for its IPO, Skytap is doubling down on what it's already doing, Culverhouse said. Currently, the company employs about 170 people; Culverhouse expects that number to double in the next year, with a focus on sales and engineering. Similarly, Skytap plans to grow its international presence.



microsoft scott guthrieMicrosoft

What Skytap won't be doing is making moves that will put it more directly into Amazon's path, Culverhouse said. Instead, Skytap will continue to focus its energies on helping big enterprise customers bring their existing software into the cloud.

"That's where we can deliver the most value," he said.

Goldman Sachs has been busy in the tech sector of late. In addition to investing in Skytap, the venerable financial firm announced Monday that it also led a $44 million investment in database provider Redis Labs.