Goldman Sachs invests in cloud provider Skytap in $45m round

The cloud company has raised $109 million in total, and will use the latest funds to expand its engineering and sales teams.
Written by Tas Bindi, Contributor

Cloud computing vendor Skytap has announced raising $45 million in a Series E round led by Goldman Sachs Private Capital Investing Group, with existing investors Insight Venture Partners, Ignition Partners, and Madrona Venture Group also participating in the round.

The latest round brings the total amount raised by the Seattle-based company to $109 million.

Skytap CEO Thor Culverhouse told ZDNet the new funds will be used to grow the company's engineering and sales teams, as well as for marketing. Additionally, the company plans on using the funds to expand its distribution channel.

"This funding comes as we hit a new level of scale as a company -- use of our product by customers has grown more than 10 times in the last three years," Culverhouse said.

The CEO said Skytap's total sales tripled year on year in Q2 2017, while service usage grew tenfold in less than three years.

Existing customer upgrades grew 130 percent year on year in the April to June quarter, while average revenue per customer grew 60 percent in the same period, Culverhouse said.

He added that three of Skytap's top five customers were acquired in 2017, and nearly 60 percent of revenue comes from large enterprises. Its customers come from industries such as financial services, healthcare, media, and retail.

On how Skytap differentiates itself from other cloud providers, Culverhouse said it is addressing an "entirely different, under-served segment of this market".

"Standard public cloud providers have popularised the concept of cloud, helped businesses understand its inherent advantages, and made it a mainstream option for companies building new 'cloud-native' applications," Culverhouse said.

"According to Gartner, those big public clouds combined will account for less than 25 percent of IT spend in 2020. The other 75 percent of IT spend is on-premises, stuck in the datacentre.

"Skytap Cloud is specifically designed for those traditional, mission-critical enterprise applications that you thought could never leave the datacentre and live in the cloud."

While cloud services are growing rapidly, he said the majority of enterprise IT budgets remain locked in the datacentre. Skytap enables enterprises to migrate their core applications to the cloud unchanged.

"The cloud is a foregone conclusion. But the unanswered question has been, 'how can businesses get there without abandoning the massive investments they've made over the years, in both time and money?' With Skytap, companies can take full advantage of the cloud without having to throw away the critical systems their businesses depend on," Culverhouse said.

He added that the company views itself as "complementary" to other public clouds, pointing to its strategic partnership with IBM.

"It's important to keep in mind that in today's enterprise, multi-cloud is a reality. Different clouds will serve different purposes."

While he believes labels such as "hybrid", "public", and "private" will become increasingly unimportant, he said hybrid IT is the reality for enterprises today and in the foreseeable future.

"What we mean is that enterprises do and will continue to leverage a combination of on-premises systems with cloud services of various types. This extends to the applications themselves, where we see enterprises combining traditional components with new cloud services and architectures to create hybrid applications that maximise existing investment, while improving agility," he added.

Skytap has 10 datacentres globally, with North America and EMEA its top markets.

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