Rancher Labs closes $40M funding round to "run Kubernetes everywhere"

The six year-old startup is going after new markets that want to run Kubernetes clusters at the edge.

Rancher Labs, the maker of a popular, open source Kubernetes management platform, closed a $40 million Series D funding round, the company announced Monday. At a time when Kubernetes is taking off, Rancher Labs is planning to use its new funding to continue its "run Kubernetes everywhere" strategy. That includes bringing it to new markets that want to run Kubernetes clusters at the edge. 

The new funding round was led by Telstra Ventures, the strategic VC firm backed by the private equity fund HarbourVest, as well as Telstra Corporation, Australia's largest telecommunications company. To date, the six year-old Rancher Labs has raised $95 million.

With an open-source business model focused on driving mass adoption and providing enterprise-level support to paying customers, Rancher Labs' software helps organizations deploy and manage Kubernetes at scale, on any infrastructure. The company says its flagship product, Rancher, is the most widely-adopted Kubernetes management platform with 30,000 active users and more than 100 million downloads.

In 2019, Rancher saw 169 percent year-over-year revenue growth. The company now has more than 350 enterprise customers.

Sheng Liang, CEO at Rancher Labs said the company has won over customers with a vision of treating Kubernetes "as a common compute protocol, almost like TCP/IP of compute."

"Before cloud, nobody worried about compute being a standard," Liang told ZDNet. "If you go into a data center console, it's pretty much just all Linux boxes." 

With the rise of cloud computing, that changed -- and became a problem for organizations using heterogeneous environments. The promise of Kubernetes, Liang said, is that it "sort of equalizes compute... That's the opportunity we went after."

It's an opportunity that's become increasingly evident. According to a recent Cloud Native Computing Foundation (CNCF) survey, 84 percent of companies are using containers in production this year, and the vast majority are using Kubernetes. 

The Kubernetes marketplace saw some significant consolidation over the past year, when VMware acquired Heptio and Pivotal and IBM purchased Red Hat. Earlier this month, VMware rolled out a new portfolio of services for application management and modernization, declaring that the company is "all in on Kubernetes."

Liang said that it's nice to see major vendors "taking it more seriously... But there's so much opportunity -- there's more than enough opportunity for us to go after."

Rancher stands apart from the competition, Liang said, for offering multi-cluster, cloud-agnostic, heterogeneous management. On top of that, he added, Rancher is going after edge use cases, "which is a total blank space."

Last year, Rancher launched K3s, a certified Kubernetes distribution designed for production workloads in remote locations or inside IoT appliances.

Currently, 95 percent of Rancher's revenue comes from the Rancher Enterprise Platform, but with the Series D funding, the company plans to more aggressively go after edge computing use cases with K3s. Rancher plans to work with companies to develop solutions for markets including 5G, digital factories, connected cars, video surveillance and medical research. Telstra Corporation, for instance, has used Rancher to support its core contact center, customer network, and services provisioning, and now it plans to use it as it rolls out 5G deployments. 

"A lot of mobile operators are upgrading their mobile edge," Liang said. "They want a small and nimble and easy-to-manage Kubernetes that's easy to run anywhere."

Rancher also has concrete goals around specific technologies it's developing to push the market forward, Liang said. For instance, the company is working on fleet management, "which is like managing massive numbers of Kubernetes and K3s clusters," Liang said. 

The company also plans to use its new funding to expand sales coverage, marketing, finance, operations and customer support. Additionally, it plans to expand geographic coverage within and beyond the 14 countries where it currently operates.

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