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Another impact of cloud computing is that many venture capitalists are now wary of companies aiming to build large infrastructure empires themselves. Michael Skok, a general partner at North Bridge Venture Partners, says he wouldn’t touch a business looking to compete with the cloud-computing giants like Amazon and Google. “It’s impossible for a startup,” he says.

What tech startups can do, according to Skok, is fill an important research-and-development role, and he sees opportunities across the industry. For example, Skok says, for every dollar spent to store a piece of data when it’s created, companies typically spend an additional $11 to $15 backing it up and managing it. So he’s interested in startups developing new technologies that address some of the current inefficiencies in enterprise IT infrastructure. “Software is far from dead,” he says. However, Skok notes that new companies also need a big idea that will sustain them through lean times, and they can no longer bank on being acquired.

Larry Cheng, a partner at Fidelity Ventures, echoes Skok’s interest in infrastructure technology. Virtualization, which makes it possible to run different virtual computers on the same physical machine, is widely recognized as an important technological trend, he says. However, much of the technology behind virtualization products is outdated. “The entire infrastructure supporting virtualization is going to have to change,” says Cheng, who also sees opportunities for startups in security.

The mood among software entrepreneurs and investors may be colored by having suffered through the first Web bubble. But Cheng is optimistic about the current environment, partly because it’s now less frenetic. He says that interest in clean-tech startups reminds him of the Internet bubble, and he’s glad to be on the other side of it.

“Enterprises still spend billions on IT, and are always looking for ways to cut costs,” Cheng says. “IT is very steady.”

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Credit: Technology Review

Tagged: Business, Web, cloud computing, startups, venture capital, virtualization

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