Technology investors betting big on cloud computing startups on hope of strong returns

Peerzada Abrar | India Times

Technology investors are raising the tempo of investments in cloud computing startups buoyed by strong returns and growing customer demand for software as a service.

This week, venture funds closed two more deals in the sector with Norwest Venture Partners putting in $6 million (about Rs 32.6 crore) in first-round funding for Attune Technologies. The Chennai-based startup uses cloud technology for scheduling, billing and management of patient data with a base of 2 million patient records.

Angel investment network Mumbai Angels has made a seed investment of under Rs 5 crore in Pune-based startup MaxiMojo, which provides cloud-based distribution and revenue management solutions for hotels.

“Savvy investors are racing to get ahead of the next wave and pick up great opportunities in the cloud and enterprise software space before valuations rise and competition for deals heats up,” says Ravi Gururaj, vice-president for cloud platforms group at Citrix Systems, a global technology firm. His startup venture, VMLogix, was acquired by Citrix in 2010.

The attractiveness of cloud-based applications across sectors from hospitality to healthcare is driven by ease of use and lower cost. The startups offer products where information is stored and processed on computers ‘in the cloud’, or the web, instead of local servers. This data can then be remotely accessed through a personal computer, cellphone or any other device, with users typically paying for the service when they use it.

“I can push a few buttons on my phone and access files from my office server remotely from anywhere,” says Sahil Parikh, founder of Synage Software.

LARGE IT COS CLOUDI-FYING APPLICATIONS

In India, the cloud market is estimated to grow over 10-fold to $4.5 billion by 2015, from $400 million now, according to a report by technology firm EMC and consulting firm Zinnov. Industry experts feel this is leading to a surge of new startups that offer niche services to large enterprises which earlier required huge budgets to automate operations.

“Large IT companies in India are cloudi-fying their applications, instead of deploying core banking application based on traditional licences-based model, they are offering cloud-based applications as a service to customers,” says Nitin Khanapurkar, partner, management consulting for information technology and services, at auditing firm KPMG.

Entrepreneurs quick to spot this growing opportunity have responded with a slew of new ventures. One such is Chennai-based OrangeScape, which provides cloud solutions to firms like drugmaker AstraZeneca, consumer-goods company Unilever and automaker Ford.

It has raised $1 million from the Indian Angel Network. These startups, which need little capital, are growing faster and are more profitable compared to traditional enterprise technology ventures. “Cloud computing startups are being valued at around 5-8 times their revenues as the technology requires less manpower and needs a smaller amount of capital to set up,” says Parikh.

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