Hybrid VC-Incubator The Fabric Chases Data Center Disrupters

The Fabric's executive team is currently in stealth mode.

The Palo Alto, Calif.-based investment firm is juggling at least four startups in various stages of development and funding, coming off the heels of the June announcement that it was part of a group of investors that led a $21 million Series B funding round for the Los Altos, Calif.-based company it helped found, VeloCloud.

"We are focused on the disruption in the data center infrastructure and the enablement of the cloud to deliver applications to the end user," said The Fabric's vice president of marketing, Prem Talreja. "We're targeting the white spaces, the disruptive markets. We're less interested in the endpoints like mobile and tablets. We're more coming from the enterprise and infrastructure point of view."

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The Fabric, founded in 2012, doesn't consider itself a true incubator or venture capital firm, although if it had to call itself one of the two it leans toward the latter, Talreja said.

The company's strategy is to partner with entrepreneurs, provide seed funding and work together to co-found a business, help build the executive team and provide development resources via its innovation lab in India. It then stays on and helps syndicate further funding rounds.

"We are co-founders of the company with the entrepreneurs in the seed funding stage and we work with them very closely as co-founders, so we're duking it out with them day in and day out and debating the issues with them," Talreja said.

The Fabric was founded by Sumant Mandal along with Rajan Raghavan and Prabakar Sundarrajan, the two who started up Ankeena, which Juniper paid roughly $100 million for in 2010.

The Fabric has raised about $10.5 million total to work with and invests between $1.5 million and $2 million per company. Talreja declined to say how much in seed funding The Fabric put into VeloCloud.

Sanjay Uppal, VeloCloud co-founder and CEO, said he and Vice President of Eengineering and co-founder Ajit Mayya were looking to "solve the problem of the physical, last mile" writing up algorithms and brainstorming ideas on how branch offices could get access to their apps.

VeloCloud, which now has more than 30 employees, has been working since November 2012 on building the technology and software it says simplifies the WAN, allowing a company's various offices to access services from the cloud. It launched beta deployments in January of this year.

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It's working with nearly 20 enterprise customers in the beta round, including companies in the construction, financial and hospitality industries.

"The first place that we're going to use the new funding is to increase the number of deployments with the channel," Uppal said.

VeloCloud is working primarily with VARs and MSPs and offers its service in the U.S. with plans over the next couple of quarters to expand into Western Europe and different parts of Asia.

Partnering with The Fabric was important because of the strategic connections it provided, Uppal said. The Fabric connected Uppal and Mayya with VeloCloud Vice President of Products and third co-founder Steve Woo, who had already been working with The Fabric on the technology.

"We're different from a traditional company that makes boxes so our geographic expansion is dependent on the cloud, so once the demand comes in, we should be able to get the geographical expansion," Uppal said.

With VeloCloud's Series B funding round closed, The Fabric's already working on multiple other deals. Talreja declined to go into specifics, but said all of the entities are based in the Silicon Valley with development teams split there and in India.

Two of those companies, Talreja said, are funded and have moved forward developing solutions related to the cloud and infrastructure, with the covers coming off one as early as this year.

The Fabric has also gone on to focus its activities on a third, helping build a team and beginning the process of validating the technology that Talreja said could be a "good candidate for Series A in the near future." And, more recently, there's a fourth that The Fabric is eyeing.

"It's a very exciting time. We're a very well-greased system," Talreja said.

PUBLISHED JULY 11, 2014