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2nd Watch Secures $19M Round To Keep On Scaling

The AWS partner that made an early bet on enterprises adopting public cloud raised more capital to maintain its intense growth pace.

2nd Watch, a Seattle-based cloud services provider that became an early superstar in the Amazon Web Services channel, secured another multimillion dollar financing round Wednesday to fuel further growth.

The born-in-the-cloud MSP accepted $19 million in funding, a round led by Delta-v Capital that also included some earlier investors.

With the latest infusion of capital, 2nd Watch will invest in employees and technology that help the company cater to the booming demand among enterprises for extensive cloud migrations and ongoing services, Doug Schneider, the company's CEO, told CRN.

[Related: The 10 Biggest AWS Stories Of 2016]

2nd Watch became a poster child of success with AWS, largely on its bet that enterprises would adopt the cloud—an uncertain proposition just a few years ago when public cloud was mostly the domain of SMBs or high-tech do-it-yourselfers, Schneider said.

"It was several years ago that we started to see the tea leaves coming into play for enterprises," Schneider said. "We made a decision back in 2014 to say we're going to crystalize our focus to be on large enterprises in particular, so they can tailor the public cloud and consume it on their terms."

Enterprise buy-in proceeded faster than anyone, even the founders of 2nd Watch, expected. Since that initial gambit, the solution provider has consistently doubled revenue year after year.

Now enterprises that were only dipping their toes in the water, or hadn't even started their cloud journeys, are committing to cloud transformations.

"We believe that it's time to make that next leg of investment in our business," Schneider told CRN. "When you're working with large enterprises, you can't react to demand; you have to be in front of it."

The latest round is technically a Series D, though the Series A was only seed money from friends and family.

With that money, 2nd Watch will further invest in client engagement—hiring more sales agents, marketers, account managers and solution architects all around the country who get "in front of revenue before it comes." That's necessary when dealing with enterprises, which typically have long sales cycles, Schneider said.


The AWS partner will also build out its cloud-enablement teams, hiring technical professionals and giving them the capabilities needed to tackle growing migration demand.

Finally, 2nd Watch will invest more in the software resources that help manage enterprise accounts, including the company's proprietary financial management platform that handles billing, and more third-party tools.

The latest round brings 2nd Watch's total venture funding since its founding in 2010 to $56 million. That kind of VC money flowing into a solution provider is a relatively new phenomenon.

But the channel has changed greatly in recent years, Schneider said, causing a shift in perspective from the investment community.

"We think of ourselves as a software-enabled services business. It's not just about reselling somebody else's stuff. There's a lot of IP from software to know-how to processes. So there is this aspect of technology here at play," Schneider told CRN.

And investors are attracted to born-in-the-cloud companies that build and scale practices with a financial profile different from traditional MSPs, he said.

"There's so much disruption going on around the whole IT stack. The big three public clouds are changing the landscape for the legacy hardware guys, so that's filtering down on the legacy channel structures," Schneider said.

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