VeloCloud Secures $35M In Funding As Partners Eye SD-WAN As The Next MPLS

As the SD-WAN market heats up, startup VeloCloud announced on Thursday that it raised $35 million in funding which will help the provider grow its channel program and meet the mounting demand for global, cloud-based SD-WAN.

Led by Hermes Growth Partners, VeloCloud closed a $35 million Series D round of funding, bringing the company’s total funding to $84 million. Additional investors for the Series D fundraising series included Telstra Ventures, the investment fund of the government of Malaysia, New Enterprise Associates, March Capital Partners, Venrock and Cisco Investments, as well as several other undisclosed strategic investors, the company said.

Investment firms aren't the only ones who have been closely following the blossoming SD-WAN market. The channel community and business customers are eyeing Mountain View, Calif.-based VeloCloud, a provider that got its start in 2012 and has since emerged as one of the leaders in the SD-WAN market, according to master agent partners.

[Related: AT&T Joins Forces With VeloCloud, Announces SD-WAN Portfolio]

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VeloCloud entered the market through wholesale relationships with service providers and carriers, including AT&T and Sprint. Petaluma, Calif.-based master agent Intelisys consumes VeloCloud's SD-WAN services through its supplier partners who are standardizing on VeloCloud's technology for their SD-WAN offerings, such as TelePacific and EarthLink, soon to be a part of Windstream.

The number of service providers throwing their hat into the SD-WAN ring by working with providers like VeloCloud is growing rapidly, according to Andrew Pryfogle, senior vice president of cloud transformation for Intelisys.

"The tack they have taken to enable service providers to get into the SD-WAN market quickly has been smart on their part. VeloCloud is offering quality of service through service providers," Pryfogle said.

Intelisys is also a VeloCloud customer, itself. The master agent has deployed VeloCloud's SD-WAN service to boost the quality and performance of its voice communications over the public internet via service provider Vonage.

In addition to going to market with service providers, VeloCloud also has its own partner program that the company launched in 2014.

As customers rely more on cloud-based applications, and multiple cloud providers, network performance matters. Channel partners -- VARs, MSPs, and telecom agent partners -- are also interested in selling SD-WAN solutions, either through their carrier partners leveraging SD-WAN technology or by partnering with SD-WAN providers directly, said Vince Bradley, CEO for World Telecom Group (WTG), a master agency based in Malibu, California.

The channel community is helping to drive SD-WAN adoption, while SD-WAN benefits partners because it represents another recurring revenue stream.

"VeloCloud is probably a bit further ahead of the competition in terms of distribution," Bradley said. "And because they were one of the first to market [with cloud-based SD-WAN services], they were able to secure a great amount of market share, and they have done an excellent job with their marketing process."

Like WTG, Intelisys has also been seeing a lot of interest in from both VARs and telecom agent partners for SD-WAN solutions from the likes of VeloCloud, as well as Aryaka and Masergy. However, SD-WAN fits squarely within the agent partners' wheelhouse because these organizations have been selling WAN solutions for decades, Pryfogle said.

"SD-WAN, if done correctly, is the next evolution of MPLS and were WANs are going next," he said. "Agent partners have tons of legacy customers that are now looking to SD-WAN as the next evolution of their WAN."

VeloCloud said that the new funding would allow the provider to expand its business, capacity and operations as the company continues to develop its SD-WAN products. The funding will also help to support larger customer rollouts, and increase sales and marketing efforts, as well as its partner program.

’We are experiencing significantly more growth than we even predicted as a stretch goal for VeloCloud Cloud-Delivered SD-WAN,’ VeloCloud's CEO and Co-founder Sanjay Uppal said in a statement. ’VeloCloud has broken away from the field with the industry’s largest number of customers, sites, and sales along with key strategic service provider partnerships. With this new round of funding we are able to stay well ahead of this new level of demand we are experiencing.’

According to VeloCloud, its number of SD-WAN sites have grown to more than 50,000 since last year, and the company has more than 600 total customer wins.