Q&A: Cloud Technology Partners CEO Discusses Plans for VC Spoils

What Does $9 Million Mean for Cloud Technology Partners?

Cloud Technology Partners closed a $9.1 million financing round last week that will allow the company to grow its workforce beyond 100 employees.

The Boston-based cloud solutions company, which was founded four years ago, has raised a total of $14 million in two rounds of funding, with some employees investing as much as half-a-year's salary in the company.

Cloud Technology Partners Founder and CEO Chris Greendale told CRN that the company plans to invest in IP and better sales coverage.

The company plans to primarily use the additional money to bolster sales of existing software and services in North America, though the firm expects more hybrid cloud engagements going forward.

How difficult was it to procure this funding?

I would say relatively easy because our performance over the past year has been outstanding … It's easy to be the head coach of a winning football team. We're in a team sport. And if the company is doing very well, it makes it very easy to go get money because people say 'I want to be a part of this success story.' I don't want to say it was easy, but it was easier than other things that I've done in my career.

What should people know about your lead investors?

First of all, having Oak Investment Partners, one of the leading venture capital firms in the world, and Ed Glassmeyer, probably the dean of all VCs in the world, he's an amazing guy, having him on our board of directors is huge. I'm so very pleased about that, very, very high-quality investor. The Pritzker family is just the same. Their reputation is fabulous. And having them join with us on a quest to build a great company is exciting. They're going to be very helpful to us as we move forward.

Who are your remaining investors?

A lot of our present investors put in more money. These are super angels ... Usually, the way the angels invest is that they'll give you some money up front and then just sort of ride it. These guys are continuing to invest, and that's unusual. So they too see a future … I won't tell you the amount, but a fairly substantial amount in this round came from employees. We've hired very experienced, seasoned consultants … and so some of them have a little bit of extra money. And if they're putting it into the company, which tells you probably everything you need to know … A couple of people put in significant amounts, like half-a-year's salary.

Had you worked with Oak and Pritzker previously?

Pritzker is first time, and Oak Investment gave us some money about a year ago. Ed Glassmeyer is somebody I've personally known for about 10 years, so he and I have some pretty good history together. He's a guy that has very high credibility, very high integrity, and as a mixed capitalist, has a long-term view of things, which is supportive of our strategy because our primary goal is to build a great company. We're not about trying to develop a reasonable company and sell it to somebody. That's not what we're about. We really are taking a long view of this. And both of these investors take a long view.

How specifically will this round of money be used?

100 percent of our workplace is on client engagements, … We really need to make some investments on the front end of our business, meaning sales, to get better sales coverage … With the sort of business we have, closing a large company … requires quite a bit of work, in terms of letting them know what our knowledge level is and figuring out what they need, and then working with them as a partner to figure out what the right engagement is, and then turning to a statement of work … That's multiple meetings, and it requires some of our best talent. And frankly, we just need more of that.

Are there any other investments you plan to make?

There's a couple of other things we need to do that will make us stronger as a company going forward, and that is invest in IP. And by IP, I mean software IP and methodology IP, or services IP. So for instance, when we're doing a particular engagement with application migration to one of the public clouds, that are certain techniques and methodologies that we use. Documenting those, and then adding software around it, makes us more efficient and effective, makes the client happier, increases our margins a little bit and all those good business things. So investing in IP is another area. IP investment and sales … are the largest ones.

Is this funding round focused primarily around PaaSLane?

We're a services company with software, which enhances our services offering. So, for instance, PaaSLane is used primarily when we have … a large, mission-critical application that's going to be moved to either a private or public cloud. The transformation process, by way of code, telling you where changes need to be made … We have another product called ADF, which helps look at application portfolios. So prior to doing migration, we can look at a whole portfolio of applications and tell which applications are cloud-ready or need to be modernized to be cloud-ready. That's kind of a first step in the migration process. And then PaasLink works on individual applications.

To what extent are you investing in software?

We have other software that we do want to develop. We are not expanding our software development team at this time, we have enough resources to do what it is that we want to do. When I talk around investing in IP, it's more around the services IP than it is around the software. But we fully budgeted next year in terms of software development … While PaaSLane is a standalone product and can be bought in a license agreement by a company, the other software IP that we have are more tools to help us be more efficient with services.

Would you consider yourselves primarily a solution provider?

We are a solution provider. Our clients are Fortune 500 companies. I would dare say you know the name of every one of our clients … Companies that are in the training, financial services, consumer products, retail sectors. We really are horizontally-focused, not vertically-focused. We're focused on helping any company with their cloud IT needs, and those are horizontal. When we're helping a company build a private cloud or migrate an application to Google or Amazon, we don't need domain expertise because it's not relevant.

How will this money help differentiate you?

Our two primary competitors are Accenture and IBM – they are in every account we are in, and we consistently beating them simply because we are 100 percent cloud focused. And in terms of knowledge and expertise in cloud, it's unparalleled. We've been at this for four years. We've done over 150 engagements ... Between ADF and PaaSLane and a couple of other tools, we have I think a higher differentiable story. And that is one of the reasons why we need fuel for growth, because a lot of people are recognizing that … So, in that sense, being able to in essence turn the wheel faster and get bigger will definitely help us grow.

Are you anticipating doing additional rounds of funding?

The short answer is yes. We will most definitely, assuming everything continues as we see today. Sometime next year, we will probably do a much larger round at a much higher price. And, right now, we have five strategics that have expressed an interest in leading the round, so it's unlikely that it will be VCs. It will most likely be strategics, and I already know who they are.

Are you intending to grow within your existing areas of business?

I think 90 percent of what we're doing we'll continue to do. We'll look about the same at the end of next year in terms of the services and we have some new software things that we're interested in. And there's a couple of areas in services we have some interest, and we're exploring that … The way we've run our business is very client-centric … They don't want to be doing business with three different vendors. They'd much rather have one vendor lead it and implement it and make it happen … There are a couple of areas that we're looking at, but we'll be 80 to 90 percent the same next year.

What's the geographic distribution of your customer base?

Well, 90 percent of our business is in the United States, simply because the U.S. is further ahead on cloud than pretty much the rest of the world. That will change, however. That said, we've done two engagements in South Korea, we've done two engagements in London, and we've done one engagement in Moscow. We will go where the client is … Four of those were offshore companies. One of those is a U.S. company with a London presence. I anticipate that we will go beyond these shores at some point in time, but there's more than enough business right now for us to just focus on the U.S.

Will your focus be around public cloud?

I don't think there's a client we have that's not doing hybrid. The large companies, they don't make an exclusive decision between any public cloud company. And one of our roles is to help those companies figure out which applications should go where based upon the needs of that application. Don't think that all public clouds are the same – they're not … Almost all of our clients have a private cloud, so there's some class of applications that will be private, and then there will be another class of applications that will sometimes go to a cloud vendor or a supplier. We're pretty much in a hybrid environment now, which was not true a year ago.

Are you servicing their cloud needs across the board?

Yes, across the board. We do strategic consulting, which helps them figure out what cloud, why cloud, how cloud … The next type is we'll do consulting engagements which help them identify a roadmap to get to a hybrid cloud environment. And then we get into the actual implementation of building cloud. So we actually build private clouds for companies … We do application development using CPG Labs, and we do application migration, which takes two forms. One is where you're taking a large group of applications and moving them onto a public cloud using some form of software. And then we do complex cloud migrations, which are these big, hairy, mission-critical apps.

How many cloud projects do you expect to complete in 2015?

At least 150 … We've had four years of growing this company, establishing knowledge and a client base and a real good team. And finally the market is coming to us, and it's coming at us very, very fast. And we've established a very strong market awareness and reputation, and so that's paying off for us right now. Our goal going forward is making sure we maintain our quality of delivery … When we have the type of reputation that we have, that is something we will fight very, very hard to keep. It's hard to do when you're in high growth.