Puppet Labs raises strategic $30 million from new partner VMware

By Michael Carney , written on January 23, 2013

From The News Desk

It's a good day to be a late-stage enterprise software company – and to be Kleiner Perkins Caufield & Byers (Kleiner) partner Matt Murphy. Hours after application performance management startup and Murphy portfolio company AppDynamics announced a $50 million Series D, a second company in the investor stable, IT automation software provider Puppet Labs, is revealing $30 million in strategic investment from VMware – who previously invested in the company’s November 2011 Series C round.

Champagne all around!

In conjunction with the financing Puppet Labs and VMware have entered a strategic partnership to deliver IT management solutions for enterprises looking to maximize the agility and productivity benefits of virtualization and cloud computing.

“This strategic investment and partnership will further accelerate the software-defined data center, and will allow a more extensive automation and orchestration solution across infrastructure and application elements for VMware-based private and public clouds, physical infrastructures, OpenStack and Amazon Web Services,” says VMware VP and GM Virtualization & Cloud Management Ramin Sayar.

Puppet, the open source data center automation and configuration management framework developed by founder and CEO Luke Kanies in 2008, offers system administrators a platform to manage heterogeneous, multi-vendor system architectures. Development and operations teams increasingly choose the next-generation platform as opposed to those legacy products offered by aging industry giants like IBM, HP, and Quest which were first conceived before DevOps and the cloud existed. More modern solutions like Crowbar from Dell for based on the Chef language and Ubuntu's JuJu provide more of a challenge.

Whereas previously it was acceptable to develop and roll out new software every six months, now large enterprises are doing so weekly or daily. “A large bank may have 1 billion lines of code and manage 10,000 to 20,000 simultaneous applications,” Kanies says. “We’re making sure customers have the technology in place to ship products in hours when necessary.”

The company serves a long list of impressive customers, including, Google, Twitter, Zynga, Ebay, NYSE, JP Morgan, Citrix, Oracle, Apple, Disney,, and Stanford University. Puppet Labs has seen 3.5 million downloads of its software in the past year, according to Kanies, and has 110 current employees, a figure he expects to grow significantly in the coming year.

Given VMware’s data center virtualization offerings, deepening its relationship with the company appears to be a natural next step for Puppet Labs. The two companies have agreed to work closely to develop and market new complementary solutions, as well as further integrating Puppet with existing products such as VMware vCloud Automation Center, VMware vCenter Operations Manager, and VMware vCenter Configuration Manager.

The pair have already worked closely, with Puppet Enterprise enabling system administrators to taking advantage of the VMware vSphere API, automatically and dynamically provisioning, configuring, and managing virtual machines. Similarly, VMware vFabric Application Director customers use the more than 750 application configuration modules on the company’s Puppet Forge content marketplace.

Puppet Labs has grown at between 100 to 300 percent for each of the last three years, and was cashflow positive at times in 2012. The company is currently investing for growth and is “about a quarter or two behind in terms of cashflow” according to its CEO.

The company was already in the process of raising a $15 million to $20 million round of financing which would have included participation from existing investors, says Kleiner’s Murphy, when VMware came to them and said it wanted to put in $30 million itself. The amount was more than it needed to execute its currnet plan, but given the attractive terms and the fact that product integration between the two companies was already taking place, everyone involved quickly got behind the plan.

Despite the size of the investment, VMware is not a controlling shareholder and will not have the power to control the direction of the company’s product roadmap, says Kanies – the company plans to continue working closesly with OpenStack, for example. And as much as it would seem to set the stage for a future acquisition  all those involved reportedly wish to see Puppet Labs remain independent and prepare for an eventual IPO. The latest round brings the company’s financing to $45.5 million with previous backers including Kleiner, True Ventures, Radar Partners, Google Ventures, VMware, Cisco, and Glenn Winokur.

“Some of the stories that the Valley knows better are the pro-sumer stories, like Box, etc.,” says Murphy. “Infrastructure is not a sexy at times, but it’s more profound in terms of its impact in making all these things possible. It will be interesting once more people understand how significant the shift to this new cloud stack really is.”

[Image source: 101dublin]