CloudGenix Raises $65 Million

The software-defined wide-area-network (SD-WAN) keeps getting more interesting. Last week brought a bevy of announcements from big players including Juniper Networks, VMware, and Versa Networks, among others. Today, Silicon Valley startup CloudGenix (San Jose, Calif.) announced today that it has raised $65 million in funding to expand a global sales.

The space is obviously hot and one of the reasons is that it has the potential to shakeup the entire enterprise networking industry by shifting networking architectures to the cloud, requiring less proprietary networking equipment at the edge. A reason the market is attractive from the investment perspective is that it opens up more opportunities to sell cloud networking software to enterprises, which drives an annual recurring revenue (ARR) model.

The $65 million check is nice amount of money that puts CloudGenix back on the radar among the leading SD-WAN startups. CloudGenix has now raised a total of $100 million, but it has kept a lower profile from other venture-funded startups often referred to as the "Vs" in the SD-WAN industry -- VeloCloud (acquired by VMware), Versa, and Viptela (acquired by Cisco). Existing CloudGenix investors including Bain Capital Ventures, Charles River Ventures, Mayfield Fund, and Intel -- and new investors including ClearSky Ventures -- participated in the latest investments.

Targeting Cisco

CloudGenix said in a press statement that its sales grew 300% year over year, fueled by what it calls “90%+ win-rates against incumbent legacy networking vendors.” However, CloudGenix does not disclose a lot of customer names. In fact, it's hard to find any on its website, though the company provided some customer names to Futuriom under non-disclosure.

When you read between the lines -- it's not subtle -- Cloudgenix, which has many Cisco veterans, has been targeting Cisco accounts for one of the large benefits of SD-WAN: Lowering both operating expenses and capital expenses on maintaining large fleets of Cisco routers by replacing them with lower cost SD-WAN boxes and more efficient cloud software that can integrate functionality such as cloud application performance improvement and security.

CloudGenix has been aggressive in going after Cisco in public statements. In fact, CloudGenix CEO Kumar Ramachandran, a former Cisco executive, did just that in an interview with Futuriom this week.

“We are in a rapidly growing market,” said Ramachandran. "One of the things we are seeing is that Cisco is the incumbent. They have a legitimate product-line issue. Last summer, Cisco had announced they were going to integrate the Viptela software in the routers. We haven’t seen that product anywhere. That Viptela software on a Cisco router is something that doesn’t exist.”

This has been an angle that many SD-WAN startups have been playing on -- looking to lower the cost of Cisco routing gear by replacing routers with SD-WAN platform, which can provide enterprise access with cheaper commercial off-the-shelf (COTS) server box that integrates networking software that runs on either the local box, called customer premises equipment (CPE), or in the cloud. Other top SD-WAN vendors that have been pursuing this angle include Silver Peak and Versa Networks, as well as many others. The SD-WAN space is rife with competition, with more than 40 startups pursuing the market.

Enterprise Base

CloudGenix says its customer base includes many medium and large enterprises in healthcare, retail, manufacturing, finance, banking, and technology. It has site deployments in “hundreds of countries and tens of thousands of locations," according to company statements.

One focus of the CloudGenix approach is application-level awareness of WAN traffic to improve the performance of applications such as voice over Internet protocol (VOIP). For example, it said it recently won a deal with a large retailer headquartered in Atlanta to deploy technology at 2,000 locations, using SD-WAN to improve Unified Communications as a Service (UCaaS). CloudGenix won’t name the customer. CloudGenix has technology partnerships with security vendors including Palo Alto Networks, Symantec, and Zscaler; cloud providers including Amazon and Microsoft; UCaaS providers such as Microsoft, RingCentral, and Fuze; and operational tool vendors such as PagerDuty and ServiceNow.

The funding round comes at a crucial stage of development in the SD-WAN market. With Viptela and VeloCloud both being acquired in 2017, many believe the SD-WAN market should consolidate more rapidly with larger networking players buying startups. By raising the $65 million, CloudGenix is making the statement that the company has the financial wherewithal to build an independent business if the potential acquirers don't come a calling at the right price.