Investing in The Cloud

I love The Cloud as a consumer, but I’m uncertain about investing in the cloud infrastructure layer as a VC investor.

By the former, I love the fact that I can share team documents (Dropbox), back up my iPhone and iPad (iCloud), check email in a low friction way (Google Apps), keep to-do lists (Evernote), stream movies (Amazon Prime, Netflix), etc.

By the latter, I always get concerned when there’s a particular theme that seems popular. I wonder if there’s a pile of companies coming down the pipeline, which are all doing roughly the same things. At least, that’s been my observation during other cycles of what’s in favor and out of favor.

I also have the view that cloud computing infrastructure requires scale, and the ones best able to do so are the large companies. For example, Amazon’s AWS has emerged as a low-cost provider. They have the scale to keep low the marginal costs of offering cloud storage.

And, they over time have increasingly offered cool features for free. I’ve seen quite a few start-ups target an interesting cloud feature, only to find Amazon quickly deploy something 80% “as good,” but for free.

This means that there are very narrow windows of opportunity for a start-up to do well before its particular space becomes commoditized. So, I’ve not become comfortable enough to invest in a cloud infrastructure company.

But, I’m still on the hunt for one….

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