Virtualizing Wide Area Networks, VeloCloud Rings Up $21 Million

Add networking to the list of technologies that are moving to the cloud. Long the purview of networking giants like Cisco and Juniper, wide area networks can now be delivered as a service thanks to companies like VeloCloud Networks, which has launched from stealth mode with $21 million in financing from some of the venture capital industry’s heaviest hitters.

The Los Altos, Calif.-based company sells services that optimize network usage for businesses. The technology allows mobile users and branch offices to use their networks in the most efficient and cost-effective manner possible, according to VeloCloud CEO Sanjay Uppal.

“There are two areas that Moore’s Law has not yet reached… batteries and the wide area network,” Uppal says, referring to the maxim that computing power basically doubles every two years. While private networks cost roughly $200 per megabit per second per month, the cost of internet service is 100 times less expensive, according to Uppal.

“What we’re trying to do is use that Internet that costs $2 per megabit per second along with the private wide area network to expand the choices for the customer,” says Uppal.

It’s a project that VeloCloud has been working on for the past two years. Initially incubated by the networking startup incubator The Fabric, VeloCloud raised a seed round in November 2012, followed by a $5 million commitment from NEA. Venrock came in to lead the $15 million Series B, which closed just over a month before the company’s launch from stealth.

While the thought of a virtualized wide area network might not mean much to most people, the possibility of driving down networking costs is a big draw for big, distributed businesses. VeloCloud already has 20 customers in beta, and these are all large businesses with lots of sites around the country, according to Uppal.

“We use deep packet inspection… We understand each one of the 2,000 applications that are coming from branch officers and assessing which line is best suited to transmit the information,” Uppal says.

For NEA general partner Krishna “Kittu” Kolluri, the virtualization of networking is just another example of an enterprise application winging its way into the cloud.

Just like his portfolio company, Storvisor, is virtualizing storage, VeloCloud is virtualizing the network, says Kolluri. “When I first joined NEA about eight years back, there weren’t a lot of interesting things happening in the security and networking area,” he says. “Now the lines between computing, storage and networking are — if not getting erased — blurring significantly.”

Photo via Flickr user Simon Cockell