With $32M, Opscode Becomes ‘Chef’ and Serves ‘New IT’ Platform

12/9/13Follow @bromano

The fast-growing Seattle software maker formerly known as Opscode is building a broad platform to serve up a new model of enterprise IT, not just a tool for automating cloud computing deployments. That’s part of the reason the company is adopting Chef as its new name.

And the opportunity inherent in a platform that serves companies looking for speed, innovation, and scalability from their IT departments—the “new IT,” as CEO Barry Crist puts it—is part of the reason the 5-year-old company was able to attract $32 million in an oversubscribed Series D round. The investment was led by Scale Venture Partners, with participation from new investors Citi Ventures and Amplify Partners, and previous backers Ignition Partners, Draper Fisher Jurvetson, and Battery Ventures.

That brings total funding for the Seattle startup to $62 million, Crist says, and sets it up for aggressive expansion of all aspects of the business.

Tempering this flurry of good news for the company is the death last week of former CEO Mitch Hill, who led Opscode from 2011 until a cancer diagnosis earlier this year. (GeekWire posted an obituary of Hill, the founding CEO of the Microsoft-Accenture joint venture Avanade.)

Chef is also the name of the company’s principal product line, making the name change a relatively straight-forward decision. The company’s IT platform helps companies that release updates to the Web multiple times a day—a big change for modern enterprises that were accustomed to releasing code three to five times a year—to automate repetitive tasks around provisioning servers and, increasingly, software delivery, integration, and testing, Crist says.

“When you do things at scale, if you have humans that are typing on keyboards with infrastructure, you can’t get things done quickly enough,” he says.

The company started by serving Web innovators, but has lately seen greater adoption from mainstream enterprise companies that no longer see their IT departments as a back-office, support function, but as a customer-facing center of innovation and business operations. Think of the bricks-and-mortar retailer—Nordstrom is a major Chef customer—that needs to integrate its operations across Web and mobile platforms.

Chef can automate provisioning for any software system with an application programming interface, Crist says. The most common scenarios include setting up and tearing down virtual machines, either on premises or in the cloud, in response to customer demand. For example, whenever a group of players comes together to play Riot Games’ online battle arena game League of Legends, Chef automatically provisions a virtual server in the cloud for Riot, and then de-provisions it when the session is over.

He says enterprise customers are using Chef to migrate more of their IT operations to Amazon Web Services, Windows Azure, or other public clouds. Enterprises using Windows are one of the fastest-growing areas of Chef’s business, he adds.

Crist

Crist

Crist says the company didn’t need to raise additional capital, but sees a large opportunity to consolidate on a year of rapid growth. Third-quarter sales grew 250 percent over the same period in 2012, and Chef’s customer count was up 350 percent through the first three quarters of the year, though the company provides no baseline numbers.

Chef probably belongs on the IPO watchlist.

And Crist noted that Curt Anderson, the company’s new chief financial officer, was most recently CFO of Microsoft’s manufacturing and supply chain group, and did an earlier stint as the Redmond giant’s general manager of investor relations.

“If you think about the future, that’s a terrific skill set to have on board,” Crist says.

I asked him directly about plans for going public, particularly given the strong IPO market. With 210 IPOs priced through Friday, 2013 is on pace to be one of the best years for going public in the last decade, according to IPO investment firm Renaissance Capital.

Crist says Chef is positioned to be a “big, important business, and there will be a variety of financial vehicles that we’ll use, and at some point in time, certainly public markets could be one of those avenues.”

The company’s subscription sales model is aided by the fact that Chef software is open-source at its heart. Customers almost always deploy the software for free at first, and then decide to buy a premium version from Chef, paying between $120 and $600 or more a month, depending on the size of the deployment. “That really changes the entire customer interaction. It becomes more about helping them… and less about selling our technology,” he says.

Chef’s main competitors, Crist says, are traditional automation solutions from large IT vendors, but it also relies on customers being ready to elevate IT’s importance in their businesses. “I think the real competition is the enterprise’s ability to move into new ways of doing things,” he says.

2013 saw a lot of experimentation in this regard, with more “shadow IT” or project work being in the cloud, Crist says. He expects that to accelerate, with some enterprises moving all aspects of their business to the cloud.

The company plans a major push in 2014 to train more people on the technology.

Chef plans to approximately double its 100-person staff in the next year, expanding sales and engineering across the U.S. and into Europe. It currently has offices in North Carolina—a hotbed of open-source software talent clustered around Red Hat; Atlanta; and Silicon Valley.

But the company is firmly rooted in Seattle, which is “emerging as the cloud capital of the world, which—for us and our business—is a terrific place to be,” Crist says.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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