OpenStack Startup Nebula Closes After Four Years In Business

OpenStack startup Nebula announced on April 1 that it is “ceasing operations” after approximately four years in business. Nebula attempted to productize OpenStack for enterprise-grade deployments but realized that the company had “exhausted all potential options” and therefore decided to close shop. Nebula-based private clouds will continue to operate but will no longer have the benefit of support from Nebula. In a note on its website, the Nebula management team reflected on the company’s decision to suspend operations by remarking:

…We are deeply disappointed that the market will likely take another several years to mature. As a venture backed start up, we did not have the resources to wait.

In total, Nebula raised $38.5M in equity and debt financing from investors such as Comcast Ventures, Highland Capital Partners, Kleiner Perkins Caufield & Byers, Innovation Endeavors and well known individual investors Andy Bechtolsheim, David Cheriton and Ram Shriram. The Nebula Management team’s assessment that the enterprise OpenStack “market will likely take another several years to mature” raises questions about the viability of OpenStack startups in a commercial IaaS market that is increasingly dominated by technology behemoths with the capital to acquire cloud-based startups and integrate them into a larger portfolio of cloud and Big Data products and services.

On one hand, OpenStack startups such as Metacloud and Cloudscaling have enjoyed extraordinary successes as evinced by acquisitions led by Cisco and EMC, respectively. On the other hand, Nebula’s failure raises deep questions about the ability of OpenStack startups to gain market traction in the private cloud IaaS space, particularly given the stellar credentials of a leadership team that included Chris Kemp, former NASA CTO and Devin Carlen and Steve O’Hara. That said, another reason for Nebula’s failure could simply involve a deeply flawed business model, but it remains to be seen whether the cloud computing space will ever receive a detailed post-mortem analysis of the reasons underpinning the company’s failure to succeed.

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