In the ever-evolving world of technology, three recent developments have caught the attention of the venture capital community. From empowering cloud-native development to optimizing cloud spend, and advancing the frontiers of generative AI, these stories showcase the innovative spirit driving the industry forward.

LocalStack Raises $25M to Revolutionize Cloud Development

Swiss startup LocalStack has secured a $25 million Series A round led by Notable Capital, a prominent venture capital firm. LocalStack’s mission is to help developers emulate and test cloud applications locally, reducing the resource-intensive process of deploying and testing in the actual cloud environment.

Knowing how your cloud application will behave in production usually requires significant development and testing in the environment in which it will be deployed, be that AWS, Azure, Google Cloud, or elsewhere. This can be a costly and time-consuming endeavor, particularly with issues relating to latency and the expenses associated with constant data transfer.

LocalStack’s solution aims to address this challenge by shifting the development process off the cloud and onto a developer’s local machine. The company’s offering consists of two core components: an emulator, which is a Docker image that the user downloads to their local machine with all the necessary AWS APIs, and a cloud platform that provides access to additional features such as team collaboration, telemetry data, and insights.

“What first got me excited about LocalStack was the increased adoption in the community, especially after LocalStack was publicly endorsed by Jeff Barr (AWS chief evangelist) — the GitHub Stars on the project saw a dramatic jump overnight and has been increasing ever since,” said Gerta Sheganaku, co-founder of LocalStack.

The company has also retained some of its open source roots, making around one-third of its AWS services available through a public repository on GitHub. This community version serves as a useful tool for onboarding paying customers, though Sheganaku notes that many community users do not necessarily become paying customers.

“In many cases, community users sign up to LocalStack but do not become paying customers,” Sheganaku said. “We see many thousands of community users who have signed up for our web app, but not purchase any of the paid services.”

LocalStack’s comprehensive support for over 100 core AWS services, including identity and access management (IAM) via Amazon Cognito, Amazon Kinesis data streams, and Amazon’s interactive query service Athena, sets it apart from more limited solutions like AWS SAM.

“LocalStack is almost like a drop-in replacement for AWS cloud,” said Waldemar Hummer, co-founder and co-CEO of LocalStack. “AWS SAM is really more specific to a certain set of services; LocalStack is much more comprehensive.”

The fresh $25 million Series A round will help LocalStack ramp up its product and go-to-market strategy, particularly in the United States, where the majority of its customer base is located. The company is also working on adding support for Snowflake, a cloud data platform, and plans to expand its multi-cloud capabilities to include Microsoft Azure by 2025.

The venture capital investment in LocalStack underscores the growing importance of tools that empower cloud-native development and testing. As more businesses migrate their applications and infrastructure to the cloud, the need for efficient and cost-effective development workflows has become increasingly critical. LocalStack’s ability to provide a comprehensive, local emulation of cloud environments positions it well to capitalize on this trend.

ScaleOps Raises $58M to Optimize Cloud Spend

In a related venture, ScaleOps has closed a $58 million Series B round led by Lightspeed Venture Partners. The startup’s focus is on FinOps, a niche within cloud spend management tools, which has gained significant traction as cloud expenditures continue to soar.

Thanks to the rapid adoption of cloud services, driven in part by the rise of AI, cloud expenditures more than doubled between 2019 and 2023, and are expected to eclipse $2 trillion by 2030, according to Goldman Sachs Research. However, poor spend management can put the return on investment (ROI) of these cloud investments at risk.

Yodar Shafrir, the CEO and co-founder of ScaleOps, discovered this firsthand while working at Run:ai, the workload management startup that Nvidia is attempting to acquire.

“I saw firsthand DevOps teams’ frustration due to resource inefficiencies,” Shafrir told TechCrunch. “I observed the high costs of unused resources and saw applications crashing due to the lack of sufficient resources. The constant pressure on engineering teams to fine-tune application resources often took time away from core development work.”

Shafrir’s experience resonated with Guy Baron, who was the head of R&D at Wix at the time. The two met as customer and vendor, and later decided to found a startup focused on solving the shared problem of optimizing cloud resource usage.

That startup, ScaleOps, operates in the FinOps niche of cloud spend management tools, which has become increasingly crowded. Competitors include Broadcom-owned CloudHealth, IBM’s Kubecost and Cloudability, and startups like Exostellar, Ternary, CloudZero, and ProsperOps.

Like its rivals, ScaleOps tries to automate cloud management for companies based on the performance requirements of individual applications. The platform analyzes an app’s requirements, taking into account available resources and cost considerations, and works to minimize the size of the app’s cloud services footprint.

“ScaleOps automates resource optimization to reduce waste, improve performance, and streamline workflows between DevOps, FinOps, and application teams,” Shafrir said. “This value proposition resonates strongly with companies seeking to optimize their operations during economic downturns.”

Shafrir’s assessment seems to be accurate, as ScaleOps’ customer base has been expanding healthily. The startup’s roster includes SentinelOne, Cato Networks, and Wiz, and Shafrir expects it to grow to over 100 brands by the end of the year.

This traction has also helped ScaleOps attract investment. The company’s recent $58 million Series B funding round brought its total capital raised to $80 million, with Lightspeed Venture Partners leading the round.

The broader adoption of FinOps has certainly worked in ScaleOps’ favor. According to a recent survey, more than four in five companies now have a formal FinOps team in place, and another 16% are actively considering adding one. Seventy-one percent of respondents to the same survey said that their investment in FinOps increased last year.

“The broader slowdown in the tech industry has heightened the focus on operational efficiency and cost optimization,” Shafrir said.

The new funding will be used to grow ScaleOps’ headcount from 60 people to more than 200 by 2026, as the company looks to cement its position in the increasingly competitive FinOps market. As enterprises seek to optimize their cloud operations during economic downturns, solutions like ScaleOps are becoming increasingly valuable for venture capital investors.

Writer Raises $200M at $1.9B Valuation to Advance Generative AI

🎉 We're excited to announce that we've raised $200M in Series C funding at a valuation of $1.9B to transform work with full-stack generative AI!

Today, hundreds of corporate powerhouses like Mars, @Qualcomm, @Prudential, and @Uber are using Writer’s full-stack platform to… pic.twitter.com/cwqZTjxMyl

— Writer (@Get_Writer) November 12, 2024

In the realm of generative AI, Writer has secured a $200 million Series C round at a $1.9 billion valuation. The startup’s enterprise-focused platform has attracted the attention of prominent investors, including Premji Invest, Radical Ventures, and ICONIQ Growth.

Writer was founded in 2020 by May Habib and Waseem AlShikh, who previously launched Qordoba, a company that helped businesses localize their products for new markets. Over the years, Writer has grown into a full-stack generative AI platform, with products that can be customized for various enterprise use cases.

In 2023, Writer launched its own family of models, Palmyra, for text generation. Later that year, the firm debuted features that connect business data sources to its models, along with the ability for customers to self-host Writer-created models.

Just last month, Writer released a model, Palmyra X 004, trained almost entirely on synthetic data. Developing this model cost just $700,000, Writer claims — compared to estimates of $4.6 million for a comparably-sized OpenAI model.

“At Writer, we’re not just creating AI models that can execute tasks, but developing advanced AI systems that deliver mission-critical enterprise work,” said Habib in a statement. “With this new funding, we’re laser-focused on delivering the next generation of autonomous AI solutions that are secure, reliable, and adaptable in highly complex, real-world enterprise scenarios.”

Writer’s current focus is on “AI agents” that can plan and execute workflows across systems and teams, as well as customizable AI guardrails and a suite of no-code development tools.

Despite the intense competition in the generative AI space, Writer has done quite well for itself. The company has hundreds of clients, including Mars, Ally Bank, Qualcomm, Salesforce, Uber, Accenture, L’Oréal, and Intuit.

“There’s a tremendous amount of engineering required to transform models into reliable business tools,” said Patrick Stokes, EVP of product and industries marketing at Salesforce. “Writer provides a refined, AI-powered solution that’s effective, easy to deploy, and has rapidly accelerated our workflows here at Salesforce. We’re excited to join them on this journey not only as an investor, but also as a customer.”

The $200 million Series C round, which brings Writer’s total raised to $326 million, will be used for product development and “cementing the company’s leadership in the enterprise generative AI category,” according to Habib.

This latest funding is another sign that venture capital’s enthusiasm for generative AI isn’t waning. According to a report from Accel, generative AI startups will get 40% of all VC cash poured into cloud technologies this year. And in the first half of 2024, investments in generative AI startups topped $3.9 billion, per PitchBook — not counting OpenAI’s $6.6 billion round.

The generative AI market is projected to surpass $1 trillion in revenue within the next decade. However, the space faces headwinds, like privacy and copyright challenges, as well as architectural issues that can cause phenomena like hallucinations.

Writer’s focus on developing advanced AI systems tailored for enterprise use cases, along with its proprietary Palmyra models trained on synthetic data, appears to have resonated with investors. The startup’s ability to deliver mission-critical AI solutions at a lower cost than industry giants like OpenAI could give it a competitive edge in the rapidly evolving generative AI landscape.

The venture capital community’s investment in Writer underscores the transformative potential of generative AI in the enterprise space. As businesses across industries seek to harness the power of AI to streamline workflows and drive innovation, startups like Writer are poised to play a pivotal role in shaping the future of this technology.

Conclusion

These three stories highlight the venture capital community’s keen interest in cloud-native development, cloud spend optimization, and the advancement of generative AI. As the technology landscape continues to evolve, savvy investors are positioning themselves to capitalize on the next wave of innovation.

From LocalStack’s efforts to revolutionize cloud application testing and deployment, to ScaleOps’ mission to optimize cloud spend management, and Writer’s push to deliver enterprise-grade generative AI solutions, these startups are addressing critical pain points for businesses navigating the digital transformation. The substantial funding they have secured reflects the venture capital community’s confidence in their ability to drive meaningful change in their respective domains.

As the tech industry navigates economic headwinds, the need for operational efficiency, cost optimization, and transformative technologies has never been more pressing. The ventures highlighted in this blog post are poised to play a pivotal role in shaping the future of cloud computing, AI, and developer tools – and the venture capital community is betting big on their success.