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Engine Yard, Host for Ruby on Rails Apps, Nabs New Funding

As GigaOm notes, San Francisco-based startup Engine Yard has raised $19 million in a third round of venture capital funding from DAG Ventures, Bay Partners, and Presidio Ventures (a Sumitomo Corporation company). The investment follows a total investment of $18.5 million in the company in 2008 from Benchmark Capital and other investors, one of which was Amazon.

Engine Yard offers a cloud-based hosting environment for Ruby on Rails applications.  Ruby on Rails is an open source software framework that underlies Twitter and many other well-known applications. You can find many notable applications based on it at Open Source Rails. With substantial funding under its belt, Engine Yard's next move may be to expand its support and services business, a la Red Hat.

While Engine Yard has successfully scaled its cloud-based hosting business on its own and through a partnership with Amazon, there have been some bumps in the road. It recently lost a big client in GitHub, which moved to Rackspace for hosting. But the company wisely intends to scale its cloud offerings further, aiming at big enterprises, and once it does that, support and services for cloud-hosted Ruby on Rails applications may represent the gravy train.

We've written before about the success that Red Hat has had providing support and services for open source software. That same business model is being imitated by several open source startups, including Cloudera, which supports the Hadoop software framework for data-intensive queries, and Acquia, which provides commercial support for the Drupal content management system. Once it scales its cloud-based hosting further into enterprise-class territory, Engine Yard may be able to do well with a dual revenue stream coming from hosting fees as well as support and services for enterprise applications.

• Acquia
• ruby on rails
• Engine Yard
• Cloudera
• Github

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