Engine Yard Secures $15 Million in Funding

by Ostatic Staff - Jul. 14, 2008

For years, you could tell the hottest open-source projects by the number of programmers on an e-mail list, or by the number of books published. Increasingly, though, the hottest projects are those around whom service-oriented businesses are being formed. Last week, we saw that PHP company Zend received $7 million. Yesterday, Ruby on Rails hosting company Engine Yard received a $15 million series B round from NEA, Amazon, and Benchmark. This follows an earlier $3.5 million round in January of this year.

Engine Yard is focused on hosting applications written in Ruby on Rails. Rails is a very popular among Web developers (including myself), but it can be tricky to deploy, particularly if you want it to scale to handle many simultaneous users. There is now a growing number of relatively standard solutions, including Phusion Passenger and Mongrel. But the setup for these is more complicated than for many other open-source Web technologies, and Engine Yard is betting that by providing hosting expertise, they can attract many Rails-based businesses that want to focus on their application development, rather than on their hosting configuration.

The amount that Engine Yard has raised presumably indicates that they're hoping to attract a growing number of business users to the Rails platform. Because of its perceived lack of scalability -- a perception that I think is often overblown and misunderstood -- some large businesses have been hesitant to adopt Rails. By offering a service that claims to scale to very large numbers of users, Engine Yard provides an insurance policy of sorts for enterprises who would otherwise be reluctant to try Rails.

What will they use this money for? Ezra Zygmuntowicz, one of the founders of Engine Yard, says that the plan is to make Ruby "the platform of choice for cloud computing and web development in startups and the enterprise alike." Notice that he didn't say "Ruby on Rails," but rather "Ruby," the programming language, This might reflect the fact that Engine Yard is investing time and money in Merb, a lightweight alternative to Rails. That, plus their investment in the alternative Ruby runtime Rubinius might indicate Engine Yard's interest in going beyond hosting, to becoming the publisher of Ruby-related tools that run well on any server, but which run extra-well in their hosting environment.

Most interesting of all is Amazon's participation in this round of funding. Given Amazon's investment in EC2, and the general popularity of that virtual computing platform, it might seem like there is a conflict of interest. Perhaps Engine Yard is using EC2 servers in their back end, although my impression is that this is not the case. More likely is the fact that Engine Yard is assembling a growing number of software and network engineers who are experienced at managing servers in the cloud, people with whom Amazon might want to do further business in the future.

Finally, there is also the possibility that Amazon is interested in Vertebra, an open-source project sponsored by Engine Yard described as a "next-generation cloud computing/automation framework." Vertebra makes it possible to control and monitor a large number of servers. This technology would appear to be the cornerstone of Engine Yard's server cloud, and might be advanced and flexible enough to replace or complement some of Amazon's own technology in the future.

Regardless of the reasons, this investment in Engine Yard demonstrates that Rails continues to grow in popularity among serious Web developers, with experienced backers expecting the growth to continue for some time.