Some people have expressed surprise to me that in this economic environment RightScale was able to raise $13 million from Benchmark and Index Ventures, as they announced today. I wasn't surprised at all. First off, RightScale has a great team and good market traction. But more importantly, I've had the opportunity to help several top-tier Sand Hill firms lately with their due diligence efforts, as they are all, without exception, looking to make investments in cloud computing now.
But this got me thinking about a bigger issue. If in this environment VCs are making investments in cloud, imagine what would have taken place without a recession: a massive wave of investment from every third and fourth tier VC in every half-baked cloud-related idea, many of them overlapping. In other words, a bubble. And bubbles pop, bringing about the infamous "trough of disillusionment" -- which does no one any good, because that's when we reach the "throw the baby with the bathwater" mentality.
As things are now, investments will be made, but they will be made prudently in only the best teams, ideas and technologies. Thanks, recession, for saving cloud computing.
