VCs are pouring millions into early-stage startups working on serverless computing, the Amazon-pioneered technology that’s ‘game-changing’ for developers

  • Serverless technology is emerging as a popular way to build large-scale cloud applications in a cost-effective way. 
  • The nascent market for serverless computing is dominated by Amazon Web Services, Microsoft, and Google Cloud — but early-stage startups are emerging to serve the sector.
  • Investors are betting on these startups because they can help customers save on their cloud costs and make it easier to take advantage of multiple cloud platforms.
  • Some prominent startups that offer serverless technology include Stackery, Nuweba, Iguazio, Vercel, Lumigo, and Ozcode.
  • Visit Business Insider’s homepage for more stories.

In 2014, Amazon introduced Lambda, a pioneering new product that introduced a concept called serverless computing. Six years later, serverless has blossomed into a full-fledged field – and venture capitalists are starting to place their bets on promising startups in the space.

The promise of serverless computing is that it gives developers the ability to run large-scale applications without the headache of managing the underlying server infrastructure. A serverless app spins up the cloud resources it needs to meet its immediate needs right in the moment, and then vanishes it all away afterwards. Ultimately, serverless computing helps customers cut costs and overhead.

The approach is new enough that only Amazon Web Services, Microsoft Azure, and Google Cloud have made significant inroads in the nascent market, offering serverless technology alongside their more typical cloud offerings.  

But startup founders — and the venture capital industry — believe there’s room to carve out a niche.

For example, startups Iguazio and Vercel allow developers to more easily build serverless applications, raising $71.7 million to build artificial intelligence app and $20.99 million to build web apps respectively. Other startups focus on monitoring and debugging serverless applications, like Ozcode, which raised about $3.5 million before being acquired in March, and Lumigo, which has raised a total of $8 million.

While serverless is still in its early days and these startups are still in their early stages, venture capitalists and founders alike think that it’s an opportunity which will only keep growing. Serverless is already growing fast among large and small companies in industries like retail, finance, and gaming, a recent report from IT industry community Spiceworks showed that about one-third of companies are either currently using or planning to adopt serverless computing this year. 

Some, like Trinity Ventures partner Schwark Satyavolu, believes that all companies will eventually move to serverless and that developers will redesign existing applications to be serverless, too. The pricing scheme of serverless — where customers pay based on exactly how much compute they use — is “game-changing in what it’ll enable in terms of new business models that are not possible today,” Satyavolu said. “That is the primary reason why we believe it will be the foundation of truly different kinds of products and services.”

 Beyond cost, another main tenet of serverless is making developers lives easier. 

“We wanted to relieve the developer of burden,” Guillermo Rauch, CEO and co-founder of Vercel, told Business Insider.

Part of that ease is speed:

“People want to develop software quickly,” Yaron Haviv, founder and CTO of the startup Iguazio, told Business Insider. “It’s all about getting value quickly. I need the tools that will allow me to do the job as soon as possible. Why is everyone in New York using Uber again and not buying their own cars? Today you’re taking Uber to get from point to point. You want to focus on building business applications, not on managing infrastructure.”

Erez Berkner, cofounder of Lumigo, a platform that alerts customers if something goes wrong with their serverless applications and helps them find the root cause, echoed that sentiment:

“I don’t need to deploy a server or operating systems, so my life is much easier,” Berkner told Business Insider as he reflected on why serverless benefits developers. “I can get a system up and running in a couple of days compared to a couple of weeks.”

Serverless startups are both challenging and working with cloud providers like AWS

One advantage these startups like Vercel and Iguazio have over cloud giants like AWS, Google, and Microsoft, is that they offer flexibility. Many potential customers are concerned with being locked into one cloud — these startups generally make it simple for companies to run services with multiple clouds, while some tools from the cloud giants favor their own services.

Vercel CEO Guillermo Rauch
Guillermo Rauch, CEO and co-founder of Vercel
Vivan Cromwell/Vercel

For example, serverless platform startup Nuweba, which has raised $15 million, is both challenging the market leaders and selling tools that are compatible with their serverless platforms, too. 

Similarly, some startups like Stackery are seeing the cloud giants as more of a partner than a threat. Stackery, which has raised a total of $7.47 million, helps developers build serverless applications using AWS capabilities.

“We all share the belief that engineers should focus their time on delivering value to their users, not on the underlying plumbing,” Farrah Campbell, alliances and ecosystem director at Stackery, told Business Insider. “We all believe serverless is a way to deliver on that vision.”

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