Private OpenStack Startup Nebula Goes Out of Business

Nebula, once a promising startup selling hardware-and-software private OpenStack cloud packages, has shut down, citing immaturity of the OpenStack market.

The startup was founded by Chris Kemp, former NASA CTO who was one of the open source cloud software’s original creators. Nebula was the name of a private cloud Kemp’s team at NASA had built for the space agency’s own use when he was CIO for the NASA Ames Research Center in Silicon Valley – before he took on the CTO role.

Nebula the company came out of stealth in 2011, promising enterprise-hardened private OpenStack cloud infrastructure that included hardware. The company said its solutions would support hardware based on specs of the Open Compute Project, the Facebook-led open source hardware and data center design initiative. It was funded by VCs Kleiner Perkins Caufield & Byers and Highland Capital Partners, as well as individual investors, including Andy Bechtolsheim, David Cheriton, and Ram Shiram, well-known in the Silicon Valley for being the first investors in Google.

Bechtolsheim, whose current data center switch company Arista Networks went public last year, said in the past that Nebula would be “the company that will bring OpenStack to the private enterprise cloud.”

But Nebula has run out of money. “This is a difficult announcement for us to make and we want to assure our customers, shareholders, and employees that we have worked hard to explore alternatives and exhausted all potential options,” the company’s senior management team wrote in an announcement on its website.

The enterprise OpenStack market will take several more years to mature, they wrote. “As a venture-backed startup, we did not have the resources to wait.”

Over the handful of years that OpenStack has been around as an open source project, a robust ecosystem has grown up around it. The ecosystem includes both startups – such as Nebula, or its competitors Mirantis and Piston (a private OpenStack cloud startup co-founded by Joshua McKenty, a former NASA IT contractor and another OpenStack founding father) – and well-established vendors, such as HP, IBM, and Red Hat.

McKenty recently left Piston to join EMC's enterprise-software spin-off Pivotal.

The demise of Nebula may end up giving an advantage to those established vendors, who don’t have all of their eggs in the OpenStack basket. Nebula’s customers no longer have the vendor’s support, and Nebula’ management specifically mentioned Red Hat, IBM, and HP as alternatives for its customers going forward.

Now that enterprise users have seen an all-OpenStack startup shut its doors, they may be more inclined to go with an HP-backed OpenStack solution, as an example, versus one provided by one of Nebula’s peers. A big vendor discontinuing support for a product is common, but they can offer more certainty than a startup built entirely around a piece of technology that hasn’t yet proven itself in the market.

Besides all the vendors providing OpenStack solutions, big end users themselves are also competition. As PayPal has recently demonstrated, it is entirely possible for a company with enough in-house engineering muscle to stand up its own private OpenStack cloud.

Correction: A previous version of this article incorrectly stated that Nebula's solutions included Open Compute-based hardware. While it has said it would support Open Compute hardware, the solutions it sold didn't include hardware based on Open Compute specs or designs. DCK regrets the error.