VCs Heads in the Cloud

The late-summer bidding war between tech giants Hewlett-Packard and Dell over hitherto unheralded California company 3Par— the price reached $2 billion, or more than 10 times its trailing sales—drew the attention of the tech world.

And many investors say they view the 3Par deal as a sign of things to come.

Cloud computing—an IT market expected to grow to north of $120 billion by 2012, by some estimates—is a catch-all term for taking computer functions out of the corporate data center or PC and putting them “in the cloud,” on resources that are off-site, virtual or Web-based.

Many venture capital investors view their cloud-related investments as portfolio crown jewels, to be sold for a pretty penny as large IT companies’ demand increases for all things cloud, say investment bankers who broker technology merger deals.

Posting $194.3 million in revenue in its fiscal 2010, which ended this March, 3Par is among the larger cloud companies, said Peter Falvey, managing director and co-founder at Boston M&A advisory Revolution Partners. “If you’ve got cloud portfolio companies I think (the 3Par deal) has got to be very welcome,” he said.

But there are skeptics, too.

To VC investor Bob Davoli, managing director at Sigma Partners of Boston, the space already looks crowded.

“Do you know how much money people are going to lose in the cloud?” he asked. “Billions.”

For more on the potential value of investing in cloud computing companies, click here for the full story from the Boston Business Journal (subscription required).