Services like video streaming, gaming, media-intensive advertising and marketing technology are putting more strain on bandwidth and backend latency than ever before due to the surge of online traffic in the last year. But for most organizations in today’s usage-based cloud world, that can represent a huge cost in compute power — or a major investment in a company’s own latency technology — to try to address that.
This has created an opportunity for startups building optimization tools. Today, one called Granulate — which has built software for organizations to handle those loads more intelligently and cost-effectively — is announcing a round of funding after seeing a huge boost in business in the last 10 months, with customer growth up 360% and revenues growing 570%.
The Tel Aviv startup has picked up $30 million, a Series B, led by Red Dot Capital Partners, with previous backers Insight Partners, TLV Partners and Hetz Ventures, and new backer Dawn Capital, also participating.
The timing of this Series B speaks to the demand in the market right now: It comes on the back of Granulate closing a $12 million Series A only in April last year. Investors say that its business growth is what prompted them to re-up so soon.
“Granulate’s unique technology and impressive growth since their last funding round reflects a rising market demand for their game-changing optimization solution,” said Yaniv Stern, managing partner at Red Dot Capital Partners, in a statement. “For companies facing rising infrastructure costs or focusing on operating cost reduction, Granulate offers a solution that can drive additional improvement regardless of any other solutions already deployed by their clients.”
Granulate is not disclosing its valuation with this latest round, which brings the total raised by the startup to $45 million.
The opportunity in the market that Granulate is targeting is the fact that media-heavy content, and services like e-commerce that rely on efficient responsiveness on sites and apps to keep people from abandoning their shopping carts, are all on the rise.
But as companies look to keep customers happy with better-quality services, they are also trying to keep an eye on margins and therefore want to keep infrastructure and computing costs low.
Granulate’s solution is software that sits at the server layer — either in the cloud or on-premises, as a customer prefers — that uses AI to detect workloads that a customer tags as important and prioritize them so that they work more efficiently. Granulate said that its software can improve response times by up to 40%, and throughput up to five times, while reducing costs by up to 60%. The company today has partnerships with AWS and Microsoft’s Azure and is in the “early stages” of talks with Google Cloud Platform.
Bigger tech companies like Netflix, Google and Amazon typically invest huge sums to build their own optimization technology, but it’s an area that smaller organizations (and you can still be huge while still being smaller than companies like Google) will not have the bandwidth — pun intended — to address in the same way.
“We are aware of similar things going on inside of Netflix as what we have built,” Asaf Ezra, co-founder and CEO of Granulate, said in an interview. “But to us, it’s a testament of how large you need to be to address this issue and the talent you need to hire to address the lowest-level issues.”
The company’s customers include at least one major retailer (which it can’t name), AppsFlyer, Period and PicsArt.
What will be interesting to watch is how the growth of 5G will affect the bigger problem: As Ezra notes, it will undoubtedly improve front-end latency.
“5G will not cannibalize Granulate,” he said. “In fact, when it becomes standard, the round trip time will be reduced for data, but the front end will be less of the ratio of the time, while the back-end latency will become more of the problem. 5G would solve only the access to your server, but not latency at the server itself.”
Longer term, it’s likely that Granulate will add more optimization and management solutions around those it already offers for latency, Ezra said, while also looking for ways to stand out apart from others in the same space. Competitors are in the process of some consolidation — witness Spot acquired by NetApp last June — so features based around a wider platform will likely be a key way to keep customers interested.
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