Chinese edge startup nets $14 million; will funding door slam shut?

Categories Edge Computing News  |  Funding

edge computing funding round

A newly profitable edge-based cloud-service startup in China has closed a $14 million Series A+ round. That is the good news. The bad news is that there is rapidly increasing uncertainty around what the investment landscape looks like – in China or anywhere else – for several quarters.

Beijing VDN Cloud Service & Technology executives said they will use the proceeds primarily to boost technology and new product research and development. They said they also will increase spending on marketing, brand-promotion and edge-node construction.

Funders included the China-based venture capital firm Fortune Capital, investment-management firm China Renaissance Capital Investment and Legend Capital, the investment arm of Chinese conglomerate Legend Holdings.

According to the business publication DealStreetAsia, VDN Cloud was launched in 2016 as a content delivery network. The company became a managed-service provider focused on edge-computing cloud services two years later. It sells remote management of IT infrastructure and other services.

Any celebration might be short-lived.

One of the legends of Sand Hill Road, Sequoia Capital, is unnerved enough about market conditions thanks to Covid-19 right now that it sent an ominous memo (published in Medium) to its many investment recipients.

The letter, in fact, links to a similar missive Sequoia sent to its entrepreneurs in the weeks prior to the 2008 economic collapse. It was in this earlier note that Sequoia wrote the prophetic and anxiety-producing sentence (in all caps): “NO ONE MOVES FAST ENOUGH.”

Both notes strongly advise them to aggressively trim their sails. Covid-19 is going to deflate sales, tangle supply chains, make financings rare and challenge cash runways. There is no debate.

While citing Cisco’s survival of the 1987 crash and Google and PayPal’s survival of the dot-com debacle, fund managers tell startups to act quickly to adapt to changes in the global economy or be left for roadkill. Cut expenses and headcount, increase ROI expectations on marketing, expect sales agreements to evaporate, reads the memo.

The problem this time around is that the world has had a remarkably short time to react to this new order. People have had much less time to absorb developments than anyone enjoyed prior to 2008 – and that bust still surprised all but a handful of minds. Sequoia’s best piece of advice – be adaptable.

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