Markus Düttmann

11th November 2021

Living on the Edge, or why we invested in Kubermatic!

The great thing about being an investor is meeting exceptional people on a regular basis. If you get lucky, you might even get the chance of working with (and learning from) inspiring founders very closely. We at Nauta are more than excited to welcome the founders of the Hamburg-based commercial open-source company Kubermatic, Sebastian Scheele and Julian Hansert, into our portfolio. Nauta is leading the $6M investment into the company and Celonis founders Bastian Nominacher und Martin Klenk join the round as business angels.

Kubernetes is here to stay

Initially released in 2014, Kubernetes has taken the infrastructure world by storm. According to a CNCF survey, 92% of all enterprises run containers in production and most of these organizations use Kubernetes. While the CNCF numbers may be slightly biased, it has become clear in recent years that the whole ecosystem is growing at an enormous pace. While this demonstrates impressively that the advantages of using Kubernetes for orchestration outweigh the disadvantages, it should not obscure the fact that running Kubernetes in production is complicated.

It already starts with choosing your infrastructure provider. Do you want to take advantage of the hyperscalers or do you want to run your system on bare metal? How you set up your cluster and which one of the at least 72 certified Kubernetes distributions fits your needs?

As an enterprise, you will eventually need basic managements features like multi tenancy, security policy, monitoring/logging and regular backups and this is only the infrastructure part. App developers will need further features on top like serverless, identity management or a service mesh. For larger teams, complexity increases even further. They will eventually need to think about higher-level topics like a service catalog to make microservices available across all teams in your company or organizational ones like billing, forecasting or workflows in general. Even more, modern companies may want to run machine learning on their infrastructure. This, of course, comes with a completely new set of implications.

Figure 1 At the time of writing this, there are 993 Kubernetes tools in the CNCF landscape

Looking at the tools in the CNCF Landscape, it becomes clear that there are billions of unique possibilities to set up a cluster and I would be surprised if there are two companies in the world with the exact same setup. It comes as no surprise, that DevOps has been one of the most sough-after IT-related skills in the recent years.

Complexity as far as the eye can see – and more

Despite all this complexity, developers have gotten used to shipping containers and orchestrating them via Kubernetes. The dream of automatically scaling distributed applications indefinitely without any hassle seems close. But mind you, orchestration technologies like Kubernetes were born in the cloud and have been built leveraging the nearly infinite computational resources of the hyperscalers.

Things quickly start to get complicated as soon as one wants to run Kubernetes on multiple clusters or, heaven forbid, on the edge. In the IT departments of some industrial giants, one may face a setup in with hardware and software is spread over hundreds or even thousands of locations and for such huge environments, there is simply no way around automation and standardization.

Figure 2 Edge computing increases complexity by an order of magnitude

To deal with this complexity, admins of such systems would, of course, love to use the same approach on the shopfloor they have gotten used to in the cloud. But as if the “normal” Kubernetes complexity would not be enough, new problems unknown to the cloud pop up on all ends and engineers are suddenly facing new and non-trivial issues. To reliably run thousands of clusters with inherent limitations, the infrastructure needs to be ready to deal with things like hardware resource constraints, imperfect connectivity or limited bandwidth.

Kubermatic to the rescue!

Kubermatic provides a complete software solution for teams running containerized workloads across hybrid-cloud, multi-cloud, and edge environments. Their goal is to automate IT operations so that the system performs all tasks needed und all conditions and requires zero human attention. They address the operational challenges of managing Kubernetes at scale while enabling DevOps teams with a self-service developer and operations portal. Their Kubermatic Kubernetes Platform is infrastructure-agnostic and vendor-neutral.

Figure 3 This is how an enterprise Kubernetes setup could look like

The Founders

Sebastian and Julian met in the Hamburg startup scene and, how could it be different while living close to Germany’s biggest port, got excited about the promise of containerization. They saw the signs on the wall and recognized the disruptive potential of Kubernetes, which was far from obvious in 2015 when alternative solutions like Docker Swarm and Mesos were on everyone’s lips. Together they started to organize Kubernetes meetups in Hamburg and Munich and, having built a community of like-minded Kubernetes enthusiasts, they started their company Loodse (later rebranded as Kubermatic).

With a lot of hustle and grit, they have built a team of 80+ industry experts and have become influential members of the European tech community.

Investment Thesis

After meeting Sebastian and Julian and speaking with them about their plans, we immediately got infected by their enthusiasm. Fortunately, months after our initial meeting, we invested into Kubermatic. Below you will find some of the thoughts we had about the company:

  • High Adoption and Growth Potential: 92% of all enterprises run containers in production and most of them use Kubernetes. At the same time, today only an estimated 5% of all enterprise applications in production are containerized. Gartner expects these numbers to triple by end of 2024. The whole Kubernetes ecosystem is growing fast.
  • Team: Up until today, Kubermatic is bootstrapped and grew to 80+ employees using internal cash-flow. The founding team is running conferences, meetups and even started a co-working space to save money on rent. We respect hustlers and love capital-efficient growth and see this as a strong positive signal for the founding team. Furthermore, Sebastian is a board member of the CNCF as the only member from a non-billion-dollar company and well-connected in the space.
  • Thought leadership: The team has been an early adopter of the Kubernetes ecosystem and is one of the main contributors to the Kubernetes project. Their clients trust the deep expertise of the team. Even pharma companies that manage their valuable und very private data in the project Melloddy using Kubermatic’s
  • Scarcity of Time and Talent: Overall, there is a scarcity of software development talent. Particularly, DevOps specialists are in high demand. Automating infrastructure alleviates the scarcity of talent and unlocks time to focus on higher-value tasks which can help a company to differentiate itself.
  • Growing Complexity: The cloud-native toolchain is constantly growing as demonstrated nicely by the CNCF landscapes currently counting 993 (state 29.10.2021) different products. We believe that the approach of offering best-in-class tooling out-of-the-box and allowing for the flexibility to choose, add or exchange specific functionalities reflects the market need of today.
  • Single Interface/Neutrality: Companies evolve towards using complex environments such as multi-cloud or edge, to adapt their infrastructure to their specific needs. An estimated 75% of mid-sized and large companies are estimated to use a hybrid setup in 2021. To reduce their overhead, we believe that clients value neutrality and look for unified interfaces to manage their operations.
  • The Power of the Open-Source Community: The company has open-sourced their Kubernetes Platform in the summer of 2020. Open-source software (OSS) has some clear advantages for its users over proprietary ones like higher transparency and flexibility, open standards or culture and a community fostering innovation. For companies in the space, a vibrant open-source community guarantees access to potential clients. Developer evangelism and community enable startups to gain traction for their product early on and prove their value. An OSS approach can be especially powerful to reduce the long enterprise sales cycles.

 Team Kubermatic, welcome to the Nauta Family, we are excited to back you on this great journey!

🎧 Listen to the origin story (starting at 28:25): Kubernetes Podcast #109
🤓 Learn more about Kubermatic on their website:
👩‍💻 Work with a great & experienced team: link to career page
🎟️ Check out their open-source projects: