Why we invested in Edgeless Systems

SquareOne led the €5m Seed round into Edgeless Systems with participation from amazing angels, including Paolo Negri (founder of Contentful), Mirko Novakovic (founder of Instana), Evan Weaver (founder of Fauna), Gil Goren (General Partner at 83North), Mathias Biilman and Chris Bach (founders of Netlify).

While enterprises spent less than $10bn on cloud services ten years ago, in 2022, the yearly spending has increased to $227bn. Despite the rise of cloud computing, more than 40% of critical IT loads still run on-premise due to security concerns and requirements. Confidential computing will change that, and we invested in the leaders in the space, Edgeless Systems, who published their first research in 2015 and are behind OC3, the leading conference in confidential computing.

Edgeless Systems enables companies to turn the public cloud into their private cloud using confidential computing. Its orchestration platform, Constellation, isolates entire Kubernetes deployments and all workloads.

Read why we invested in Edgeless Systems and why confidential computing might be the missing piece for AI enterprise adoption.

Why confidential computing?

Cloud computing has transformed how businesses and individuals access and manage computing resources. Services like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud have made it easier to scale applications, store data, and deploy software without extensive physical infrastructure.

Nevertheless, many companies today still hold on to their outdated and often expensive physical data centers, and consumers refrain from using cloud-based services that are not deemed private enough. More than 40% of critical IT loads still run on-premise. When running workloads in the cloud, you must trust the cloud provider with all your data and that the cloud provider runs the correct operations on your data. This may be acceptable in some cases, but for industries with sensitive data, it is not. Examples are industries like the public sector, healthcare, or defense.

So, what is confidential computing?

Confidential computing is a technology that shields computer workloads from their environments and keeps data encrypted even during processing.

Data exists in three states: data at rest, in transit, or in use. Historically, encrypting data in use was not possible. However, confidential computing shifts this paradigm by ensuring that data remains encrypted at runtime in memory. Additionally, confidential computing enables the cryptographic verification of workload integrity through remote attestation. By combining runtime memory encryption and remote attestation, confidential computing empowers the secure processing of data, even on third-party systems (for a deeper dive into confidential computing and its use cases, check out this whitepaper by Edgeless Systems). Hence, confidential computing will boost the next level of cloud adoption and catalyze disruptive technologies like AI.

Confidential AI

Especially in the age of AI, data privacy is more important than ever. While Generative AI comes with immense opportunities, it opens many privacy and security concerns that haven’t existed before. If employees start feeding client data, sensitive business documents, proprietary source code, and various forms of regulated data to LLMs, the protection of this data must be airtight. Every enterprise has AI on its radar, and employees want to use it. Most enterprises cannot cope with the associated security risks and ban the use of AI entirely. But there is an answer to that problem: confidential AI. We believe that confidential computing will enable the secure adoption of generative AI (TechCrunch wrote an article about this).

Introducing Edgeless Systems

This is where Edgeless Systems comes into play: Edgeless Systems makes the cloud the safest place for sensitive data. Its orchestration platform, Constellation, isolates entire Kubernetes deployments and all workloads. This allows sensitive data to be encrypted not only during transmission and storage but also during processing, eliminating security concerns. Customers can run Constellation on all major clouds like Azure, AWS, or GCP. Deploying and migrating data is simple, using the plug-and-play and lift-and-shift principles. In addition, it is open-source.

Why did we invest in Edgeless Systems?

Stating all the reasons why we invested in Edgeless Systems would be too much for one blog post, so I’ll keep it brief here and limit myself to three: team, product, and market.

Team

Investing at the very early stage, the team is always one of the most critical factors in our investment decisions.

Felix Schuster and Thomas Tendyck, co-founders of Edgeless Systems, couldn’t be a better match. Having studied together at Ruhr University Bochum, they have known each other for a long time. Felix (CEO) was one of the first researchers in confidential computing in 2015 at Microsoft Research. As a Research and Development Engineer at a Cybersecurity firm in Bochum, Thomas has proven strong domain expertise. As distinguished experts in the field, the team is hosting the yearly Open Confidential Computing Conference (OC3), one of the leading conferences in the confidential computing space. We were impressed by their team chemistry and are excited to see such a rare founder-market fit.

Product

Not all confidential computing solutions are the same. Confidential computing can be divided into three levels, with level 3 securing the entire deployments and not only individual containers/apps (level 2) or keys (level 1). Currently, only solutions from Edgeless Systems provide level 3 security, protecting against all infrastructure-based threats (Felix wrote a whole blog post about this).

Also, Edgeless Systems is one of the few credible open source projects in the field of confidential computing, allowing for greater trust, given that anybody can verify how the code works. Trust is crucial since customers are handling sensitive data, which is one of the reasons why we strongly believe in open source (read our thesis on open source here).

Market

Confidential computing is the future. Or, as Mark Russinovich, CTO of Microsoft Azure, said at the OC3 conference: “Confidential computing will no longer be a specialty feature but rather the standard for all computing tasks. In this way, the concept of confidential computing will simply become synonymous with computing itself.”

Confidential computing will be the new standard for data privacy and, thus, a crucial factor for the digitalization of many industries. This is also reflected in market numbers. While the confidential computing market was valued below $5bn in 2022, it is expected to reach more than $54bn in 2030, growing at a CAGR of 37.7%.

Accordingly, the potential is vast, and Edgeless Systems is best positioned to become a category-defining company in the space of confidential computing. We are super excited to partner with the team and look forward to a bright (and always secure 😉) future.

PS: If you’re interested in learning more about confidential computing, you should check out OC3, the leading conference for confidential computing hosted by Edgeless Systems.