Marc Andreessen, the Silicon Valley whiz kid who almost single-handedly defined the concept of an IPO doubling its offering price back in 1995, is looking to repeat the trick through his one-year-old startup Loudcloud. Fresh off an infusion of $120 million in June, the Menlo Park, California-based Internet service firm -- which provides infrastructure, hosting capability, Web site monitoring, and site backup -- is looking to tap the IPO market with a $150 million offering later this year.

Working in Loudcloud's favor is last year's race to the capital markets, which caused many Internet companies to neglect such back-end considerations when building their Web sites. New financial realities, however, have made back-end service providers increasingly attractive because they don't charge for setup or consulting, but for capacity served.

"If speed is of the essence, what's often left behind is whether an application is scalable, with the ability to add server capacity and functionality," says Jay Adelson, chief technology officer at Equinix, a Loudcloud hosting partner backed by Mr. Andreessen prior to its IPO in August. "One of the beautiful things about the Loudcloud piece [of the equation] is that they're maintaining a platform in a very advanced way."

But with a customer base largely composed of names few investment bankers would recognize, is Loudcloud more smoke and mirrors than substance? After all, Loudcloud is leaking cash -- a six-month operating loss of $48.2 million on revenues of $1.9 million -- almost as fast as investors are pouring it in.

"Andreessen's reputation helps, but at the end of the day you still have to have a viable business model," notes Joshua Greenbaum, a principal at Enterprise Applications Consulting in Berkeley, California. "A lot of what Loudcloud is trying to do is rise above what has become a somewhat commoditized set of IT services. They have to do that."

SPEED OF THUNDER

Indeed, Loudcloud's Smart Cloud services seek to redefine the business plans of young and old companies struggling to rationalize costs. Time-to-market and scalability were two factors that appealed initially to Hugh Hempel, chief operating officer of Hopelink, a Menlo Park, California-based startup that will launch a site this fall to match patients with clinical trials. "They moved faster than we could move," Mr. Hempel says, noting that Loudcloud's setup can be running in 60 to 90 days.

The complexities of syndicating Hopelink's services would have been prohibitively expensive. But on a monthly subscription basis that allows companies to pay for a set of services and a specified level of server capacity, Loudcloud made a lot of sense.

"It's more of a rent-your-capacity model," notes Howie Spielman, leader of the technology center in San Francisco for Viant, one of eight Internet systems integrators that have joint marketing relationships with Loudcloud. Through a partnership announced last month, Viant handles initial Web site and software development, Cognizant Technology Solutions fixes ongoing software bugs, and Loudcloud satisfies infrastructure requirements, including hosting, maintenance, around-the-clock monitoring, guaranteed backup, and scalability.

"There's been a real transition from time-to-market toward time-to-value," Mr. Spielman says. "You have to be able to bring real value to an application once it has been launched." If a client launches a marketing campaign, for example, Loudcloud is able to provide additional server capacity to handle a pickup in traffic within a matter of days.

"When you're a brand-new company, capacity on demand is key," notes Mike Cortese, director of technology at Juniper Financial, an online bank founded in January. After considering traditional hosting companies such as Exodus Communications and Digex, a key element in the choice of Loudcloud was its ability to restore the bank's Web site if the data center goes offline or if somebody hacks in. When the site goes live this fall, Juniper is targeting 99.99999 percent reliability, known as the "5-9s."

MIMECOM THE COMPETITION

While Loudcloud is fast-tracking Internet startups as well as bigger clients, such as Nike and Britannica.com, back-end customer support is a hot area of venture capital financing. MimEcom, which landed a $100 million round in June, would also consider a public offering depending on market receptivity. NOCpulse and Crossgain, two recent entrants, took in $12 million and $10 million in April and May, respectively.

"We took in the $100 million because there's a tremendous amount of interest in this space, and because it gave us the ability to grow the business over the next 12 to 15 months," notes Sharmila Shahani, MimEcom's vice president of marketing.

And while scalability and outsourcing are key mantras for the industry, some question whether Loudcloud and its competitors will be able to scale their own operations while maintaining a high level of customer satisfaction. In the case of Loudcloud, at least initially, that does not appear to be a problem.

"Usually, talent is one of the largest hurdles to overcome," notes Equinix's Mr. Adelson, who gushes that Loudcloud has assembled "a team of superstars." Mr. Adelson thinks the superstars will carry the day. But it remains to be seen how well they'll play the game.

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