Mechanical Orchard, led by former Pivotal CEO, raises $50M round led by Alphabet’s GV

Digital transformation – the process of transforming outdated applications and processes with cloud technologies and digital workflows – can be a risky undertaking. In 2023, Harvard Business Review reported that while 89% of large enterprises have a digital and AI transformation underway, they captured just 31% of the expected revenue increase and 25% of the anticipated cost savings from this effort.

Rob Mee, formerly CEO of Fundamental, says he was inspired to face the challenges of digital transformation after spending years working with companies dealing with aging infrastructure. In 2022, Mee founded Mechanical Orcharda startup that uses “AI-enhanced” tools and cloud instances to build modernized copies of legacy enterprise applications and services.

“The risks involved in modernizing critical legacy systems have left many IT leaders feeling that the risk is simply not worth the reward,” said Mee. “But with obsolete software increasingly becoming an existential threat to business, there is simply no way to bring down the can anymore.”

Pivotal had a difficult situation. The company’s shares lost more than 40% of its value in one day after a weak earnings report and the stock price never fully recovers; possibly VMware bought the company for an enterprise value of $2.7 billionwell below its peak.

But Mee assures TechCrunch that Mechanical Orchard is on a strong growth trajectory, with large enterprise customers in retail and logistics in the pipeline.

“There is interest and opportunities in many sectors where legacy IT is a challenge, such as manufacturing, transportation and financial services,” he said. “Our approach is all about reducing risk – IT leaders can see ongoing evidence that the migration is working, which increases confidence in the process and assurance that there will be a positive outcome.”

In a vote of confidence, Mechanical Orchard this week closed a $50 million Series B round led by GV (formerly Google Ventures), Alphabet’s corporate venture arm, bringing its total raised to $74 million.

“The increase was unsolicited,” Mee said. “Mechanical Orchard wasn’t scaling proactively, but GV presented a great partnership opportunity.”

Many vendors have created tools – and entire business divisions – to support digital transformation. Storage giant Box, for example, once ran a consulting division called Cash transformationdesigned to help organizations with the minutiae involved in their digital transformation journeys.

So what makes Mechanical Orchard different? Well, for one, it relies on generative AI to act as a “peer programmer” in rewriting and creating new software for businesses. There is inherent risks in leveraging AI for programming, but Mee says Mechanical Orchard always has developers in the loop to debug and review the final product.

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Mee wouldn’t say which generative AI platform Mechanical Orchard uses, or whether it trains its own in-house coding models. This may be important for some customers with sensitive code who are concerned about having that code run through a third-party service such as GitHub Copilot or AWS Q Developer.

To “transform” a company’s legacy system – for example, software running on a mainframe – Mechanical Orchard works to understand the system’s behavior, identify its dependencies and decompose its components to define their purposes and how they work. Then the Mechanical Orchard team writes cloud-hosted code that replicates the functionality of the old system. Customers own this code and can deploy it wherever they see fit.

Mee says the new funds will be directed toward research and development with a focus on expanding the company’s AI capabilities. The San Francisco-based company currently has around 90 employees across its offices in the UK, Ireland, Italy and Germany.