You don't see many "up rounds" in today's tough venture capital climate, one of the reasons why Skytap's recent funding stands out. The Seattle cloud computing startup -- which today is announcing $7 million in a second round of funding -- actually closed the deal at a higher valuation than the previous round.

Chief Executive Scott Roza said they received a term sheet from an outside investor, but decided to keep the deal with the existing investor syndicate when they matched the competing offer. Ignition Partners and Madrona Venture Group led the round, bringing total funding in the company to $13 million.

"I think it is totally odd, and it would be challenging to try and get that without an external valuation," said Roza, adding that series B deals are really tough for some companies right now.

Skytap was successful since the first round of capital included two established venture capital firms who could step up again. It also didn't hurt that revenues, bookings and customer additions exceeded expectations last year, and continue to grow.

Founded by current and former University of Washington computer science professors, Skytap offers an online service that allows corporations to easily test software and hardware configurations in the cloud. Customers pay anywhere from $200 to more than $10,000 per month for the service.

Revenue is growing because it helps customers -- including WildBlue, VDIworks and Kivati -- save money. Customers who test their applications in the virtual lab -- pulling various databases and operating systems from the company's product library -- save as much as 50 percent over the traditional method of IT testing, Roza said.

Of course, not all corporations feel comfortable testing critical applications through an online service.  But Roza thinks that will change over the next decade as companies gain more confidence with the idea of software as a service, a trend line that he feels will erase some of the control and paranoia issues that currently serve as roadblocks.

While Skytap has had success reeling in customers -- about 50 to date -- it still faces the uphill task of trying to convince corporations to take a gamble on an upstart technology.

"Even with a good value prop, it is a challenging market to sell in," said Roza. "Because CFOs are basically saying: 'Hey, if I got by last week without something, it is going to be really hard to convince me that I need something new next week.' That is just the mindset."

Skytap employs more than 20 people, with plans to grow to just under 30 employees by the end of the year.

The startup competes against Palo Alto, Calif.-based VMLogix -- a 5-year-old startup backed by Trilogy and Bain Capital -- and Austin, Texas-based Surgient -- which raised $20 million in 2006. Next year, Microsoft is slated to offer its own lab management product.

In a recent meeting with employees about the financing, Roza said that he told them that they plan to be frugal. And he said they are building the business with the assumption that this could be the last capital that Skytap raises.

"We are going to manage the business like we have raised less than ($7 million). We are going to think about how we spend money on everything: facilities, adding new headcount, marketing programs," said Roza.  "And we are going to be very, very, very careful in this market."

Even so, the company is planning one capital expense with the new cash. Vice President of Product Management Ian Knox said it is on his agenda to buy a bell for the office to mark every time the company rings up a new sale. It won't be gold-plated.

"It will be $35 max," said Knox.