Engine Yard: The Ruby on Rails Company Salesforce Didn’t Buy

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programmer-entrepreneurs seeing a burgeoning gold rush and deciding to sell picks and shovels—but in a way that’s created a lot of actual value for its customers.

“Often, tech companies are started by a couple of Stanford MBA guys saying ‘We should be rich, let’s write a business plan and go down to Sand Hill Road and get some VCs and boomity-boom, we’ll sell out and we deserve it,'” says Dillon, who became Engine Yard’s CEO in January 2009. “The problem is that nobody knows whether there is any value in that, or whether the dogs will even eat the dog food. Tom and Lance built a company the old-fashioned way. They encountered demand and they worked their tails off to meet it.”

In 2005 Mornini and Walley were partners a Sacramento, CA-based software consulting company called Quality Humans, teaching big companies about software version control and other practices that would bring their systems into compliance with Sarbanes-Oxley regulations. One day a copy of Hansson’s 2005 book Agile Web Development with Rails showed up in Mornini’s mail. (He’d ordered a pre-release version from Amazon and then forgotten about it.) “I started reading through it and I was just blown away,” Mornini says. “The root philosophy they had is that there isn’t more than one way to do everything; they said ‘You should do it our way,’ which I saw as an unbelievably powerful mechanism for keeping programmers aligned and being able to work on multiple projects at once with one code base.”

At the same time, Mornini says, Ruby on Rails was a very clean language. “I saw these beautiful examples where you literally didn’t need documentation, because you could just read the code and it was entirely obvious what different sections were doing,” he says. Mornini was so excited that he used a redeye flight from California to Washington, D.C., where he and Walley were involved in a federal consulting gig, to try reimplementing the website for one of his failed previous startups using Ruby on Rails. “I got off this five-hour flight and had about 80 percent of the site rewritten,” he says. “I was amped and buzzing. I showed up at the apartment we were renting, and Lance was like ‘What the hell is going on with you,’ and I said, ‘Check this out, we need to get into the Ruby on Rails business today.'”

Walley and Mornini started consulting on Ruby on Rails development projects, and “the business started flying in,” Mornini says. That was when the pair realized that established Web hosting services like Rackspace weren’t equipped to help developers get their Ruby on Rails applications out to the world. “None of the traditional hosting services knew a darn thing about it,” Mornini says. “We decided we had the opportunity to be the commercial entity in Ruby on Rails.”

So Quality Humans morphed into Engine Yard, and Mornini and Walley started building a data center—what would now be called a computing cloud—and hosting other companies’ Rails applications. “It was unbelievable how it took off,” Mornini says. “Three months after we started, Benchmark Capital contacted us and said, ‘We’ve noticed that all the interesting companies coming to us now are using Ruby on Rails and it seems like almost every one of them has chosen to host with you. We want to know who you are.’ That was a meeting we didn’t turn down.”

By December 2007, Engine Yard had moved to San Francisco and collected a $3.5 million Series A round from Benchmark. That was followed by a $15 million follow-on investment just six months later—with Amazon and New Enterprise Associates now joining in—and a $19 million C round in October 2009, which brought in additional investors … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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