Cloudkick Founder Alex Polvi on the Experience of Getting Acquired by Rackspace in Startup Year One

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first met Rackspace. So we have been talking to Rackspace for a long time now. But we ended up raising some money from investors, and continued the relationship with Rackspace—we put out joint blog posts, for example, which for an early stage startup was awesome.

We ended up raising $750,000, and in January 2010 we released our commercial product. We raised an additional $2 million in March 2010, all through Rich Levandov at Avalon Ventures. And we were working on figuring out a bigger relationship with Rackspace, and that’s when the acquisition happened. The product was doing well, customers seemed to really like it, and Rackspace was really interested, so from an entrepreneurship perspective, that’s good. Now, as part of Rackspace, we’re building products for the Rackspace Cloud.

But to go from a startup entrepreneur’s perspective, where you’re trying to get from zero to $50 million, and suddenly be in a company where you’re trying to go from $5 billion [in market cap] to $50 billion—that is the challenge now. Rackspace is extremely entrepreneur-friendly—it wasn’t “come in and kill the technology and take the team and call it a day.” This will be the Silicon Valley presence of Rackspace. We are going to build this out, and we are continuing to expand the team here just as if we had raised a big round of funding.

X: What do Cloudkick’s tools actually do, in lay terms?

AP: Monitoring and management of cloud infrastructure. We took the core set of tools that every ops team would need—and by ops team I mean people running production Web infrastructure on Amazon EC2 or the Rackspace Cloud or GoGrid—and provide those as SaaS. It boils down to things like monitoring. You get an alert on your phone when CPU usage is too high, or graphics rendering performance is down.

X: So those are services that Amazon and GoGrid and Rackspace (before Cloudkick) don’t provide as part of their cloud hosting?

AP: The best analogy is that it’s like an ATM at a bank. A bank is about providing infrastructure to hold your money. But you still need the software interface to interact with your money. Amazon provides support, but that’s not the emphasis. Their emphasis is just on providing the raw infrastructure.

X: Back to your Y Combinator experience. Was it tough getting into the program? Most of the startups that go through YC are working on consumer-facing Web applications, not on heavy-duty IT infrastructure stuff.

AP: We didn’t actually start out with the Cloudkick idea. When we applied, they were like, “We like the team, but we don’t like the idea. Come up with a new idea.” The very first idea—the one we applied with—was sort of a for scholarships. It was pie-in-the-sky stuff. We were a bunch of infrastructure guys sitting around trying to come up with things that sounded entrepreneurial. It was obvious, once we had some third-party perspective, that we needed to work on infrastructure things. If you get into Y Combinator and you have domain experience in the area where you’re building, you are essentially unstoppable, because they will help you get funding and everything else. So we switched and iterated and Cloudkick is what popped out.

PG [Y Combinator co-founder Paul Graham] doesn’t have as much product experience with infrastructure things, so we didn’t get the full value there. But he has tons of experience with … Next Page »

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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