Rackspace Hosting may be sold.
The San Antonio-based company hired Morgan Stanley to evaluate potential partnerships and acquisitions.
“In recent months, Rackspace has been approached by multiple parties who have expressed interest in exploring a strategic relationship with Rackspace, ranging from partnership to acquisition,” according to a statement filed with the Securities and Exchange Commission last week.
“Our board decided to hire Morgan Stanley to evaluate the inbound strategic proposals and to explore other alternatives which could advance Rackspace’s long-term strategy,” Rackspace wrote. “No decision has been made and there can be no assurance that the Board’s review process will result in any partnership or transaction being entered into or consummated.”
Rackspace, which provides web hosting and open cloud services, reported it did not intend to comment on the situation until its board approves a specific partnership or transaction. The company has faced increasing competition from giants Google and Amazon, which provide cloud hosting services.
In February, Lanham Napier, 43, retired as Rackspace’s chief executive officer. He had led the company since 2000 from a small startup to a large publicly traded company with more than 5,000 employees worldwide and more than $1.5 billion in revenue.
A year earlier, Lew Moorman, Rackspace’s president, left the company because of health issues with a family member.
Since February, Graham Weston, Rackspace’s chairman and co-founder, has served as its CEO.
Rackspace, founded in 1998, is the largest technology company in San Antonio with more than 3,000 employees occupying the old Windsor Park Mall in Northeast San Antonio. It also has an office in Austin and has international offices in London and Hong Kong.
Rackspace’s stock, traded under the symbol RAX on the New York Stock Exchange, soared on the news of the possible sale last week. Rackspace’s stock closed at $36.12 on Friday, up nearly 18 percent. The company’s stock traded as low as $26 and as high as $54 in the last 52 weeks. The stock traded as high as $81 per share in January of 2013, according to Forbes.
Tag: Cloud
Wonder why Dropbox expanded to Austin and opened an office here earlier this year?
One big reason could be Dell.
Dell and Dropbox announced a partnership Thursday at Dell World to create Dropbox for Business using the Cloud. Dell, which went public earlier this year, is hosting Dell World at the Austin Convention Center through Friday. The company is moving to become more entrepreneurial.
The customers that are succeeding are taking advantage of technology, said Michael Dell, CEO of Dell.
“The combination of Dell and Dropbox provides a great solution for customers,” Dell said.
Dell’s strategic partnership with Dropbox will help its commercial customers access data anywhere at anytime. That will help customers become more productive and promote greater file sharing and collaboration among remote workers.
“Dropbox is one of the most innovative and fastest growing start-ups and the most popular solution of its kind,” said Brett Hansen, executive director, end user computing software at Dell. “Now through Dell’s global sales team, Dropbox and Dell can help organizations of all sizes embrace consumerization of IT while protecting company data.”
Dell now offers Dropbox for Business plus Dell Data Protection Cloud, part of the Dell Data Protection solutions portfolio, to let employees use their favorite cloud storage application at work.
“Dropbox has always been about giving people a simple, elegant way to access their most important digital stuff, and today Dropbox is used in over 4 million businesses because it’s easy to use, easy to deploy and offers a secure, centralized location for company data,” said Marc Leibowitz, global vice president of partnerships, Dropbox. “
More than 200 million people and 4 million businesses including BCBG, Kayak, National Geographic and Rockstar Energy use Dropbox and 1 billion files are uploaded to Dropbox every 24 hours.
John Engates, Chief Technology Officer at Rackspace Hosting in San Antonio
The cloud ushers in a new era in wearable technology.
Under Armour’s late 2013 acquisition of mobile workout app MapMyFitness and Nike’s continued sponsorship of TechStars Nike+ Accelerator validates that wearable technology is heating up and here to stay. Athletic apparel manufacturers will attempt to catch up with one another in a war for data about users’ exercising habits. This will also continue in other areas such as smart watches, glasses and goggles, and other medical devices. This staggering amount of data generated by the growing number of these devices need to be stored and analyzed somewhere and what better place than the cloud, where it can be seamlessly transferred between device and server? This will also usher in other ecosystems of app developers and plugins as these devices emerge as platforms and APIs are exposed. The vendors that help users make the most of this data will be the winners.
Specialized clouds will emerge in 2014.
Until now clouds generally fell into two buckets: public and private. In the new year, the idea of workloads running where they perform the best will prevail as new clouds that focus on specific application tasks and workloads will rise. There will be a cloud for high I/O needs, CPU performance, GPU, etc.
Open source projects will get even more prevalent and popular.
As the world begins adjusting to new realities around online privacy, developers will gravitate more and more to open source projects where source code is immediately available for anyone who so wishes to check on anything suspicious by inspecting the code directly. The NSA spying scandal and the lack of trust of foreign and even domestic technology will drive more and broader adoption of open source. With the added benefit that the community propels innovation faster, it’s hard not to feel good about the future of open source in this day and age.
IT will soon mean Information Transformation.
More and more enterprises will need to adopt tactics normally associated with startups (e.g.: devops, continuous integration and delivery) in order to handle the need to support ever-changing digital fields such as mobile application development, web analytics and social media. In this transformation, system administrators will need to brush up their coding or get left behind with the legacy applications. Database admins will need to make the jump to Big Data and NoSQL. The enterprise CIO who realizes how to make devops and agile work in their organization will lead the way. This will take root in 2014 and continue to grow over the next 5-10 years as applications are replaced.
Small packages, big time-savings.
Container technology such as Docker and ZeroVM will begin to simplify the way application deployment and portability works, allowing applications to be spun up and down at break-neck speeds. Containers will be used heavily in production starting in 2014 and beyond.
Gravitant, which makes software for companies to manage their cloud services, announced Wednesday that it has received $10 million in Series B funding.
Corsa Ventures led the round and was joined by existing investor S3 Ventures.
The Austin-based company plans to use the money to expand its sales and marketing, to fulfill customer orders and to add more features to its cloud management platform.
In addition, Alex Gruzen with Corsa Ventures will join Gravitant’s board of directors.
“Gravitant has the potential to change the way Enterprise IT is done,” Gruzen said in a news statement. “While cloud computing shows much promise in transforming IT, CIOs are struggling with cloud adoption and simply not getting the ROI they expect from their private and public cloud investments. Gravitant’s cloudMatrix brokerage and management platform optimizes agility and cost while maintaining control. The result is a vastly improved cloud ROI.”
“Customer interest in cloud brokerage and management platforms is accelerating, and this funding will help us take advantage of this rapidly growing market space,” Mohammed Farooq, co-founder and CEO of Gravitant said in a news statement. “We believe Gravitant will be the next major software company in Austin, and we are very pleased to see the support from Austin-based venture capitalists to help us realize this goal.”
Jason Seats, managing director of TechStars Cloud, leads the TechStars for a Day program at Geekdom.
“We help awesome founders build great companies,” said Jason Seats, managing director of the TechStars Cloud.
The program has become a launching pad for technology startups with five TechStars programs around the country in Boulder, Boston, Seattle, New York and San Antonio. TechStars Cloud focuses on companies that build infrastructure products for the Internet as well as consumer applications accessible on the Web.
“Deep down there is some altruism,” Seats said. “We like to build stuff that matters. It’s not about making the most money.”
But the TechStars companies collectively have raised $265 million and 185 companies with 1,200 employees.
Last year’s TechStars Cloud class raised $15 million including $2.5 million from local investors in a fund headed up by John Mosher.
The TechStars Cloud is a three-month technology incubator that takes place every January at Geekdom, a co-working and collaborative space at the Weston Centre in downtown San Antonio. The first TechStars Cloud took place last January and featured 11 teams that came from all over the country. This year’s program kicks off on Jan. 14 and will be housed on the newly renovated 10th floor of the Weston Centre. The deadline to apply is Sunday at midnight.
The application process is highly competitive, Seats said.
Each team receives $18,000 in cash and $100,000 in debt financing. In exchange, TechStars takes a 6 percent stake in the company.
For that investment, the companies get mentorship from successful entrepreneurs, investment, access to a vast network of entrepreneurs, venture capitalists and other resources, and perks valued at $200,000, Seats said.
During the three-month program, the teams overhaul business models and craft products while they fine-tune their company story and pitch.
Ryan Shank and Vincent Wong, co-founders of
Ryan Shank and Vincent Wong, co-founders of MHelpDesk
“We’re interested in the mentorship and network aspects of the program,” Wong said.
“We’re looking for mentors to take the company to the next level – to take the company to the masses,” Shank said.
Dustin Larimer, co-founder of a team chat application, applied for the program. He volunteered as a TechStars HackStar for the last class and he’s seen the benefit the teams receive from the program firsthand.
“I got to see the transformation in them,” Larimer said. “The quality that comes out of that crystalizes a line of clarity that you couldn’t find on your own.”
Throughout the day, the applicants listened to a series of speakers that talked about their mistakes, how to raise money and how to run their businesses effectively.
Dirk Elmendorf, co-founder of Rackspace and Trucking Office
“We all think we’re great at marketing,” Elmendorf said. “We’re all wrong.”
Finding, hiring and retaining the best employees is one of the most important parts of running a startup company, he said. Sales and marketing people are essential, he said. But he didn’t always think that way.
“Original model was no salespeople,” Elmendorf said. “Ok, that model doesn’t work.”
His latest startup, Trucking Office, has since hired a few sales people.
Startups should also focus on having cash in the bank, Elmendorf said.
“Depending on the business model you pick, you might always be fundraising.”
Startups need to also focus on customer acquisition costs.
“These are essential things to do the business,” he said.
When someone asked Elmendorf how he focused on the trucking industry, he said his team originally wanted to supply accounting software to all small businesses. But they found the trucking niche and that’s where they are focused because it’s a large and important market.
“I never thought I would be excited about doing accounting software for truckers,” he said.
But he is. The software helps independent truckers do their jobs better and fight big conglomerates, he said.
Lumeris announced plans Tuesday to build a software engineering and innovation center in Austin and to hire 100 software engineers, project managers and consultants.
The St. Louis-based healthcare technology company develops software applications for healthcare providers to access on the Internet. Its technology seeks to improve quality and reduce healthcare costs.
Lumeris has raised $220 million from investors including Kleiner Perkins, Caufield & Byers, Camden Partners, Blue Cross Blue Shield Venture Partners and Sandbox Capital.
“Healthcare is a $2.6 trillion industry that is now embracing cutting edge information technologies to improve quality and drive down costs,” John Doerr, a partner at Kleiner Perkins said in a news release. “Our country’s economic future and health demands we succeed with this mission. We spend more than any other country in the world, but our life expectancy barely makes the Top 50. We can do better. The enormous talent pool in Austin makes it a great place to fuel Lumeris’ growth and innovation.”
Lumeris and Essence Healthcare, its sister company, have 550 employees in St. Louis, Boston and Hyderabad, India. It has annual revenue of $500 million.
Lumeris want to hire Web app developers and cloud experts. For more information on job postings and recruiting events, visit Lumeris’ website.
“There is no bigger technical challenge or worthy mission than fixing our country’s healthcare system,” W. Michael Long, CEO and Chairman of Lumeris said in a news release. “The digital revolution occurring in healthcare driven by breakthroughs in digital communications and data management and a national economic crisis created in part from unmanaged healthcare costs is moving fast. We need Austin’s best and the brightest who want to build really interesting things and improve the lives of their friends and loved ones. That’s my definition of cool.”
Long was previously CEO of Austin-based Continuum that was purchased by Computer Sciences Corp. He then helped launch healthcare giant Healtheon/WebMD, serving as CEO and Chairman.
Jason Seats, managing director of the TechStars Cloud, says hundreds of companies applied to the program. In the end, TechStars choose 11 companies. All of them are from outside of San Antonio. Seats is not revealing the company names until April 6th at TechStars Cloud Demo Day.
Nicole Glaros, one of the founders of TechStars in Boulder, will also move to San Antonio for the 13-week program with her family. Seats says the program will serve as the catalyst San Antonio needs to ignite its high-tech startup community. All of the companies will be located at Geekdom, a collaborative workspace at the Weston Centre in downtown San Antonio.
The TechStars Cloud could serve as a catalyst to ignite 
San Antonio’s startup technology community.
That’s because ten new startups will locate here for the 12-week program, which kicks off in January. Also, Nicole Glaros, TechStar managing director, will move here with her family. She will run the TechStars Cloud along with Jason Seats.
On Saturday, about 120 applicants, mentors, funders and others gathered at Rackspace’s new collaborative workspace downtown, called Geekdom. The 15,000 square foot offices on the 11th floor of the Weston Centre will host the TechStar Cloud companies.
At TechStars for a Day, applicants listened to speakers and panel discussions about what it’s like to be a TechStars entrepreneur. They also networked. The program ended at 4 p.m. but many stayed until past 6 p.m. to drink Dos Equis and Shiner beer and chat.
Seats ran the TechStars for a Day program. People sat in bright red, black and white stools and chairs or on large red bean bags in front of a giant screen on which Seats projected the images of Glaros and TechStars Founder David Cohen, both located in Denver, via Skype. Glaros is in the last trimester of her pregnancy and can’t travel right now. But she gave sage advice and insight into the program.
“TechStars’ secret sauce is its mentors,” Glaros said, which include some of the best and brightest minds nationwide, she said. “These mentors are giving freely of their time to make sure these companies get to the next level.”
Glaros told the room to “put down your smart phones and start talking” and to “participate actively” to get the most out of the day. She also told them to “nail your elevator pitch. It should be two sentences and less than 30 seconds.”
“Don’t hog too much of anyone’s time,” Glaros said. “Keep conversations to five minutes.”
And on that note, Glaros’ broadcast froze. Seats tried to fix the connection, which prompted Rackspace Chairman Graham Weston to say “This is the only production in town where the guy running the show is also the audio and visual guy.”
The lean production speaks to the culture of the TechStars startups to do as much as they can on strict budgets. But all of the TechStar Cloud winners get money. They receive $18,000 and access to a $100,000 loan. They must relocate to San Antonio for the duration of the program, which culminates in April with a TechStars Cloud Demo Day, in which they pitch their companies to investors. Weston, Rackspace Founders Pat Condon and Dirk Elmendorf have provided the funding for TechStars Cloud for the next four years.
Cohen, also spoke to the group via Skype because his mother was visiting him. TechStars has already funded 100 companies of which nine have been acquired by larger companies and 14 have failed. Collectively, the startups have raised $100 million. Anyone can apply for the program, including foreign companies, as long as they obtain Visas. The program is about “a community” of expertise around funding technology startups, Cohen said. Successful entrepreneurs serving as mentors, combined with alumni and TechStar’s network of 75 venture funds and angels nationwide help to make the program a success, Cohen said.
“A large focus is on quality,” Cohen said. TechStars provides 10 mentors to one company, he said.
“Our goal is to make every single company we fund successful,” Cohen said.
The two biggest startup killers are lack of a market for a product and issues with the team, Cohen said. TechStars mentors can help with those issues because they have faced them before in their own startups. To succeed, the companies need to “be the best in the world at what you do,” Cohen said.
Trying new things, failing and learning from the mistakes are some of the biggest advantages startups have over large and well funded companies, Cohen said.
In response to a question from the audience, Cohen said the biggest misconception about TechStars is it’s “only for very young companies or 21 year old white dudes.” The average age of a applicant is 31 and the age range of TechStar entrepreneurs is generally between 22 and 42 years old, although they’ve had older entrepreneurs, he said. Lots of companies are already established in a market but need help getting to the next level, Cohen said.
“Many companies come into TechStars with $1 million in revenue or $1 million in funding,” he said.
The inaugural TechStars Cloud program focuses on “companies that are building the cloud and not building on the cloud,” Cohen said. The cloud provides companies the ability to deliver computer services online.
After the overview of the program and advice from Cohen and Glaros, Seats introduced Weston to the crowd.
“The legacy of this man is going to be all about this town,” Seats said. “Graham Weston has done more for this town than any single man since Davy Crockett.”
Rackspace knows how to help startups because it was one not too long ago.
At a San Antonio hamburger joint in 1998, Weston and his partner Morris Miller met with three Trinity University students, Elmendorf, Condon and Richard Yoo, the founders of Rackspace, a startup hosting company. Rackspace has since evolved into a publicly traded hosting giant with $1 billion in revenue and nearly 4,000 employees. It is San Antonio’s largest technology company and Weston, Elmendorf and Condon want to create more like it.
Weston, referencing the book “The Coming Job’s War,” said most of this country’s net new jobs are produced by companies less than five years. Startups are fueling the country’s economic growth now and into the future, he said.
Then Weston gave a pitch on the city’s shining attributes that would have made the Greater San Antonio Chamber of Commerce proud. He mentioned the city’s low unemployment rate and huge medical and biotechnology industry, which is larger than the tourism industry. He touted the city’s rapidly developing urban life with thousands of apartments and condos being built in the downtown area and the city’s 68 miles of bike trails and 11,000 acres of urban parks. San Antonio has affordable housing, Weston said.
“You can buy a great house for less than $200,000,” he said.
San Antonio has the benefits of a large city, but the feel of a small town, Weston said. It’s kid friendly and a great place for families, he said. He also mentioned the city’s 31 higher education institutions and 100,000 students and its thriving arts community.
The city also has five Fortune 500 companies and a few large private companies like USAA and HEB. The startup community in San Antonio is poised to take off, Weston said.
“The founders and I are determined to create the next Rackspace over the next 20 years,” Weston said.
Weston then introduced Seats, who founded Slicehost, which Rackspace acquired in 2008. Rackspace’s cloud revenue has grown from zero to $200 million since that acquisition, Weston said. One of the requirements of the acquisition was that Seats move to San Antonio, Weston said.
“He’s the sort of entrepreneur San Antonio needs more of,” he said.
Seats has an office in Rackspace’s Geekdom and is looking forward to helping other entrepreneurs succeed with their ventures.
In addition to the entrepreneurs, Ned Hill, a venture capitalist with DFJ Mercury in Houston, gave the audience advice on how to seek funding. DFJ Mercury provides investments ranging from $50,000 to $1 million and has $110 million under management. One of DFJ Mercury’s hot portfolio companies is Austin-based Game Salad, which allows anyone to create a game for a variety of devices without knowing any coding.
Hill often gets asked “How do I choose the right VC?” He says “The right VCs are easy to spot. They are the ones writing the checks.”
He told the entrepreneurs to be flexible and persistent.
“You’ve got to be really good at telling your story,” he said. VCs invest in ideas that make sense and have value and in people who are passionate and know their market better than anyone, he said. “Vision, passion and drive,” Hill said. “Let it shine though. Don’t give up, make it happen.”
Deals can take only a few days or up to a year to get funded, he said. DFJ Mercury likes to own at least 20 percent of the company upon exiting the investment. VCs like to see the opportunity to earn ten times their investment when they give a company money, but most deals don’t earn anywhere near that, he said.
He advised the entrepreneurs to always be thinking about their exit strategy, especially if they receive funding.
“You can’t be in it for the lifestyle,” he said. “If you’re not able to sell a company in five to seven years then you’ve got a problem. Try to exit your business within five years.”
Elmendorf told the group that one of their greatest strengths was not knowing a lot.
“You literally have no idea how hard it is what you’re trying to do,” he said.
But that’s ok, and failing is also Ok, he said.
“As long as you keep doing this, it’s a learning process,” he said. “Failing is totally awesome as long as you don’t stop. If you stop and go get a real job, then you’re a failure.”
Starting a company is a “messy, hard endeavor,” Elmendorf said.
Startup companies need to know what problem they are trying to solve. It’s easy to get sidetracked, so entrepreneurs must constantly focus and ask themselves what they’re trying to work out, he said.
Entrepreneurs often play multiple roles in the organization early on, but they’ve got to spin those off and hire more people as the organization grows.
“I was HR because I had the most jobs,” Elmendorf said. “I slowly carved off the other things that weren’t related.”
Other panel discussions and talks featured former Techstars entrepreneurs, some who succeeded and others who did not.
Don’t be afraid to try something that doesn’t work out, said Josh Fraser, founder of EventVu and Torbit. He shut down EventVue after three years in February of 2010. EventVue created an app that allowed people to network at conferences. After closing up shop, he started getting calls from Facebook and other large companies that wanted to hire him. He also got calls from former investors who wanted to know what he was working on next. He’s now founder of Torbit.
Donning a brown stetson and cowboy boots, Lance Walley founder of Chargify and a TechStars Cloud mentor, talked about customer acquisition and pricing.
“Pick a niche and charge enough for your products,” he said. “If you know who your customer is, you can acquire them.”
In a later panel featuring other TechStar mentors, Rackspace Founder Condon said that narrowing the market and focusing the product on a specific customer is the best way to succeed.
“You have to say no to a lot of folks,” he said.
The application deadline for the Rackspace TechStars Cloud program is Monday, Nov. 7.
The deadline to apply for the TechStars Cloud program is Monday.
But already the program has received several hundred applications for the inaugural TechStars program in San Antonio, said Jason Seats, managing director for TechStars Cloud and cofounder of Slicehost, which San Antonio-based Rackspace acquired.
On Friday night, several of those entrepreneurs met with Rackspace employees and tech company mentors at the Esquire Tavern on the Riverwalk downtown. Some of them travelled from Nashville, Portland, San Francisco, Madison, Wisc. and the United Kingdom.
On Saturday, they will gather on the 11th floor of the Weston Centre downtown from noon until five to hear speakers from Rackspace including one of the founders, Dirk Elmendorf and Rackspace Chairman Graham Weston along with speakers from TechStars.
Seats calls it “TechStars for a day.”
Elmendorf says Rackspace has remade the 11th floor of the Weston Centre into “Geekdom” with plenty of space for start up companies to work and mingle.
The 13-week TechStars Cloud program will start in January and culminate with the TechStars Demo Day in April in which the selected companies will pitch to potential investors. San Antonio is the fifth site for a TechStars program with other locations in Boston, Seattle, New York and Boulder, Colo.
“This location is all about cloud,” Seats said.
The cloud is like “the plumbing of the Internet,” Seats said. It’s the “heavy-lifting technology stuff that takes place behind the scene.”
Seats says the applicants for the TechStars Cloud program, so far, have more of a business to business focus, rather than a business to consumer focus. The applicants span a wide range of industries including music, hosting, infrastructure, video and gaming.
The interest in the program is high because not only do the 10 TechStars Cloud companies receive $18,000 in initial investment but they receive mentoring and access to a network of accomplished entrepreneurs and potential funders.
“It’s a fantastic time to start a new company,” Seats said. “If you’re a developer with a great startup idea, the economy is not hurting for you.”
Most of the TechStar cloud companies will come from outside of San Antonio, Seats said. He expects just one to two to be from this area. And he hopes that the injection of new talent into the San Antonio startup community will serve as a catalyst to spur further companies here. And he hopes some of the companies may decide to stay in San Antonio permanently upon completion of the program.
Seats has met with several of San Antonio’s angel investors and he says the community is starting to invest in technology and biotechnology companies locally.
“There is no scarcity of money in San Antonio,” Seats said. “There’s always money for good ideas and good people.”
Seats just returned from TechStars Demo Day in Seattle. He was especially impressed with Romotive, which creates a kit to turn an iPhone into a robot, Everymove, which works with companies to provide healthy incentives to their employees, Vizify, a social network data analysis site and GoChime, connecting brands with people on social media.
