For me it looks like IBM and VMWare are reinventing themselves trough these aquisitions. If you work with enterprise customers, you can see how much they hate these kind of vendors, and how eager they are to understand open-source solutions,and to adopt the fast pace of internet companies. IBM and VMWare understood this too, and now they are adapting to this new landscape. I am confident that when IBM will say to my customers: hey, we can deploy and support Kubernetes for you (with the same agilty as your existing small vendors) they will
go for it, just to get rid of the bureaucratic burden generated by their purchasing departments, and us, the small vendors will have to reinvent as well, and this is how innovation happens.
the list goes on and on. A lot of these products would not be where they are today (nor shuttered necessarily) without the resources (or lackthereof) poured into them after acquisition. Yahoo tried and failed miserably in its end.
Facebook may be the best example on that list. They get beat to mobile messenging, they buy Beluga. They lose screen time to mobile devices, they buy Snaptu. They get beat again to mobile (camera/photo album), they buy Instagram. The get beat by in messenging AGAIN, and they buy WhatsApp. They get beat to video by youtube, they buy LiveRail. In a panic to not be beat again they buy Occulus.
Plus, in this case they are mostly buying the Reputation and Service Contracts, not as much the product. IBM is already mostly a Service, not product, company now.
Google is a great example too. Many of Google’s best-known hits began outside of Google:
* Maps (maps from Where2 Technologies, acquired in 2004; real-time traffic from ZipDash, acquired in 2004; satellite imagery from Keyhole, acquired in 2005)
* Android (founded in 2003, bought for $50M+ in 2005)
* YouTube (founded in 2005, bought for $1.7B in 2006)
* Adsense (Google acquired Applied Semantics in 2003,
DoubleClick in 2007, and AdMob for mobile ads in 2009)
* Google Docs (spreadsheets by 2Web, acquired in 2005; docs by Upstartle, acquired in 2006; slides by Tonic Systems, acquired in 2007)
Great comment. Thanks for sharing all of this knowledge.
> They loose screen time to mobile devices, they buy Snaptu.
This was acquisition for feature phones and not touch phones. Your comment implies that Facebook mobile app came out of this acquisition - which is not true.
While I'd love to believe both IBM and VMWare are acquiring in the spirit of Open Source and innovation both are, sadly, chasing sales organizations who are looking at long term pipeline dry up in their legacy product models. Time will tell, especially for IBM, but the people running these organizations are truly not friendly to, or even remotely, understand OSS at the core. Nor do they care.
Acquisitions today are mainly to block competition early. While I'm painting a broad stroke most of these types of acquisitions do little to nothing for the greater long term good of the original products. What has IBM contributed to OSS in the last decade that's been of significant value? Then compare that to the money they make off repackaging these tools and "supporting" them. IBM is chasing dollars and relevance. VMW is trying to compete in a market they've not been able to wedge into helping them sell more seats for VSphere.
Both of these companies have, historically, abused OSS. It's disheartening to see that these monoliths have figured out to buy early and often. And through that playbook, ultimately, maintain control.
Heptio got a world class team. Congratulations to the founding team. Having played with and followed the Kubernetes ecosystem for the last couple months, I'm wondering if this was not all planned:
Find a hot niche market (Kubernetes). Play the "Cool" card on social network, and hire all the "most famous" Upstream kubernetes contributor (typically those that tweet a lot). Those newly hired contributors, make the company even cooler and there is now a perception everywhere that the company is the next big thing. The product build by the company is not as important as the hype they got (as shown by the other posts that wonders what they actually do).
At this point, a big business jumps in desperate to get some of the hype branding for that new market (Kubernetes) and pays big money for what is essentially a huge acqui-hire (mainly acquiring the Heptio reputation).
This existed before with Openstack, and other similar hype cycles.
These engineers will never otherwise work for VMware. So they spent a shitton of money to hire them. I wouldn't be surprised if it was just for the two engineers.
There are certainly more than just those two engineers that work at Heptio. Surely some of them will also continue the work that Heptio still has in front of it? I don't have any insider knowledge about this besides what was in the article, but it says that "Beda and McLuckie _and their team_" will all be joining VMware.
I have no reason to doubt any of that, although I don't know what it means for Heptio's Amazon partnership, or utilities like Heptio Authenticator. Presumably that work will still continue in some form though, it would be a surprise to hear otherwise since VMware and AWS are already "strategic technology partners" as well.
I knew a guy like that. He was big into open source and he worked for a small start up. His company was swallowed up by a huge tech company. Years later I tried to get him to join the company I worked for, and he said it was impossible, basically his stock options were so insane he couldn't work anywhere else. "Golden handcuffs"
This is obviously pure conjecture and completely made up, but I’m guessing between $200m and $250m. They’ve raised a total of of $33m at ~$100m. Assuming they got that valuation off of 10x revenue. - that means they were doing $10m or so per year in revenue.
Typically investors are looking for a 3-5x return if a company sells short term (< 10 years). A 5x on $33m is $165m, there’s more math that goes into so it’s easier to just round up. Which is about $200m.
I would be surprised if Heptio made more than $5M in revenue. As far as I can tell, their business model was to first spend a lot of money upfront building a high-profile team of upstream contributors, and developing lots of cool open-source projects; then leverage the upstream brand recognition into service contracts, in the hope of becoming the “Red Hat of Kubernetes”. They certainly were very efficient at the “spending money on great upstream engineers” part. I doubt they got very far along in the “generate revenue” part.
I think they spent roughly half of their series B money on this brilliant plan, with headcount increasing at a steady clip. Meanwhile they probably realized building an enterprise sales and support organization is no fun, and growing it fast enough to justify ballooning R&D costs is not as easy as it looks. Given the profile of the founders - former Google and Microsoft employees with no enterprise sales experience to speak of - they were either deeply bored by the prospect of scaling this part of the company, or the board started pressuring them to bring a more sales-savvy CEO, or possibly both. It’s also possible that there was founder conflict brewing - those guys had zero experience outside of giant corporations, so they jumped straight into the deep end of the pool with a high-profile launch, rapid team growth, etc. For inexperienced founders who haven’t had time to gel as a team, it can be a jarring experience. Given that they still had reasonable runway (let’s say 12 months), they were not desperate to sell. My guess is that their number was $250M: plenty of money for the founders, and it matches the recent CoreOS acquisition. In early stage acquisitions it’s often important to stroke the ego of the founders, so that they can experience the acquisition as a victory rather than a defeat. A lot of times that boils down to a pissing contest on valuation. $250M is a steep price for a $5M business, but it’s still a great deal for Vmware. They need a credible Kubernetes story, and as much open-source DNA as they can.
EDIT: others are pointing out that the acquisition price might be below $84M. It’s likely that VMware structured the deal into a modest a acquisition price for shareholders, augmented by a somptuous retention package for key employees (basically the founders and engineers). I think they pitched the resulting deal as a $250M “acquisition” from the founder’s perspective. This is very common for acqui-hires, especially when the risk is high that the team will be unhappy and be tempted to leave.
I've had a chance to interact with Craig and Joe on multiple occasions and got an impression that they are rock solid both in their business strategy, team building, technical execution and vision, so not sure where do your assumptions are coming from?
Yes this is of course all speculation. I’m just pattern-matching based on my experience and superficial observation of the facts. If you’ve met them a few times, it looks like you are too, no?
Objectively, this is a pretty great outcome. So you could say they had a good strategy and executed well on it. And their engineering team looks great, no argument there.
"On June 12, 2015 Cisco acquired Piston Cloud Computing, a privately held San Francisco based Openstack product company. Piston provides software that enables streamlined operational deployment of large scale distributed systems. Piston's enterprise grade software helps customers automate orchestration and deployment of underlying distributed systems for running applications on OpenStack."
The threshold of required disclosure is based on what's material to the public company involved. This is an accounting concept that scales up as the company is bigger. But sure for many companies $84MM would be material.
Google did not disclose the price for Feedburner, but it was rumoured to be around $100M (I worked at Google at the time and have no insider information whatsoever on the deal).
Did Heptio do some consulting for Amazon AWS? They have a guest blog post from memory, and im wondering if they helped kickstart EKS? Obviously they built aws-iam-authenticator, and as a company worked with AWS services... I would have thought Amazon acquiring them would have made way more sense?
In general, Amazon doesn't aqui-hire as much as some other tech gians. They acquire things instead of spending CapEx (Whole Foods), to vertically integrate (Annapurna Labs), or things with very good customer bases, and brands (Twitch, Zappos).
Heptio had none of these.
EKS seems like more of an "OK, fine, if you really want K8s, you can have K8s" move to me.
Congratulations, and welcome to the family, I guess! It's hard for me to connect the dots and harder for others probably that don't know you, but Pivotal is another VMWare brand AIUI (and I know you are a Pivotal Labs employee, big fan of your work)
Pivotal and VMWare are sister companies, -ish. I wondered about whether to mention it but decided at the time to leave it off in case it sent a mixed message.
I think it's quite interesting as few years ago consultancies weren't valued that high and investors wouldn't think that investing into a consultancy is a good idea. With Redha and now Heptio acquisitions it seems like times are changing :) I guess it's really important for those large corporates to acquire engineering talent in bulk and it's probably really healthy for their internal culture to get some fresh ideas.
Anyway, I really liked Heptio strategy of building and supporting some open source tooling to help with your k8s cluster, let's hope their team will continue the tradition! :)
This is actually an interesting point. An acquisition is either a cause for celebration because it's validation of what you built and a potential financial windfall, or it's a sign that your company has fallen behind and needs a soft landing.
Kubernetes companies are like the chat apps of 2018. Unlike chat apps, Kubernetes has yet to gain a serious foothold in large numbers. These acquisitions feel like FOMO.
I can very safely tell you that this is not the case. There is massive money in Kubernetes right now, and the spending spree will continue, as non-traditional players (Financial services, health-care) drive adoption. This despite the fact we are coming up to a end of a financial cycle is going to look considerably less rosey for some of these companies.
The question is, who buys Rancher, and does someone buy docker?
Kubernetes is growing quickly. Containerization is still relatively new. Docker already won one part of the game, which is the actual container environment. Docker Swarm, however, is a crap product, and even Docker themselves have thrown in the towel and now embrace Kubernetes, which solves the deployment and orchestration problem better than anything else.
Everyone is using Kubernetes, yes. Few are using Kubernetes for high scale production workloads. This will change within the next 2-3 years, of course, but there is a massive amounts of inertia at many of the companies that you've mentioned from moving away from traditional server based workloads.
Scroll down to Case studies; https://kubernetes.io/case-studies/ - there are far more large corps using it that aren't listed on this of course. I'll let them toot their horns if they'd like. :)
Also, as I work with k8s I like to watch the trend of HNs "Who's hiring?" threads out of curiosity and I ctrl-f for kubernetes/k8s. Last few times I've looked 20-25+ have had kubernetes in their postings. It's been a pretty fair chunk / near-majority over the last 6 months or so.
It's a marked difference from when I got on the kubernetes train around 2015, that's for sure!
They all do. Major tech companies have money to burn. Name a trendy tech that BusinessWeek or WallStreetJournal says will "transform the industry" and some schmuck exec will decree they need to be using it.
Most people shouldn't be using k8s anyway, because most people don't need that level of complexity. OTOH, Heptio was building some core functionality for enterprises using k8s. There's a ton of crap that k8s doesn't do right now, this was a smart move to build products they can then sell to k8s users.
