Sumo Cast 013 - Jason Seats






Jason Seats is a Techstars Ventures Partner. Jason was most recently the Managing Director of the Techstars programs in Austin and Cloud in San Antonio. Prior to joining Techstars, Jason was a founder of Slicehost, an early cloud computing hosting company. In 2008 Slicehost was acquired by Rackspace and became the core for the initial Cloud Servers product. Jason continued on at Rackspace until 2010 as VP of software development for Rackspace Cloud, managing the cloud engineering teams.

Todays guest is Jason Seats from Techstars. Jason bootstrapped a company all the way to exit and helped create the cloud as we know it.

1:48    The reason why Slicehost was a bootstrap company was simply because Jason didn’t know anybody with money, nor how to raise money. He feels it was out of necessity rather then having to be clever, even though it is insane to bootstrap a hosting company. He knows it was a quick ride from inception to exit. He didn’t intend to build a company to    sell, but rather a company that was fun and interesting to work on and provide cashflow.

3:40    One of the things that happened with the company early on was that it always had excess demand - they were lucky to fall into excessive demand. Whatever equipment they had it was fully utilised, so they were able to build a waiting list situation complete with a bit of logic that would show where the customer was in line on the waiting list and ramp up their equipment to meet the demand. Jason discovered people were swapping and buying different places in the queue - and this line concept led to a way for customers to pre-pay for months of service and he was able to sort the line accordingly by this priority.

6:58    He recalls that thanks to this pre-pay system in 3 months he was paying back the cap-ex which is remarkable.

7:55    Rackspace approached at a time when there was still only 8 employees working for Slicehost. They entered through the virtual door of email and offered to talk about the business. Jason and his partner agreed to take the call - assuming that Rackspace either wanted to acquire, sell or compete with them. They made the decision to keep everything above board and transparent. At the end of the conversation they still didn’t have an idea what the call was about - and a day later an email arrived offering to acquire the business. Terrified to be more than a mile away from the datacenter, Jason and his partner didn’t want to fly out to Texas to talk a deal, but Rackspace offered to fly up the next day to talk. An initial offer arrived in a week and they pushed hard to trash out a deal before the blackout of the IPO for Rackspace came up. Unfortunately they missed this deadline and Rackspaces IPO happened, and Jason felt the boat had sailed - especially coming as it did with the financial crash of 2008. He feels that the transition from having a company they never wanted to sell to becoming a company that they felt they had to sell happened amazingly quickly.

14:48    Jason was 150% in on the acquisition - he wanted to convert the risk in the business into a win situation. He felt that there was a very binary choice - run the business or cash it in, there were no other options. He recalls that he was very anxious every day he ran the company - from hacking to bugs, to basically leaving the customers down but in hindsight he discovered that every company goes through it regardless of size.

17:26    Hosting was always a very cyclical industry says Jason. His partner Matt wasn’t as into the sale as Jason was for various reasons - one being he didn’t want to move to Texas.

19:00    The acquisition closed in October 2008, right in the middle of the Lehman crisis. Rackspace IPO’d in the middle of the Financial crash, which was a pretty ballsy move in Jason’s opinion.

21:07    Cloud was coined in a real way in 2006 by Amazon when they launched EC2. That did not hit mainstream until 2010.

21:55    Jason feels that he got massively lucky. You can’t predict the tailwinds that they were lucky enough to hit. His partner Matt was doing freelance software development for people and  saw a gap in the market for hosting for these clients who wanted to pay, but had no option to pay for their hosting. He also references XEN as an open source platform that did virtualisation. Combining this knowledge he feels that they just made a lot of lucky guesses with setting up the company from XEN to Ruby on Rails and hardware configuration. You can’t legislate for all that.

26:05    Some founders that have blown Jason away have exceed over 750 companies that have  gone through the Techstars startup support. He feels that best characteristics in successful entrepreneurs are those that combine adaptability and flexibility with stubbornness and persistence. Some people are great on one, but it takes both to be successful.

28:55    Jason channels Brad Feld as an example for when is it time to close down a start up. He feels Brad in his simple way would ask ‘is your heart still in it?’ , ‘Is it fulfilling’ - and that will tell you the answer. The issue is really managing the very real obligation to investors and employees. At the end of the day Jason says it feels like life and death, but when you get a bit of perspective you realise nobody died.

30:52    Nearly everything he knows from Venture investing Jason learned from Brad - he met him very early in his education into the investing world. He feels like every time he has had a conversation with Brad he learns something. A recent example was a workshop that Brad was running for managing directors. Brads take on how you choose a company to invest in was very simple - he said theres only 2 questions. The first is ‘Is this a problem I’m interested in solving’. The second is ‘Are these the people I want to solve it with’. It really is a simple as that.

34:20    After Jason left Rackspace his wife gave birth to their first child, and he took some paternity leave. During this he came to the realisation that corporate life didn’t suit him. He knew he had to do something else but didn’t know what that something was. He heard that         Techstars were going to launch a cloud program that interested him. Jason was invited to run the program, and didn’t expect to be part of Techstars long term, and didn’t expect to become and love being an investor.

36:55    In his year off he was still trying to find his purpose and he thought he wanted to be a hedge fund manager, but thought better of it. He learned pretty quickly that it wasn’t really of interest to him- but found the investor is halfway between Hedge Fund managing and startups. To him it is the perfect blend of real money and real financial staking and product.

39:08    At present Jason is getting ready to learn about crowdfunding - he feels it’s a sign of things to come.

40:05    Jason invites everyone to check out