7 ms·

VMware acquires Heptio, the startup founded by 2 co-founders of Kubernetes

245 points by kaboro 8y ago

jacques_chester 8y ago
Congratulations to everyone at Heptio!
- supergirl 8y ago
  funny how these days if your company is acquired it is cause for celebration.
  - beatgammit 8y ago
    Why. It's a chance to cash out, which is usually a great thing!
    - acct1771 8y ago
      Not for the user/consumer, usually. This industry used to mean something.
  - deforciant 8y ago
    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! :)
  - burnstek 8y ago
    If you're in executive management then it's a big cause for celebration, and it's been that way since the dawn of M&A
  - onetimemanytime 8y ago
    why not? Someone valued your creation quite a bit. You're RICH. You can start the next thing 4 years from now, or never.
  - baseballMan 8y ago
    Being on the low end of the totem pole when an acquisition happens usually means it's time to find a new job.
  - jamestimmins 8y ago
    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.
- federicoponzi 8y ago
  Why this was downvoted?
- yebyen 8y ago
  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)
  - jacques_chester 8y ago
    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. (And thankyou!)
    - yebyen 8y ago
      I found this post only after I wrote that, ha: https://content.pivotal.io/blog/were-looking-forward-to-welcoming-heptio-to-the-family-this-is-why-our-customers-will-be-the-big-winners https://content.pivotal.io/blog/were-looking-forward-to-welc...
pm90 8y ago
Surprised to see them get acquired so soon. > Terms of the deal are not being disclosed — VMware said in a release that they are not material to the company Can we make an intelligent guess about the upper bound of the transaction? i.e. would it have to be < $500 million? < $1 Billion?
- ryanSrich 8y ago
  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.
  - pinewurst 8y ago
    I'm guessing lower than that, as Heptio is/was basically a smallish services organization (I've talked with them).
  - zapita 8y ago
    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.
zenithm 8y ago
I'm sure everyone involved made some money but aren't they basically a consultancy?
- redwood 8y ago
  Acquihire and street cred are valuable at a time when there's a bit of a race in the space. IBM revved up the heat.
  - Justsignedup 8y ago
    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.
    - yebyen 8y ago
      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.
    - johnvanommen 8y ago
      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"
- segmondy 8y ago
  Really? With all the tools they have written that are open source and on GitHub?
nunez 8y ago
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.
- caymanjim 8y ago
  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.
- acct1771 8y ago
  Kubernetes was on Cramer. Definitely fear of missing out...
- InTheArena 8y ago
  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?
  - raesene9 8y ago
    Well Docker has just taken new funding, which makes it seem like they're not looking for an exit in the immediate future. In general though seems likely there will be a load of consolidation across the container space over the next year or so.
- Thaxll 8y ago
  Except everyone is using Kubernetes.
  - kraig 8y ago
andrei821 8y ago
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.
- basch 8y ago
  Is that any different than Microsoft - PowerPoint, Hotmail, FrontPage, Windows Live Messenger, Visio, Bungie, Rare, Lionhead, Mojang, Dynamics (Great Plains, NAV), Skype, Defender, Perceptive Pixel (Surface Hubs), Yammer, LinkedIn, Acompli (Outlook Mobile), GitHub, Xamarin, Beam (Mixer) Facebook - Beluga (Messenger app), Snaptu (Facebook for Every Phone, Facebook Lite), Instagram, Atlas, Parse, WhatsApp, Occulus, LiveRail (video monitization) Adobe - PageMaker, After Effects, Photoshop, FrameMaker, GoLive, Audition, Echosign (Adobe Sign), Macromedia (who itself acquired Freehand, Dreamweaver, Flash, ColdFusion), Fireworks, plus its entire Marketing Cloud: Omniture, Day, Auditude, Neolane, Livefyre, TubeMogul, Magento, Marketo etc Oracle - ... 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.
  - mandeepj 8y ago
    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. https://techcrunch.com/2011/03/20/facebook-reportedly-acquires-snaptu-for-an-estimated-60-70-million/ https://techcrunch.com/2011/03/20/facebook-reportedly-acquir...
tyingq 8y ago
Curious what the relationship will be like with Pivotal now. It would be a little odd if Vmware makes something that competes with PKS.
- voor 8y ago
  Pivotal is amped up and excited about the acquisition. Check out @rseroter’s Tweet: https://twitter.com/rseroter/status/1059738266189017088?s=09 https://twitter.com/rseroter/status/1059738266189017088?s=09
  - tyingq 8y ago
    I saw that, but also saw this on Heptio's blog post about the announcement: "Heptio’s mission is to build a platform that accelerates IT in a multi-cloud world." Just feels like some overlap with PKS, and both companies being Dell owned is interesting.
    - AlphaSite 8y ago
      I mean PKS is vmware and pivotal co-developed.
deleted 8y ago
[deleted]
willejs 8y ago
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?
- discodave 8y ago
  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.
warp_factor 8y ago
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.

245 points by kaboro 8y ago

jacques_chester 8y ago

Congratulations to everyone at Heptio!

supergirl 8y ago
funny how these days if your company is acquired it is cause for celebration.
- beatgammit 8y ago
  Why. It's a chance to cash out, which is usually a great thing!
  - acct1771 8y ago
    Not for the user/consumer, usually. This industry used to mean something.
- deforciant 8y ago
  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! :)
- burnstek 8y ago
  If you're in executive management then it's a big cause for celebration, and it's been that way since the dawn of M&A
- onetimemanytime 8y ago
  why not? Someone valued your creation quite a bit. You're RICH. You can start the next thing 4 years from now, or never.
- baseballMan 8y ago
  Being on the low end of the totem pole when an acquisition happens usually means it's time to find a new job.
- jamestimmins 8y ago
  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.
federicoponzi 8y ago
Why this was downvoted?
yebyen 8y ago
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)
- jacques_chester 8y ago
  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. (And thankyou!)
  - yebyen 8y ago
    I found this post only after I wrote that, ha: https://content.pivotal.io/blog/were-looking-forward-to-welcoming-heptio-to-the-family-this-is-why-our-customers-will-be-the-big-winners https://content.pivotal.io/blog/were-looking-forward-to-welc...

pm90 8y ago

Surprised to see them get acquired so soon. > Terms of the deal are not being disclosed — VMware said in a release that they are not material to the company Can we make an intelligent guess about the upper bound of the transaction? i.e. would it have to be < $500 million? < $1 Billion?

ryanSrich 8y ago
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.
- pinewurst 8y ago
  I'm guessing lower than that, as Heptio is/was basically a smallish services organization (I've talked with them).
- zapita 8y ago
  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.

zenithm 8y ago

I'm sure everyone involved made some money but aren't they basically a consultancy?

redwood 8y ago
Acquihire and street cred are valuable at a time when there's a bit of a race in the space. IBM revved up the heat.
- Justsignedup 8y ago
  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.
  - yebyen 8y ago
    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.
  - johnvanommen 8y ago
    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"
segmondy 8y ago
Really? With all the tools they have written that are open source and on GitHub?

nunez 8y ago

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.

caymanjim 8y ago
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.
acct1771 8y ago
Kubernetes was on Cramer. Definitely fear of missing out...
InTheArena 8y ago
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?
- raesene9 8y ago
  Well Docker has just taken new funding, which makes it seem like they're not looking for an exit in the immediate future. In general though seems likely there will be a load of consolidation across the container space over the next year or so.
Thaxll 8y ago
Except everyone is using Kubernetes.
- kraig 8y ago

andrei821 8y ago

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.

basch 8y ago
Is that any different than Microsoft - PowerPoint, Hotmail, FrontPage, Windows Live Messenger, Visio, Bungie, Rare, Lionhead, Mojang, Dynamics (Great Plains, NAV), Skype, Defender, Perceptive Pixel (Surface Hubs), Yammer, LinkedIn, Acompli (Outlook Mobile), GitHub, Xamarin, Beam (Mixer) Facebook - Beluga (Messenger app), Snaptu (Facebook for Every Phone, Facebook Lite), Instagram, Atlas, Parse, WhatsApp, Occulus, LiveRail (video monitization) Adobe - PageMaker, After Effects, Photoshop, FrameMaker, GoLive, Audition, Echosign (Adobe Sign), Macromedia (who itself acquired Freehand, Dreamweaver, Flash, ColdFusion), Fireworks, plus its entire Marketing Cloud: Omniture, Day, Auditude, Neolane, Livefyre, TubeMogul, Magento, Marketo etc Oracle - ... 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.
- mandeepj 8y ago
  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. https://techcrunch.com/2011/03/20/facebook-reportedly-acquires-snaptu-for-an-estimated-60-70-million/ https://techcrunch.com/2011/03/20/facebook-reportedly-acquir...

tyingq 8y ago

Curious what the relationship will be like with Pivotal now. It would be a little odd if Vmware makes something that competes with PKS.

voor 8y ago
Pivotal is amped up and excited about the acquisition. Check out @rseroter’s Tweet: https://twitter.com/rseroter/status/1059738266189017088?s=09 https://twitter.com/rseroter/status/1059738266189017088?s=09
- tyingq 8y ago
  I saw that, but also saw this on Heptio's blog post about the announcement: "Heptio’s mission is to build a platform that accelerates IT in a multi-cloud world." Just feels like some overlap with PKS, and both companies being Dell owned is interesting.
  - AlphaSite 8y ago
    I mean PKS is vmware and pivotal co-developed.

deleted 8y ago

[deleted]

willejs 8y ago

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?

discodave 8y ago
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.

warp_factor 8y ago

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.