Well-known open source companies listed to create billionaires, the founder does not want to be a CEO only want to be a code farmer

Author | Luo Yanshan

Last week, Amazon's cloud services suffered a major glitch that paralyzed many of its associated popular website services. The incident quickly sparked a buzz about how enterprises can minimize the impact of disruption in an era when data and services are increasingly dependent on cloud data centers, whether large enterprises can rely on a single vendor, or whether they need to spread their workloads to prevent such incidents from happening again?

In subtle contrast, hashicorp, a cloud-focused software company that also went public last week, tells the story of multi-cloud, providing software that helps engineers set up resources across multiple clouds. Amazon, on the other hand, is less of an advocate of using multiple public clouds, preferring customers to stick with Amazon for all of their cloud computing needs.

Hashicorp's market capitalization today exceeds $15 billion, which is exciting and not surprising. The story of Hashicorp may just be one example of the current IPO boom for open source companies. Multi-cloud and cloud infrastructure automation have attracted the attention of the capital market, and the ongoing epidemic has further accelerated the pace of enterprise transformation to the cloud, and perhaps in the near future, more "HashiCorp" will land on the capital market.

It starts with open source and community

HashiCorp was founded in 2012 by Mitchell Hashimoto and Armon Dadgar. Forbes estimates that Mitchell is worth $1.2 billion at IPO prices and armon is worth $1.5 billion, but about $1.2 billion is held through charitable trusts.

Headquartered in San Francisco (although 90% of employees work remotely), HashiCorp has grown thanks to the growing popularity of its open source tools, including Terraform for infrastructure configuration, Vault, a platform for managing passwords, Consul for network management, and Scheduler and Workload Coordinator Nomad.

Overall, HashiCorp provides software that helps enterprises run a mix of public and private cloud systems and older applications. Major cloud infrastructure providers working with HashiCorp include Alibaba Cloud, Amazon's AWS, Google Cloud, Microsoft Azure, and VMware.

HashiCorp claims that its open source products were downloaded more than 100 million times in fiscal 2021, and it is estimated that about 79% of Fortune 500 companies have downloaded HashiCorp's tools. HashiCorp's sales grew 49 percent to $82.2 million in the most recent quarter. However, net losses over the period also widened to $22 million as the company increased its investments in sales, marketing and research and development from $9.3 million a year ago.

Like most college startup stories, Mitchell and Armon met at the University of Washington. The company's "headquarters", founded in 2012, is in the living room of Armon's home. Until 2014, they were the only two employees in the company.

However, HashiCorp's early development was slow. In the first few years, Mitchell and Armon's day-to-day routine was to write and share code. The first product, Vagrant, was only about 100 downloads in its first year, and 90 of them were actually downloaded by Mitchell and Armon themselves. The number of downloads rose to 1,000 in the second year, 100,000 around the 3rd and 4th year, and not more than one million until the fifth year.

To increase downloads, Mitchell and Armon did a lot of community building work early on. They met with programmers from major companies and introduced them to the tool. Mitchell flew 350,000 kilometers a year at that time, and Armon could call out the names of the first 1,000 users of the product. In Mitchelle and Armon's view, early entrepreneurs in open source projects must focus on building communities in addition to having confidence in their products.

HashiCorp has been hosting an annual conference for the DevOps community called "HashiConf," with a population ranging from 100 to 1,000 people. Through these activities, teams can get valuable feedback from industry personnel. Developers can learn about HashiCorp's products from other developers; those who aren't quite sure if they want to use HashiCorp products become followers of HashiCorp products after learning from others because they understand how much other companies trust HashiCorp's products.

"This is much more authentic than anything we say ourselves." Armon says, "We bring product executives with us for all our meetings. We let them have conversations with our users. ”

Founders who are reluctant to do management work

Both Mitchell and Armon are bitter about the CEO's job. "You think of entrepreneurship as a daily struggle for your passion; but the reality is that you need to inspire others to fight for your passion every day." Mitchell describes it this way.

In the early years, the company also faced a major problem of how to make money. While HashiCorp's open source product users come from a variety of industries and sizes, it's not clear which group the revenue will come from. HashiCorp's first paid product was Atlas for SMEs, which was designed for SMEs and, although there were some users, there has been no breakthrough.

Armon says the team spent a lot of time reflecting on themselves before they realized they should focus on enterprise customers because HashiCorp's value proposition is to solve problems at scale. For example, vault, one of HashiCorp's products, solves the problem of compliance governance that only large companies have.

Looking back, Armon says he wished he had thought about HashiCorp's target customers sooner rather than just focusing on solving the problem, but thinking about who you were solving the problem for.

HashiCorp began to transform to an enterprise version of the product, outside of the product, organizational structure, Mitchell and Armon believe that the company needs to hire a professional manager with extensive sales experience to be the CEO of the company. In 2016, with the addition of Dave McJannet, a veteran who has worked at Microsoft and VMware, the company began its transition to commercialization. The next four years. HashiCorp's workforce grew from 30 to 400 that year, and its market capitalization has increased more than 20-fold. To date, HashiCorp has more than 1,650 employees.

In addition to selling the CEO position, in July this year, Mitchell also announced his resignation as CTO of the company, while stepping down from the HashiCorp board of directors and becoming a personal programmer again. "Over time, I became acutely aware that my passion was about being involved in software engineering, not about taking on a technical leadership role."

But he's not leaving the company. As an individual contributor, Mitchell intends to focus on HashiCorp's projects and will continue to advise Armon and McJannet on strategic planning, as well as an advisor to his old comrades.

Mitchell had been involved in writing Vagrant code before, so in his opinion his day-to-day work wouldn't have changed much. The core difference is that he no longer has to travel around to attend client meetings. Mitchell says that while he also enjoys meeting clients, he's struggled with endless travel that has struggled for him to have enough energy to program. He also said his family was happy to see that he no longer had to be a "trapeze artist."

1% user fee doesn't work

Mitchelle once pointed out in the sharing that the most common mistakes made by open source companies are to fantasize about converting early individual users, always feeling that as long as 1% of users are converted, they can be a successful company. But the reality is that most of these users have no intention of paying.

Today's HashiCorp rolls out tools for free until they are robustly used by developers, and then builds peripheral products that solve enterprise-level problems such as security and collaboration. McJannet says, "It's important that we accept that our products will be overrun for free trials by developers for a long period of time, making the product a standard tool in a truly target user base. ”

So after the failure of its first paid product, Atlas, HashiCorp set its sights on the big business. Large enterprises are more willing to pay than small and medium-sized enterprises.

Armon notes, "The open source community is about the same as the average app user. They will use your product because there is an obvious pain point. They can give you great feedback and even help you promote your product for free, so the open source community has always been very important to us. However, once you decide to charge these users, they will feel very badly. So we choose not to charge individuals, but to charge businesses. This principle helps us define which products are paid and which are free. ”

Targeting large enterprises also means a change in the sales team. McJannet recalls that when talking about HashiCorp's first million order, he personally flew to Virginia to introduce the product to customers face-to-face. The other person looked at him and said, "Actually, we like your products and like your company." The bank is using your open source products internally, and everyone is very optimistic about you. However, we will only sign a contract with your company if you come personally." The client continued, "Because I see that among the people you come to negotiate are experienced sales and account managers, and you have professional customer service staff. ”

McJanne emphasizes: "Until then, customers didn't know what it meant to work with HashiCorp. We need to build bridges of trust between us. They are willing to trust me, and I know the meaning of that trust. ”

Reference Links:

https://www.hashicorp.com/blog/a-new-chapter-for-hashicorp

https://www.cnbc.com/2021/12/12/aws-outage-and-hashicorp-ipo-point-to-a-multicloud-future.htmlhttps://www.cyzone.cn/article/621947.html