Anatomy of Innovation: Exodus Founder B.V. Jagadeesh (Part 4)

SM: Did anybody else mirror your concept of what was essentially an Internet datacenter?

JVB: Nobody had this concept. This was in 1995, at the exact same time the dot-com companies started to emerge. Hotmail, map companies, and other started to take bud. We started to become the de facto standard for hosting those companies. We raised about $3.5 million for a Series A to let us support these companies.

SM: Who funded you?

JVB: It was a combination of angel investors. We were two young, high-energy people with customers.

SM: What were you charging your customers for the service you were providing?

JVB: For a server we would charge $500-$600 per month. If you wanted a T1 it would be $1,000. Our goal was to keep the servers for 4-6 months until companies got their own T1. It turned out that when customers got their own T1 they would rather keep the server on our site because we had redundant connections with UPS. We could keep their site up when they could not. Links were not all that reliable, so our redundancy was good.

Customers wanted to us keep the server and the T1. That same customer was then generating $1,500-$2,000 in revenue per month.

SM: That is a pretty good revenue stream.

JVB: Not bad. By the time we had the funding we already had a run rate of close to $2 million in revenue. Since we already had customers, we felt the smart move with that funding would be to build a datacenter. We built one with a raised floor, a generator, and great UPS systems in a very clean environment. It was a 15,000 square foot building, and we all moved into it as well.

SM: Yet you still had to maintain each customer’s box, right?

JVB: Yes, we still had that model. Customers owned their own servers. We never owned them. They brought their equipment to our space because we did not want their equipment on our books. The day we moved from our Sunnyvale facility in the Santa Clara datacenter, our customers were in awe.

Nobody had seen such a nice, sophisticated datacenter. They were proud to have their servers there.
That was the true birth of the Internet datacenter. In August of 1996 we were halfway through our move, and there was a massive power failure west of Utah because of a grid failure. This area was badly affected. We had a generator, so our brilliant marketing guy made a very big deal of it. BBN, which was based in Palo Alto, went down. They were a government-funded facility and they went down.

SM: You were thinking of rural India!

BVJ: Exactly! Experience is invaluable. We never had a power failure. We had ads blasting in the newspaper, ‘When the whole world went down, Exodus had the lights on’. It was a very catchy advertisement. We had a lot of customers from BBN move at that time because they lost their confidence in BBN.

They saw us as a young company that really understood how to do these things. The Internet was so new that we really gelled really well with their impressions. Three months after we moved into the building we had the entire 15,000 square foot facility used for datacenter space and we were starting our second datacenter. Our third datacenter was 50,000 square feet.

This segment is part 4 in the series : Anatomy of Innovation: Exodus Founder B.V. Jagadeesh
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