Anatomy of Innovation: Exodus Founder B.V. Jagadeesh (Part 5)

SM: What year of your story are we at now?

JVB: 1997. That is when we saw the hyper growth.

SM: What kind of revenues did you have in 1997?

JVB: We were at $12 million. In 1996 we had $3.5 million. In 1998 we went public and hit $50 million. By 2000 we were almost a $1 billion company in terms of revenue.

SM: What valuation did you get with the IPO?

JVB: IPO valuation was not much. It was just $350 million on a $150 million run rate. It was huge growth, but we were a new business and people did not know how to value it. Goldman Sachs were the underwriters and they did a fantastic job.

SM: It shot up after the IPO?

JVB: The first six months it was very nervous. We priced at $15; the opening day it hit $27. It was between $15 and $27 for the next six months. After that it just took off.

SM: I remember that in 1999 Exodus had some splits.

JVB: We had four splits between 1999 and 2000. We were splitting every quarter. At the peak, in June 2000, we had a market cap of close to $28 billion. It was unbelievable.

SM: As you went through this hyper growth process, how did your role in the company change?

JVB: I am always a very practical person. We did not have experience in terms of scaling the business. On top of that, a lot of the New York and Wall Street customers were asking us “if we are going to move our crown jewel into you, what kind of experience do you have to run these types of datacenters?” The first thing we did was to bring in a CEO, Ellen Hancock, in 1998.

I was running all of the engineering and operations. The first thing I relinquished was the operations. We brought in a decent operations manager who knew how to handle things. I was still running the backbone and the development engineering. We were offering a lot of value added services. One of the reasons Exodus had a premium, aside from our being the leaders, was that we had one-third of our revenue coming from managed services. Many of those tools were developed internally. We had a lot of intellectual property.

SM: It is almost like first generation software-as-a-service?

JVB: Correct. We used to take those tools and translate them into services so customers had comprehensive services including hosting, networking, infrastructure, and all of these managed services. It gave us SLA of 99.999% uptime. We were also leveraging other tools like HP OpenView, Computer Associate tools, and other partners’ tools.

Engineering and the backbone started growing significantly. In 1999 I basically went to Ellen and told her I thought it was time to have a more seasoned VP of Engineering and that I would step aside and move into a CTO role. We brought in someone from IBM to run engineering.

As the CTO I was involved in a lot of the M&A and business development activities. I was also speaking in public and evangelizing the whole Exodus concept. I did a lot of talking with customers. I enjoyed that role.

SM: How was your dynamic with Ellen? Stepping aside can be difficult for entrepreneurs.

JVB: I was never a CEO, my partner was. To me it was OK. I was deeply involved and my activities did not diminish. She was relying on me in many ways because I had massive responsibilities. None of that actually changed. I volunteered to give up responsibilities when the time was right. I am a big believer that in order to build value you have to bring in the right kind of people. I left in the middle of 2000 and to this day I have a great relationship with her.

This segment is part 5 in the series : Anatomy of Innovation: Exodus Founder B.V. Jagadeesh
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