A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 6)

Sramana Mitra: Where are we timeline-wise now?

Jason Cohen: We’re still in the mid-2000s. Just accelerating through that, I sold Smart Bear in 2007. I left in 2009. I had to stick around for a year.

Sramana Mitra: To whom did you sell this company to?

Jason Cohen: There was another company called Automated QA. They made testing tools. Of course, we made peer review tools. They’re both in the quality arena. What happened was Automated QA, themselves, had sold to a venture firm out of New York called Insight Partners. They manage a few billion dollars right now.

Insight wanted to do a roll-up where they took a bunch of software development quality tools and made a suite out of it. Today, they have bought something like seven companies. The whole company is still called Smart Bear. This was an instance where the company was sold, the company’s financials were healthy when we sold it, and it continued to grow and be profitable.

Sramana Mitra: What kind of revenue level did you reach before you sold?

Jason Cohen: It was similar to ITWatchDogs. It was in the single millions in revenue. It was very profitable. Our net profit margin was 50%. It was a very profitable bootstrapped company. That continues to be a very profitable and growing venture. They have something like 200 to 300 employees right now. You can probably do some kind of math on the general size and shape of that. I actually don’t know their current revenues because I left in 2009.

Sramana Mitra: In 2009 when you left, what happened after?

Jason Cohen: The reason I left Smart Bear when I did is my wife was pregnant with our first and only child. It just felt like time to be at home and stop doing some of the stuff for a while. I quit Smart Bear and I was a stay-at-home dad for a year. I was an equal caretaker at home. It was great. I wouldn’t give that back for anything. Back at Smart Bear, I had started a blog. This is how the new company was eventually born.

I started a blog called A Smart Bear. The idea was it will be the company’s blog and everyone would blog on it. Then as it got popular, this was one of the few ways for me to stay intellectually connected to the rest of the world. Of course, where there’s focus, there’s progress. Right now, it has about 50,000 subscribers. I don’t write very much anymore because WP Engine takes up so much time but I used to write once a week. When it got to be somewhat popular, I would get on Hacker News every Monday when I posted.

Then the site would crash because WordPress doesn’t actually scale. I would call blogger friends and say, “I don’t care if it costs $50 a month, but I just want the blog to not go down.” The answer was always, “I don’t know but if you find it, tell me because I need that too.” There goes the light bulb. I vetted WP Engine after talking to 50 people. The fundamental value was they would pay $50 a month and we did four things which we call today the four S’s. One is speed. Two is, it has to scale. Three is security, and four is service, but service in the sense of application level questions.

Sramana Mitra: So your value proposition was WordPress hosting and not just regular hosting that Rackspace provides. For instance, we host our site on Rackspace.

Jason Cohen: Yes. If you call Rackspace and you say, “This plug in isn’t working or my site is slow.” They’ll say, “That’s terrible.” They’ll be nicer about it but they don’t diagnose why the site is slow. We also have some dev tools which nowadays, a lot of our competitors have. At that time, it was unique. For example, staging area. That was automatic and built into the platform. That was what I launched with in 2010.

We started early in the year but we launched officially in May with about 30 customers. It also started as a bootstrapped company. About 18 months in, it was clear that the market is very big. Also on a personal note, I wanted a different journey this time having done three bootstrapped companies.

Sramana Mitra: You wanted to experience the cycle of raising money. I understand that.

Jason Cohen: I didn’t want to experience raising money because that’s not a great experience. What I wanted to do was to have a different entrepreneurial journey. I think you have to be very modest and have a beginner’s mind about new adventures. It’s not like that means I’ll know what to do and I’ll be successful. It’s still a different set of goals and constraints to say, “We’re building a company that has $100 million in revenue versus a company that has $10 million in revenue”

It was clear by then that the opportunity was that big. It was actually logical to do that. A lot of times you raise money for stuff that is not logical or is not consistent to do that, and that’s a problem. Here, it was consistent. Fast forward to today, we’ve raised $43 million total, which sounds a lot except that our annual revenue far exceeds that. Whenever you can invest a dollar and get more than that in annual recurring revenue, that’s obviously a very good investment. We’re actually very good stewards of that money and we’ve raised a lot only because we’ve grown so quickly and actually have been so successful on the revenue side.

This segment is part 6 in the series : A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine
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