Scaling a Cloud-Based Disaster Recovery Business in Silicon Valley: Axcient CEO Justin Moore (Part 3)

Sramana Mitra: You bootstrapped?

Justin Moore: Yes, we convinced the original equipment manufacturers to give us engineers. The logic I used with them was, “You’re not going to get your maintenance renewals on the equipment that you sold. That’s some of your highest margins. If we can get this deployed and get your full renewal and maintenance contracts, that’s meaningful money for you.

There are two choices. You can either work with me by giving me some of your engineers and some of your network architects, or given that I have exclusive rights, I can just start taking out advertisements in the New York Times or Wall Street Journal and flood the market with a billion to a billion and half of un-deployed infrastructure.” Of course, they didn’t want that to happen. We bootstrapped because we didn’t even have to pay the 20 contractors and consultants that we had.

Sramana Mitra: Which one was the first client that bought into this value proposition?

Justin Moore: The first deal we ever did was actually a deal in Illinois with a company called Design Incorporated. I read about them in the paper. They had done some acquisitions and they were consolidating their infrastructure. I remember cold-calling the CFO and saying, “What are you doing with the data centers and the excess infrastructure?”

The first deal we ever did was actually more of a buy and sell equipment than the bigger vision of how to map networking and fiber optic infrastructure to secondary or international markets. It was just buy and sell arbitrage. I had no money in the bank account. I took what money I had and and bought a flight out to Illinois. I pitched him this concept. I walked through their warehouse and data centers. I made him an offer to acquire it all, and he said yes. I had to go online and find a contract. Within two weeks, we had to find acquirers of some of the infrastructures. We made a profit of $200,000 on our first deal, which was insane at that age. It seemed like enough money for a lifetime.

Sramana Mitra: How big was the contract for you?

Justin Moore: It took us about a month but our profit was about $200,000.

Sramana Mitra: We’re talking which year now?

Justin Moore: That was right in the 2002 period.

Sramana Mitra: How did this then move from 2002 onwards?

Justin Moore: We started working with bigger companies like Accenture and Level3 Communications. Our first big contract was Quest Communications. That was a contract for all of their excess infrastructure. It was $1 billion in un-deployed assets. That was our first mega contract.

Sramana Mitra: How many years does this keep going in this mode, or what is the next major strategic change or inflection point in the business that is worth discussing?

Justin Moore: We just built the company. We did the same thing we were doing for four years.

Sramana Mitra: What was the revenue level four years down?

Justin Moore: Within the first 12 to 24 months, we did about $15 million. Then we probably did about the same over the next two years. It stayed at that level but it was consistent and it was without head count. It was very profitable. We faced a crossroads where we had three choices. One is keep doing what we were doing.

I was, quite frankly, getting bored. It had been interesting, but it wasn’t really stimulating. I didn’t feel like we were creating anything. I didn’t feel like we were building a company. I felt like we were making deals. It just wasn’t very rewarding and enriching. I was just bored and not enjoying what we were doing. The opportunity to build a business was to build a network of consultants, contractors, and engineers who could help people optimize their network infrastructure and who could provide support and service to secondary markets.

That was more of a body shop and not that interesting to me. You could create a lot of jobs but you would always be limited by the number of people you have, what you can bill out. It’s not a model that really interested me – low leverage and not disruptive. We had made a ton of money and it was great. The opportunity was dwindling because the arbitrage period, over time, went down. We just decided to finish out the contracts we had and move on.

Sramana Mitra: You just basically shut down the business?

Justin Moore: Yes. We closed our existing contracts and then shut the business. It wasn’t like we had built a huge employee base. All the contractors and consultants just went back to their employers who they were on the payroll of anyway.

This segment is part 3 in the series : Scaling a Cloud-Based Disaster Recovery Business in Silicon Valley: Axcient CEO Justin Moore
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