Bootstrapping to $18 Million: Vlad Friedman, CEO of Edge Hosting (Part 3)

Sramana Mitra: What year did you come up with the insight?

Vlad Friedman: It was in the mid-90s. I don’t remember the exact year.

Sramana Mitra: You started to provide a hosting solution in the 1995 to 1996 time frame. What was the customer base that you went after with that?

Vlad Friedman: Interestingly, the hosting solution came in 1998. That’s when I went into the automotive space and started to understand the recurring business model. I built that up to a couple of million dollars a year company at that point. In 1998, I said, “This Internet thing is cool. Let’s put up our first website.”

I fired seven vendors in a row because nobody was really outcome-focused or service-focused back then. Everyone just wanted to sell you a site or server. I took the same modality that I had in the consulting business and said, “What if we took this and translated it to a hosting operation?” Generally, one of the most expensive costs of technology is people. What if we could take all the things that people have to do and figure out ways to do them really efficiently at scale? We make the investment. We figure out the multi tenancy between these different platforms. We came to market with that message.

We were certainly nowhere close to the least expensive vendor in town. We were probably in the upper echelon. The customers just started to come knocking down our doors. That’s where Edge was born. It was born because I couldn’t find anyone who had an outcome-based approach. Everyone just wanted to sell a box. No one thought about hosting. We started small. We bootstrapped. We took a couple of computers. We stuck them in one of our IT closets and that just started to blossom and grow at a very fast pace. That was our foray into the business we are today.

I had stumbled on to the magic of the recurring revenue model. I took an outcome-based approach focused on delivering value to a customer over the long-term instead of just selling them a single consulting engagement or single product. We combined those two in a market where there were very few people focused on driving those outcomes. That’s how Edge was born.

Sramana Mitra: Was there a particular customer segment where you were getting more traction than others?

Vlad Friedman: When we were small, our customers were smaller. These days, that has certainly changed. We have customers all the way up to publicly-traded firms and Fortune 500 corporations. Then so many of the Internet companies were small. They would come to us looking for these outcomes. What was interesting back then, which is true of today, is by not being the lowest cost provider, we were typically their third or fourth vendor. By the time they came to us, they really appreciated what we did. They either were compromised by hackers or their systems went down. Almost everything we work with is public-facing, revenue-generating, and mission critical.

Even back then when we were small, that was our focus. We were the ones who got the phone call when nobody else could do it. When no one else could put together a design pattern that worked, we figured out these design patterns for hosting these public-facing systems that just stayed online and didn’t go down. Our customers really appreciated that. We focused heavily on that promoter score and making sure that, as technologists move between different businesses, they take us along for the ride. It was really about becoming a trusted advisor, but then doing one thing really well.

This segment is part 3 in the series : Bootstrapping to $18 Million: Vlad Friedman, CEO of Edge Hosting
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