Slicehost: How A Goal-Setting Bootstrapper Launch & Sold His Business

If you meet Matt Tanase in person, ask him to show you the wallpaper photo on his phone. It’ll probably be of a jet that he’s aiming to buy one day, and the photo is one of the ways he motivates himself to keep working so he could earn enough to buy it.

When he bootstrapped Slicehost, the hosting company he co-founded, the inspirational photo was of a car. After he sold the company to Rackspace, he could have bought that car (or any other car he wanted), but he didn’t. As you’ll hear in this interview, the photos and the objects are motivators, but they’re not the real reason he works. So why does he do it? Listen to the interview to find out.

Matt Tanase

Matt Tanase

Slicehost

Matt Tanase is the co-founder of Slicehost, which offers virtual servers for application developers. He sold the company to Rackspace in 2008.

 

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Full Interview Transcript

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Andrew: Hey everyone. It’s Andrew Warner, founder of Mixergy.com, home

of the ambitious upstart and back from South by Southwest where I picked up

what I guess they call South by Southwest voice. My voice is shot

completely from talking too much.

But I’m really excited to come back here, and as soon as I got in I

launched right into today’s interview which is about how a bootstrapped

entrepreneur created and sold his company. Joining me is Matt Tanase. He is

the co-founder of Slicehost which offers virtual servers for application

developers. He launched the company in 2006 and sold it to Rackspace about

two years later.

I invited him to hear the story behind how he did it and to find out how

he’s following up on that company with a startup called DevStructure. Matt,

welcome to Mixergy.

Matt: Thank you, Andrew. I’m glad to be here. I’ve been a big fan for a

long time, so it’s an honor.

Andrew: Thank you. Me, too. I’ve been doing a little bit of

cyberstalking of you in preparation for this interview, and I found your

personal blog online with a post where you had a picture of a Rolls-Royce.

I think, here’s exactly the headline. It says, “Goals are Good.” What do

you mean by that?

Matt: I’m just a very motivated and driven person, and I like to set goals.

It’s kind of funny because that’s the type of goal for me that once I could

do it, I really wouldn’t because it I s a little ostentatious. It’s really

not my style at all, but I live in Florida most of the year.

That’s kind of a big car culture down there, and I happened to be at the

dealership that day. They had that beauty parked out on the lot, and I was

like, oh, I want one of those. I took a picture. It works the rotation on

my phone. Sometimes, it’s the background or something like that. It’s just

something to work towards. I’m a huge believer in setting goals and looking

at them every day.

Andrew: And so, it’s on your phone right now.

Matt: Actually, on my phone right now is a Gulfstream jet.

Andrew: Oh really?

Matt: I might have set the bar a little higher. Yeah.

Andrew: You know what, Matt? That’s inspiring. You’re saying, did you

get the car and that’s why it’s no longer on your phone?

Matt: No, no. I didn’t get the car. I do have nice cars, and I talked with

my brothers who’s also a big car nut, and I said, “If I could have any car

right now, it would be that Rolls-Royce Ghost.” I don’t need a new car

right now, and I’m very blessed with what I have. Maybe, the next time

around. We’ll see how the stocks are doing. We’ll see how the new business

is doing. That might be it.

Andrew: What are some of the goals you set before you launched

Slicehost?

Matt: Slicehost came at a really interesting time in my life. When I

graduated from school, I had a small consulting company. And for a few

years had what was really an ideal situation and at the same time not a

good situation. What I mean by that is I had a very large, steady client

that was almost my sugar daddy for lack of a better word.

If I didn’t have any other business, I could just go out there and do work.

I could work ten hours a week. I could work 60 hours a week. It paid me a

pretty good hourly rate, and it was a safety net for me. I did consulting.

I built up a small network and security consulting business and really just

got burned out on it after a few years. Consulting is a difficult gig. Even

when times are good, you’re always thinking about next month or three

months or six months.

That’s kind of what happened. Business slowed down a little bit. The

company that I was doing the work for came to me and said, “We looked at

how much we’ve paid you over the last three years, and you either have to

work here or we can’t use you anymore.” I didn’t want to work there, so I

kind of went on my own.

It was good for a little while, and then business slowed down and I was

just kind of in a funk, for lack of a better word. I was kind of burned out

on the networking and security stuff and took a little bit of time off and

burned through my savings and stuff like that.

I was pretty much flat broke and looking for something to inspire me again.

I got back into consulting but with a little bit of a different twist. I’m

a programmer by trade. I have a computer science and electrical engineering

degree, and I was really just burned out on the typical web development

stuff.

I started to play with Ruby, using Ruby on Rails with some local customers.

I started to get more and more jobs, and that whole foray led me down the

path to Slicehost because I couldn’t find anywhere to host the applications

that I was writing for people.

Andrew: So you were writing applications. You were looking for a place

to host them. You couldn’t find the right place. You decided that you were

going to create a hosting company for developers like you who want to be

able to host their apps online.

Matt: Yeah, exactly. It seems like another lifetime ago. It was, I guess,

five years ago now, early 2006. Ruby on Rails were pretty hot. It had just

come out. My goal was really to kind of establish some recurring revenue.

It was one of those lessons I had learned in my previous endeavors as a

consultant was when times are good, they’re good, but those times don’t

last forever.

What I was very specifically trying to do was give my clients a way to have

to pay me every month, basically, if I worked or not. I was looking at

setting up hosting for them, and at that time, again, it seems like another

world, you really only had two choices. You could spend $300 or $400 a

month on a dedicated server, or you could get really crappy shared hosting.

And there was nothing between.

That was what I was trying to do. I was trying to find some sort of way I

could charge my clients a couple hundred dollars a month, but it was really

only going to cost me $20 or $30 a month, and I would have that markup.

Andrew: I want to continue with the story, but I wrote a question to

come back to later in the interview. As soon as I wrote it down, it started

sticking in my head, and I have to ask. You sold your company to Rackspace.

Couldn’t you just walk into a Rolls-Royce dealership and buy the Rolls-

Royce right now? I know this is a minor point, but it’s now stuck in my

head.

Matt: I could if I was a more flashy and less practical person, but I’m not

going to be one of those stories where you see somebody that has the good

fortunes of selling a company or coming into some money and blows it within

five years.

Andrew: I see.

Matt: I grew up in a pretty practical family and a lot of common sense. You

won’t see me making mistakes like that until buying a Rolls-Royce doesn’t

impact the bottom line at all.

Andrew: I see. You see use it to this day to keep you driven?

Matt: Oh absolutely.

Andrew: To be at a place not where you could afford to walk in and buy

it, but where you could afford to go in and buy it and not have it impact

your finances at all, in any significant way.

Matt: Right. It’s funny because I’m a big believer in Buddhist philosophies

and detachment from possessions and things like that. There’s actually been

several articles written on this. How do you balance being a believer in

Buddhism and that practice with being an entrepreneur which is very goal

driven. Let’s face it. Winning, for an entrepreneur, aside from the

satisfaction a lot of times is money.

It’s a strange thing. When you want something, it’s all you can think

about, but when you can finally get it, then you’re just kind of like, you

know, I’m really happy with what I’ve got. Like I said, I’ve got a couple

nice cars, but that’s not really going to change anything for me.

It’s actually really funny. I was with my girlfriend. She was getting her

car serviced a couple of months ago, and I got into a brand new car at the

dealership. It just didn’t do anything for me. There was a time ten years

ago I would have literally been salivating, sitting in that car. You kind

of just grow up and mature a little bit, but again I really believe in

putting things on the wall, putting things on your phone, having something

in the background on your computer and saying, “I’m going to do that one

day.” That’s my goal.

I think that’s the most satisfying feeling anyone can have is when they set

a goal that at some point just really seems unattainable, and then one day

two years or three years or five years, ten years down the road they sit

down and they talk and they can achieve that goal.

Actually, just recently, when we were talking off air, I have to move. I

spend most of the year down in Florida, but I have family in St. Louis.

I’ve been looking for a place in St. Louis as I’ve been renting up here for

the last couple years. I actually sat down with an architect about building

a house that I had really admired up here from the time I was in high

school. I used to drive by these houses and say, “I’m going to have one of

those one day.”

It’s not practical at this point, but we sat down. We had a serious

conversation about what it would take if it’s a good time. I was actually

thinking it might be a good time because the property values are

distressed, but he’s still pretty high in demand. So I don’t think it’s

going to happen. I walked out of that meeting, and I was on cloud nine

because I told this guy, “Mike, I have literally driven by every one of the

houses you’ve built here over the last ten years.” I was telling him. He

was like, “I can’t believe it. I feel like you know these as well as I do.”

I’m like, “This has always been a dream of mine.”

Andrew: When I worked through college, I used to have this picture of a

laptop that I wanted to be able to afford. I just have it up on my desk all

the time, and it would drive me to make an extra phone call and to push

myself when I was tired. It sounds like you do something similar, that you

have pictures beyond, on your cell phone, I think you said, on your wall.

Can you describe one thing that you were especially eager for that really

drove you and how you kept it in the forefront?

Matt: I’m fortunate to be able to set a lot of these goals now. At the time

Slicehost really was my only goal.

and gave us the freedom

that we wanted to do and allowed us to work together because he was one of

my best friends.

Andrew: I’m sorry, Matt. We lost the connection for a moment just as

you were saying, really my only goal was, and then we lost it.

Matt: The cliffhanger, right?

Andrew: Right.

Matt: I said when I was building Slicehost, really my only goal was to

create a business that could sustain both Jason and I. Jason was my partner

and one of my best friends, and we wanted to work together. We were

ecstatic that we didn’t have to go out and get 9 to 5 jobs.

It’s funny at that time we were literally so busy that you don’t really

stop to think about things like that. Sure, I had a car that was eight or

nine years old, and every once in a while I would go look at new cars. But

things were happening so fast that it almost feels like you blinked and it

was over. It’s almost until it’s after the fact that you can say, oh, I’d

like to do this or I can do this now.

One quick goal that I’ve had for years is I really want a private jet. I

want to be able to fly private, and even now that’s pretty much

unattainable. Every time I get on a Southwest flight, I’m pretty tall. I

squeeze into a coach seat. I just take 30 seconds, and I look at that

picture on my phone and I’m like, you’re going to work a little bit harder

when you get off this plane, aren’t you? It’s such a miserable experience

now that I just think to myself, how amazing it would be when you can

actually do that.

Of course, knock on wood, one of these days I’ll be able to do that, and

I’ll probably be like, oh, it’s too big of a hassle and too expensive and I

can do something better with my money. I’ll probably end up flying the same

way I always fly. Like I said, it’s great to just set something out there

that seems so far away and just keep putting one foot in front of the other

and moving towards it.

Andrew: What is working harder for you mean? When you look at that

private jet and you say, “I’ve got to work harder to get it.” When you’re

back in the office, where do you direct that energy today?

Matt: It’s very different today because, obviously, after Slicehost we’ve

had some success, and Jason and I are in different positions in life. Today

that means a combination of things. That means a combination of managing

all my own investments, which I do. Doing research on stocks and just

various ways and places you can put your money to work which is not exactly

the easiest thing in the world right now.

If you can imagine selling a company in October of 2008 and over the next

several months trying to figure out what to do with money and stock, it was

absolutely terrifying. And then, the other big chunk of that day is working

on my current endeavor which, quite honestly, has been very challenging and

hasn’t taken off the way that we wanted it to. We’ve really been working

hard to try and listen to that feedback we’re getting from customers and

build something that people really want and something that people talk

about.

That’s hard to do when you really don’t have to work anymore, to give

yourself that motivation to get up every morning, to spend three to four

hours on this and then seven or eight hours on that and conference calls

with your partner and writing code and writing copy and just thinking. It’s

not hard for me because I love it, but you have to have that internal drive

and that fire and set those goals to want to keep doing that.

Andrew: I wrote down another question to come back and ask you about.

You said very openly, and I really cherish when people say things like

this, it hasn’t taken off the way that we wanted it to in reference to your

current company, DevStructure. I want to come back and find out about that.

Let’s return to the story as you started telling it. You were a developer.

You couldn’t find the right hosting, and you said that the problem was that

having a dedicated server, which basically means a computer put on a shelf

somewhere, in a server rack somewhere, that’s dedicated to the developer,

was too expensive and it was too much.

On the other end you saw that shared hosting was crappy, I think you said.

Matt: Yes.

Andrew: And you wanted to find a better solution. I understand why

having a dedicated server might be too much for somebody who’s just

starting out with a new web app. Why was and is shared hosting a crappy

solution? What is it actually, and then why is it a bad solution?

Matt: Well, keep in mind the caveat before I understand these questions,

the hosting landscape was extremely different five years ago. You described

dedicated hosting perfectly. It’s your own server in a datacenter, in a

rack, with networking and bandwidth. At the time it was typically, at

least, $200 a month. Anything less than that was pretty bare bones.

Shared hosting is a hosting company that would cram hundreds, if not

thousands, of accounts onto the same server. Probably the technical people

know exactly what I’m talking about where you’ve been on a server and

Monday, Wednesday and Thursday it works great, but Saturday, Sunday and

Tuesday it’s awful and it’s really slow.

These shared hosting companies, there was really a race to the bottom in

terms of pricing. When I first started, it was actually pretty expensive.

Sometimes, it was $30 or $40 a month. Now, you can get deals for $3 or $4 a

month for the same thing. It was a volume business, and they didn’t really

care so much about customer support or performance because they tended to

lock customers in.

You really had these two divergent worlds, but the bigger problem

specifically to what I was doing was that the requirements for Ruby on

Rails, it needed root access on a server, basically, full administrative

control. The only way you could get that was on a server that you owned at

the time which almost locked you into the pretty expensive multi hundred

dollar servers. Even if you said, I don’t really care about performance,

this is a hobby project or something like that. You couldn’t call up one of

these shared hosts and run your app on it.

That was kind of this dichotomy we were faced with. You were either forced

to pay, or you couldn’t do anything, and being forced to pay I was looking

at a way to, myself, put several clients on a single server so that I could

make some money. Because if I went to all of these small to medium sized

businesses, which were most of my customers and I said I need $400 a month,

they would have laughed me out of the room for hosting.

But, if I went to them and said I need $80 a month, then they would have

said sure. And if I could put ten people or 20 people on a $400 a month

server, then I could pocket that extra $1200 or whatever, $1400 it might

be.

Andrew: I see. And so, once you discovered the opportunity and once you

knew what you needed to create, how did you go about creating it?

Matt: Well, I started to play with actually open source virtualization

technology called Xen, X-E-N. I had read about it, and I remember I put it

on a server I had at the house or in my office at the time. I had a little

one room office across the street, and I just started to play with it. I

installed it. I got some virtual instances running. I printed out a 100

page manual and read it cover to cover.

The only way I can explain it is this kind of light bulb went off where I

was like, everyone that’s doing Ruby on Rails stuff is going to want

something like this. It was obvious that that framework and the language

were really taking off. People online were sharing tips and tricks, where

they were hosting, how they were doing it, and printing up five page

articles on what they had to do to get something installed.

Simultaneously with this, I had actually gone to a datacenter that was in

town. They themselves were just getting started. I walked into this place,

and it was pretty much empty. They had bought a datacenter from a

bankruptcy auction from the dotcom days. They had this built out empty

datacenter. There was a young sales guy there, and you talk about getting

lucky. It’s one of those things you look back on and how the hell did that

happen, and that was really key to our success.

I signed up for a deal where he gave me six months for free. I signed my

name to some contract, and I remember I walked out of there, and I was

literally scared to death because I had no money. I had just committed to

what would be a $100,000 contract over three years and really had no

business or anything. But I had some datacenter space, right?

At that point, I called Jason who was, like I said, a friend of mine and

really one of the smartest guys that I know. I sat down with him, and I

told him what I was working on. I remember we had lunch. He had just taken

a new job. He was married. He had a house. He’d just bought a home a couple

of years earlier and had finally moved from a . . . I don’t want to call it

a crappy job, but it was a job he took and had kind of been thinking about

leaving for a couple years.

He actually had gone to a very good position where he’s working with

several of our mutual friends and had been given a pretty cool spot, kind

of in terms of the R&D guy for technology. He had a nice raise, and we sat

down at this lunch and I said, “You know, I put all the money I have in

getting the datacenter and getting a couple of machines. This is what I

think we can do.” The next day he just called me up, and he said, “Yeah,

let’s do it.”

He bought half of it at that point. He put $10,000 in to match what I had

put into it. So we were 50-50 partners. He had a full-time job. I had a

full-time job consulting, and from that day on, which was, I guess, in the

spring of 2006 we started working like, every hour of every day that we

were awake into we actually launched the company in August of 2006.

Andrew: The $10,000 that he put in and the $10,000 that you put in, was

that the only funding that went into the business?

Matt: That got us off the ground. The whole funding thing is a really

interesting story because we got the company launched off of that. Like I

said, we launched in August of 2006. We were both working that entire time,

and it pretty much took off instantly. It seems weird saying that, but

hindsight it really did. We were starting to get new customers every day.

We launched with three servers which was basically every dollar that we

had.

As we were getting more users, customers, we would take that money and buy

another server. Then, we could take another 30 customers in. We started to

realize that we had something here, and we had the infamous Slicehost “wait

list” which people were starting to leave their email address and say, let

me know when you have server space.

Every day, starting in about September, this thing started to grow. We’d

literally say, okay, we put a new server in, send out 30 invites, and then

30 new people would sign up. Then, we’d have to wait two weeks until we had

enough money from our paycheck to buy another couple servers.

At some point I think Jason had a credit card that had $30,000 on it that

he had nothing on. So we maxed that one out. I think we might have done one

other credit card, but obviously that only gets you so far. Keep in mind

the servers we were buying were $4,000 or so.

It’s not like $40,000 got us very far. It got us ten servers which was

great, don’t get me wrong, but we were coming nowhere close to clearing out

the log and keeping up with demand.

After that, we went to friends and family. Jason and I both come from very

modest families, and we wrote up, I guess, kind of like an explanation of

our business. I wouldn’t call it a business plan, but it was a summary of

what we were doing.

We emailed it to about a half dozen people, and three people responded. It

was our mutual friend, Colin, his dad, and Jason’s father-in-law and mother-

in-law. They all gave us a little bit of money, and I think between the

three of them we took just about $100,000. Now, it really wasn’t funding.

What we proposed was a high interest loan.

Andrew: Okay.

Matt: What we actually ended up doing was paying them back at a credit card

type rate. I think we figured it out one day. It was about a 23% return if

they got back . . . I think we asked for the money for a year. We said we’d

start to pay them back every month at this interest rate, but we ended up

paying them back in full with all of the expected interest within about

nine or ten months.

Andrew: I see.

Matt: They really got a fantastic return probably in excess of 30%. That

was as close to funding as we ever got. Our next great idea which many

people will remember is we had this several hundred person wait list for

Slicehost. In this stroke of genius, I guess, sitting there one afternoon

Jason and I decided to say to people, “If you’re willing to pay more, we’ll

let you move to the front of the line.”

We were one of the first hosting companies that actually billed month to

month and didn’t make people sign a contract. So what we said to you,

Andrew, if you said, “I absolutely need my site up to host Mixergy. I need

it tomorrow. I’ll pay whatever it takes.” We’d say, “Pay us 24 months

upfront, and you can have it right now.” People that were willing to pay 24

months upfront moved immediately to the front of the line. People that were

willing to pay 12 months upfront then came next, all the way down.

We suddenly had this huge cash infusion from our own customers, basically.

There were literally hundreds of them that were happy to do that because

they literally had no other choice at the time, and that’s how we built the

business. That was it. That gave us enough cash to start to buy servers and

get an unlimited credit card with American Express and start to get terms

with some of our vendors. From that point on, we were ahead and we didn’t

look back.

Andrew: If you’re paying your bills to the hosting company on a monthly

basis and you’re collecting revenue from your customers on a monthly basis,

and presumably your costs are lower than your prices, why couldn’t you just

keep firing up as many servers as you could afford, as many servers as

people wanted and pocket the difference between the price and the cost?

Matt: Well, it’s unfortunately not that simple. You had to really plan

ahead because this is kind of a capacity problem, in a sense. You have X

number of customers, and you have Y, some combination of infrastructure

which would be servers, datacenter space, power, and bandwidth. Those

things don’t happen overnight.

For instance, as we were planning our next round of customers, that meant

that we had to negotiate with the datacenter to take down more datacenter

space. We had to buy racks for the equipment. We had to buy routers and

switches and networking cable. And then, on top of that we had to buy the

servers, which sometimes would take two or three weeks to be built and

shipped to us. But they wouldn’t start working on that until we had paid

them for it because we couldn’t get terms.

It was really this very delicate, ulcer-inducing balance of how much money

do we have coming in, how mad are people getting that they can’t have their

server today, what are our competitors doing, and what are we putting

online tomorrow? We just tried to keep as much of it in the air as possible

and be as good to our customers as we could so that they would stay patient

with us and keep believing in us.

Andrew: One of the things that I told you I know my audience is going

to be excited about is that you are a bootstrapped entrepreneur. You didn’t

go and get venture funding, but now as I hear this story, I wonder why not?

Why not get an angel investor to put money in because you knew you had a

client list who’s ready to buy from you, or go to an investor and raise

money that way, to a venture capital firm, I mean, and raise money that

way?

Matt: Sure. I think the first thing is we were based in St. Louis, which

was good and bad. It was good in the sense that it’s a relatively low cost

of living, and it happened to have a ton of empty datacenter space because

it’s a Midwest telecom hub. It was bad because it really doesn’t have much

of a startup community or an investment community.

We did have one person that proposed what would probably be the worst angel

investment terms you’ll ever receive. Someone proposed to us signing for us

a $250,000 line of credit in exchange for 10% of the company. That’s not an

angel investment.

Andrew: Oh wow.

Matt: $250,000, that was, they signed for a line of credit that we had to

pay back for 10% of the company, and we promptly turned that down. We did

have, I want to say, one or two phone calls, one with a local angel

investor.

I remember very specifically, I hung up the phone that day and I was angry

because I thought the guy was basically worthless, not to mince words. That

he really had no interest in funding us and didn’t understand what we were

doing and basically spent most of the time talking about all these other

deals he had been involved in, which quite honestly weren’t that impressive

unless you lived in St. Louis.

I think at some point Jason and I just really got a chip on our shoulder

that we were this ignored company that was doing really well in St. Louis,

and nobody was going to pay attention to us. And we were going to show

them, and we didn’t need their help.

Andrew: Wow. Why didn’t your competition seize this opportunity? Why

didn’t they say, you know what? Matt and Jason, they’re just too slow to

catch up to this. We see that there’s a list of developers ready to sign up

for the service. We’ll just do it ourselves.

Matt: Hosting companies were cash cows for a lot of the existing ones. I

remember very specifically when I was looking at the company, thinking over

and over, that hosting had been around and popular at that point for over

ten years and that these companies had not changed at all. They all used

the same billing software. They all had the same price plans, and it made

them a lot of money. I think one of the problems was there wasn’t incentive

for them to change.

We were really in the truest sense of the word trying to scratch our own

itch in that we were riding Ruby on Rails applications, and we needed

somewhere to host them, and we couldn’t do it. At the same time I could see

on the horizon this wasn’t just a Ruby phenomenon. Python and Django were

right there, and they were going to need something similar. And then, at

the same time the high end people, like Rackspace at the time, they were

rolling in dough because they were charging $4-500 a month for a server.

Really, our first true competition, and I’ll never forget this day, was

when Amazon launched EC2 which was, at the time, seemed absolutely absurd.

The big online book company just became our biggest competitor. I remember

it was like someone punched me in the stomach that day because it happened

within a month of two of us launching. It was like, holy crap, where did

that one come from?

We were really just lucky in that we were around first. I believe at the

time we were much easier to use and get started with. Certainly, the

argument could be made that AWS was in a much more robust infrastructure

and better for supporting large apps, but when it launched you basically

needed a PhD in computer science to understand what it took to get started.

And you really needed to make an investment in their platform.

Of course, today every startup uses AWS or Rackspace, but at the time

people were kind of looking for a bridge between the old hosting world that

they knew and this new world that would come to be called Cloud Computing.

I think we, at that time, filled that little niche market, that people were

ready for something different, but they were still thinking about it in the

terms of a plain old, dedicated server.

We were sitting there, and we were cheaper than everybody, too. That’s the

thing I forgot to mention. There was only two guys, and we wrote software

that did everything for us. So we didn’t need a ton of people.

Andrew: And the nice, Slicehost. I can figure it out, of course. I’ve

heard it in past interviews with you in preparation for this interview, but

for people in the audience what is the name Slicehost mean?

Matt: Basically, the concept was that we sliced the server into several

smaller servers that you could use. So, it was slice and host for hosting.

Andrew: How long did it take you to catch up your wait list?

Matt: The wait list went into effect . . . I remember the big post that we

made where we were brutally honest with our customers. I love them. They

were like friends to us. We used to hang out in the chat room and talk.

They cheered us on, and they spread the word. We literally owe everything

to them.

We wrote this long post explaining why we had this wait list, that we

couldn’t afford to buy more servers and what we were trying to do. We

understood that this might piss some people off that had been waiting for

months, and then suddenly someone was going to come and leapfrog them. But

I think they understood it. I want to say we put the wait list into effect

. . . Gosh, I don’t know if it was towards the end of 2006, but I think by

spring of 2007 we had cleared it out.

Andrew: Okay.

Matt: It was three, four, five months, something like that. We went from

having, I want to say, at its peak it was over 800 people waiting to get in

and give us money to clearing it out and being able to keep up with our

bills going forward.

Andrew: Right. And the way you describe the business model, you

basically are profitable right away because you get to take the cost of the

servers and the racks and spread them out over the time that you’ll use

them, but cash flow, as you said, is a big challenge in your business. How

long did it take to get cash flow positive?

Matt: Well, the cash flow was the noose around our neck. Like you said, it

was actually, if you could peek behind the curtain it is a very simple

business. We provided a simple service, power, bandwidth, compute and

hosting for a fixed price every month. The problem was the capital that you

needed to invest to bring new customers on so that just as soon as we got

cash, we spent it.

I would say probably, you know, we were profitable and cash flow positive

from basically day one in a sense, but it probably wasn’t until that summer

of 2007 where I would say we were comfortable in that we could start to

plan things and not literally exist in a panic. By September of that year,

2007, we had hired our first two employees. Obviously, by that point we

were taking in enough that we could start to do the things that you think

about doing when you have a successful business.

Andrew: Do you remember what your revenues were in 2007, the first full

year of operation and the second year since you started?

Matt: Boy, I sure don’t. It was a pretty impressive growth curve, but like

I said, it was just choked by how much cash we could get our hands on.

Andrew: Right. So roughly, what was it?

Matt: I would say by the end of ’07 we were probably in the low millions in

terms of revenue.

Andrew: Like $5 million?

Matt: It was definitely below $5 million. When we hang up, I could pull up

QuickBooks probably and check it out.

Andrew: I think this is fine. It gives us a good sense of where you

were. What about 2008 when you sold?

Matt: By that time we were many multiples above that, but honestly I don’t

remember the specifics.

Andrew: Over $10,000 but less than $20, you’re saying?

Matt: I’m sorry, what?

Andrew: Between $10 and $20 million, excuse me.

Matt: That’s probably about right, and I’m also bound by any number of

confidentiality agreements that I signed.

Andrew: If you were to go into QuickBooks and come back and say,

“Andrew, it was $3 million, not $5 million or $4 million, not $2 million.”

It doesn’t make a big difference. I just want to get a good sense of where

you are.

Matt: We’re obviously doing very well. I think we had around 20 employees

the next year.

Andrew: Wow. This is like a hockey stick though, isn’t it?

Matt: Yeah. Yeah. Absolutely.

Andrew: As a guy who’s a goal setter, as a guy who struggled for a

while there, when you made your first million, do you remember what that

was like? What was it like to see the first million in the account?

Matt: Well, it really wasn’t our money in a sense. I remember, and this

would be some advice that I have for people. Jason and I own this 50-50,

but I never thought about using that money or doing anything with that

money. When we started off, we didn’t even pay ourselves. When we started

to pay ourselves $2,000 a month, I was ecstatic. I was like, oh my God I’ve

made a business that is actually paying me money. And then, a few months

later it was $3,000 a month, and then we ended up with relatively modest

salaries. I don’t think we even got above $6,000 a month.

Every dollar that we made there would be hundreds of thousands of dollars

sitting in our account or whatever, but that had places to go. I guess

having run a business earlier really helped me in that sense, that I

treated this one, that I was very hands off. We got some excellent

accountants very early on, and it was a business in the truest sense of the

word. We never confused the business’s success with our success.

It was this independent entity that we were growing, and we were investing

in, and we were going to get something back at a later date. But it did

really feel good to go from literally nothing to suddenly you’re getting a

six figure credit card bill for equipment and things like that or wiring

that much for equipment. You’ve got it all sitting in the bank account. It

keeps you going. It energizes you to see the success.

Andrew: At what point were you able to stop taking on side work and

focus fully on Slicehost?

Matt: I remember we did another project. We wrote, I think, a blog search

engine for an advertising company that was brought to us by a friend and

former neighbor of mine named Hans Gerwitz. He came to us with this project

and wanted to use Ruby for the front end of it or something. He had two

other guys he was working with, and it was like a modest size project. But

one of the guys kind of flaked out on him and we ended up taking over what

he was doing as well.

It went from a smallish project to actually a pretty decent sized

consulting project, and that was the job that sprung Jason, that allowed

Jason to quit his job. I think that happened in the fall of 2007, towards

the end of 2007. I’m sorry, 2006, that first year because by the first

year, the first full year, 2007, we were both working full-time.

The other thing I remember is I had a very good consulting client that I

had developed in a relationship, and not only was it a good business, I

genuinely liked the owners of the company and the people that I worked

with. And it was interesting work. We were actually writing apps for their

team to go out in the field and record the GPS coordinates and the

condition of power line poles, which sounds fantastically boring, but it

was actually really interesting from a development and a logistics

standpoint. These guys were growing like gangbusters, too.

I live in Florida now because at the time I flew down with them to Florida

to give presentations about our technology. At the time the software that

we were writing for them, that they were, in turn, selling. I used to fly

down there with them, and I’d say, “I love it down here. I want to live

down here one day.” I love being by the ocean, and it was just a really

relaxing vibe.

I remember having to go in and tell the owner of that company that we had

developed a really good rapport with, that we couldn’t work with them

anymore. I remember like, my voice cracking as I told them because there

was one part of my brain that was like, you have to let go of this because

Slicehost is the horse you need to ride.

But there was this consultant side of me that said, “Are you out of your

mind? These people are paying you a retainer every month. It’s a great

company to work with. They’re growing.”

I was scared to death, but we knew we had to do it. I’m sure Jason was just

as scared when he had to quit his job which he had literally just taken a

few months before to suddenly not take a salary and work for us.

Andrew: In preparation for this interview, I went back in time to see

what people wrote about Slicehost back in ’06 and ’07. Something strange

just kept popping up. People were talking about the fact that you had a

forum and a blog.

Matt: Yeah.

Andrew: What’s the deal? Why is a forum such a big deal that you had?

Matt: We really built a community around Slicehost. It’s one of those

things that seems so obvious now, but at the time it really wasn’t. Our

customers were literally just like us. They were younger guys doing

software development that were really passionate about their work. We just

had this bond with our customers. We treated them with respect. Like I

said, we would do anything for them because I looked at our customers as

this gift that allowed me to do Slicehost.

Andrew: So you created a community where they could talk to each other?

Matt: Yeah. Absolutely. Where they could talk to each other and be sharing

how they’re running certain software setups and performance tweaks and ask

questions. But also a place where they could ask us questions, and we could

give them help. If they wanted to know why a specific server went down,

because that impacts them, I was happy to answer to them and to be

accountable to that.

It was really just a place for all of our users to congregate and hang out

and talk to us and talk to other users. It’s one of the things I’m most

proud of is that I still go to that forum, and Slicehost has really kind of

moved on. It’s the technology that at one point powered Rackspace Cloud

servers, and they’ve evolved as well.

There’s still people that post in the forum. There’s a lot of Google juice

built up in that forum with people sharing little tips and tricks. It was

really one of the smarter moves we made.

Andrew: What about the risk though of creating this forum with all your

customers and having one of two happen? Either a competitor can go in there

and say, oh, these are the best customers that Slicehost has. We’re going

to take them, or the community itself says, Slicehost is good, but they’re

a mom and pop operation. There’s other servers over here. Let’s all get

together and go to this cheaper, more professional operation where they

don’t have a wait list, and they have cash not credit cards.

Matt: Sure. Yeah. We were not afraid to be honest with people. Very early

on, the identity of Slicehost was Matt and Jason. It was just two guys. We

didn’t really try to pretend to be something we weren’t. We did a podcast

very early on where we said, “Hey, I’m Matt. This is Jason. And this is

100% of Slicehost that you’re listening to right now.”

Some people knew that, and I think some people didn’t, and they were a

little taken aback. You can go back in the forum and find questions where

people literally said, “Why should I go with you guys? I’ve never heard of

you before.” That was the post, and we would really just try to win them

over.

Andrew: I understand that, and I understand that if you have a forum

that your most passionate customers can be advocates for you and speak in a

way that’s much more genuine sounding than you would on your own behalf.

What about the risks of your customers banding together and going away or

somebody else picking them off? How did you deal with that?

Matt: That’s just something I’m not afraid of. My goal is to provide such

good service and such good customer support that that doesn’t come up.

Andrew: So leaving your Florida client that made you worry, but this

didn’t worry you at all.

Matt: No. I believed in what we were doing. Yeah. I just was never really

scared of that. Quite honestly, we didn’t really have a legitimate

competitor for probably in excess of a year. Within a couple of years there

were definitely full on competitors, people that were literally copying our

website, copying our prices, copying our terminology and doing the exact

same thing.

In the beginning there weren’t a lot of places that you could go. I

remember Engine Yard sprung up, but they were not truly a competitor when

you look at it in hindsight. They were very high end Rails hosting and

consulting.

Andrew: Okay.

Matt: You had AWS and Amazon, but most people didn’t understand how to use

it. So, there were existing legacy hosting companies that were using

different virtualization technology, but in my eyes they were dinosaurs

because they were using the old technology. They were treating that

business the same way they were treating their other business. In some

ways, I guess, at the time that thought didn’t cross my mind.

Andrew: I asked about the risks of having this community. Can you give

me a specific example of one of the benefits of having the community? What

happened as a result of this forum and the community that it built, that

you wouldn’t have had otherwise?

Matt: Sure. A very specific benefit was just the Google juice that you got

from having a forum and having an article site and having a blog. Those

three things, our name suddenly started to pop up for Ruby on Rails hosting

and Rails questions and Python questions, just topics that were important

to software developers. You could enter a system administration problem,

and you might get a link to a Slicehost article, or you might get a link to

a Slicehost forum.

The other thing is I think people just saw that, hey, this is a real

growing, thriving company with real people behind it, and it seems like

everyone is happy and having a good time. I want to be part of this.

Andrew: I see.

Matt: Because it really was a community in the truest sense of the word.

There were people that visited the forum every single day.

The other thing which we haven’t talked about, which I think was very

instrumental to our success was everyone uses 37signals Campfire now.

Everyone’s heard of that or something like it. I was never a IRC guy.

37signals came out with Campfire that year. I think it was in 2006.

Jason and I kind of used it as a running log or set of notes between the

two of us because a lot of times he was at work during the day. So I would

find a link or want to tell him that I did something. We’d just use this

room, this Campfire room, and we made this decision to put a public

Campfire room on our website. I swear to you, between the two of us we

covered 22 hours out of the day watching that chat room.

Any number of our earlier customers will tell you that they came by that

chat room and talked with us for five or ten minutes and were, like,

astounded about this. It wasn’t the Java applet that popped up with the

picture of the operator in the headphone that we’ve all seen. It’s “May I

help you?”

This was like real people, a normal person talking to you like we’re

talking here now, answering questions and saying, “All right, we love to

have you with us. If you have any other questions, stop back.”

So many people referenced that as that’s what made me try it out. Then, I

show the forum and the blogs, and I really felt like there was something

here.

Andrew: I see. Wow. I can imagine. That’s still surprising, even to

this day. When you go into a website and you see that there’s a real person

willing to talk to you and eager to talk to you right there, I imagine a

lot of the first comments were, “Hey, is this a real person? Are you

really, Matt?”

Matt: Right. Yeah. People were astounded that we were the founders of the

company, and we were just hanging out in there waiting to talk.

Andrew: Why did you decide to sell?

Matt: It was, by far. . . I think it will be the hardest decision I hope to

ever encounter, and it was really one of those things you can go back and

forth on. I think, at the time, it was Rackspace approached us in June of

2008. The deal finally went through. It actually fell apart once. It came

back together in August and went through in October.

It was hard on Jason and I for separate reasons. We didn’t immediately have

the same viewpoint, obviously. I don’t think most people would in that

situation. It was also hard to let go of something that literally had been

your life for the previous two years.

You have this fear. Are we selling too early? Then as soon as you convince

yourself that no, it’s too early. We need to hang on to this. Then you say

to yourself, if we say no to them, not only do we have Amazon and Google

lining up, but now suddenly here comes Rackspace fresh off their IPO with

tons of money.

I think it was apparent to us a couple of things that the Cloud computing

world at that point was really just getting started, and it was going to

attract a tremendous amount of attention and money and money that we didn’t

really have, in the sense that I’m building out a gigantic datacenter for a

couple hundred million dollars. Or I’m also opening up datacenters in

London and Hong Kong and East Coast, West Coast.

We were really just to the point where we were cruising along with our

business. We had multiple datacenters. We had employees, but we were still

just a drop in the bucket compared to some of the names that were starting

to literally zero in on the market we were talking about.

I think the other thing was Rackspace was a really good fit for us. We

really clicked with their team, Lou Mohrman and Jim Curry. Lou is the head

of their Cloud Division and just very high up in the company. He has been

there from the very early days. Jim used to head up business development,

and now he’s in charge of Open Stack.

In one, it almost kind of fired you up, again because you saw how smart

these guys were and how much firepower, momentum they had, and you wanted

to be part of that because you said Slicehost is probably not going to

fight these guys on its own. But if we kind of grow up with Rackspace

behind us, what kind of thing can we become?

Again, it was literally the hardest decision that I’ve ever made, and I

think Jason would say the same thing, too.

Andrew: What was the biggest hesitation or the biggest reason not to do

it?

Matt: Very early on, they wanted us both to move to San Antonio, which was

not something I personally was interested in. My family and my home was in

St. Louis, and I think that would have been really hard for me. I’m not a

big company guy, and at the time I think Rackspace was coming close to

3,000 people. That just doesn’t appeal to me to work in an organization

that big. I think that those were probably the biggest concerns.

Of course, in the back of your mind there’s a voice that’s saying, hey,

everything’s going great. We had just gotten to the point where Jason and I

were starting to take some money out for ourselves. That year, just

literally within a few months of them approaching us, we had finally

started to take out, okay, we made this much this month. Let’s take this

much out. We’ll buy some stocks with it.

We actually started another company together. We’re doing some investing.

But we had just started to see some returns on our sweat equity, and you

could kind of project what was going to happen, and it was only going to

get better.

At the same time, you had this looming fear that at any given day disaster

can strike, something goes wrong on one of the machines. You have a two day

outage, and all of your customers leave. That’s terrifying when you’ve

invested literally every dollar that you have and 18 hour days for the

previous two years.

Yeah, everything’s great right now, and some big company’s waving a ton of

money in front of you, more money than you thought you’d ever see in your

life. But if you keep going, you might make more money, or the company

could implode next week.

Andrew: Right.

Matt: It’s just one of those things. I wish there were people I could have

called and consulted with, but I do believe it’s one of those things you

need to go through yourself to really understand and appreciate it. If

somebody called me up and said, “Matt, tell me what to do?” I think I could

only tell them what was going through my mind, the roller coaster, and how

stressful it was.

Even how stressful it was, once you even made that mental commitment to

say, okay, this is going to happen, it doesn’t happen overnight. It’s a

three month process with literally every day being on the phone with your

accountants and attorneys and their attorneys.

I remember very vividly the week we were set to close. It was late October,

2008. Around us the world was starting to melt, and our attorneys saying to

us, “We had three other deals fall through this week. So guys, don’t be

surprised if they pull this off the table at any minute.” It was kind of a

relief once it finally went through, and all this work had culminated.

Andrew: Why did, at one point, the deal fall through before it came

back together?

Matt: They just approached us, and it was in the truest sense of the word,

it was out of the blue. They called us up one day. As any business owner

has had those kind of feeler calls or someone calls up and says, “Oh, hey,

I’m really interested in your business, yada, yada, yada. Can we have a

call with you guys?”

I’m always open to that sort of thing. We had a conference call with them.

I want to say it was on a Thursday or Friday, and they called us back that

Monday or something and literally said, “We’d like to come and see you

We’ll be there on Wednesday.” And you’re like, “Oh my God.” These guys, who

are legitimate, are coming up here. They were there. They went home for a

day, and then called us back and said, “We’d like to make an offer.”

It’s one of those things. It probably went from, within a week of calling

us up to say, let’s have a phone call to someone doing the equivalent of

sliding a piece of paper across the table with a number on it. Of course,

that’s every entrepreneur’s dream, but at the same time it kind of knocks

the wind out of you because you don’t expect it. They want a decision. They

don’t want you to go back and think about it for a couple of months.

Andrew: When it finally went through, can you describe the feeling,

when the paperwork was done and suddenly the wire hit your account?

Matt: I actually remember that. I was eating lunch. We knew that it was

coming through, and I was checking on my phone. You just saw it hit your

account on your phone, and it just takes your breath away because I was

extremely grateful and thankful for my family just to have something like

that happen. I wish everybody could experience it.

The only thing I can say is we got very lucky, and we were in the right

place at the right time. And there’s no way to say that’s definitely going

to happen, but if you work hard and you believe in what you’re doing and

you enjoy it . . . I truly enjoy what I do. It makes it a heck of a lot

easier to get to a point like that.

Andrew: I don’t think the exact amount was announced. I’m looking at an

article by Jason Kincaid from October, 2008, that says the acquisition

price was $11.5 million cash and stock, but that’s for Jungle Disk and

Slicehost, which they bought at the same time and up to an additional $16.5

million, depending on performance. Was it ever broken down beyond that? Did

you guys go public with it?

Matt: No. Unfortunately, we couldn’t say what it was, but it was a

combination of an upfront purchase price with some earn-outs, and we hit

all of the earn-outs.

Andrew: Really? Wow.

Matt: Yeah. It was a combination of cash and stock which, again, that’s one

of those things. I grew up through the dotcom bust. We were getting stock

in March of 2009 which, of course, now everyone says, oh my God, that’s

fantastic. At the time you were thinking to yourself, oh my God, I’m going

to be one of those people. Actually, we were very insistent on getting some

cash and our attorneys and accountants were as well because of that very

reason.

We were hitting our numbers, and everything was going great, and everyone

was happy, but at the same time it was still terrifying because you’re

like, is half of what I’m getting just evaporating in front of me in the

stock market?

Andrew: Yeah. I know that, as you said, when the dotcom bubble burst

around 2000, a lot of people had stock who thought they were rich, ended up

having nothing but tax bills to pay on it.

Matt: Yeah. Absolutely. I had lunch with a friend of mine. He did literally

the exact same thing. He sold a hosting company and was a multi millionaire

one day and sat for a month. Every day he watched a little bit more

evaporate until he was broke. Anyone that wants to pretend that there’s not

some element of luck and good fortune in something like this . . . I

respect hard work as much as the next guy. I really believe that it’s one

of the things that is not sexy. It’s not sexy to say, I busted my ass every

day for five years to get to this point.

Everybody likes the overnight success story and the college kid that starts

something in the dorm and sells it in a year, but anyone that doesn’t

attribute a little of their success to luck, I don’t know how much respect

I have for them because I’ve known tons of smart people that have worked

way harder than me and the ball bounced a different way. It didn’t end up

quite as good for them.

Andrew: That brings us to the next company, which is DevStructure.

Matt: Yes

Andrew: You launched it in 2010. What is DevStructure?

Matt: DevStructure, right now we own an open source piece of software

called Blueprint. We basically look at a server, and we like to say that we

reverse engineer it. By that I mean, if you were setting up a server for

your production or your development environment, we could look at it and

tell you all of the software that you had installed on it, so any sort of

packages or source that you’ve put on it as well as any configuration files

that you’ve changed.

And then, we put that in a format that you can reuse or export to another

server as well as convert to a Puppet or Chef for use with an

infrastructure management tool. It is a little bit different in the sense

that it’s a software company. Obviously, Slicehost was a hosting company.

We’re very focused on the DevOps world which my partner, Richard Crowley,

and I, it’s something we’re both very passionate about. I think personally

I drew from some of my experience with Slicehost and what I saw a lot of

our customers working on and trying to do. He was an operations guy and a

programmer at OpenDNS and Flickr and brought a lot of the knowledge that he

learned there into the company. As I like to say, we want to bottle up all

of the knowledge between us and give it to other people.

Andrew: I’m going to read the description again and then ask you for a

clarification on something.

Matt: Sure.

Andrew: Here it is right off your website. I’ve got it in my notes.

Blueprint is DevStructure’s work horse tool that looks inside popular

package managers, finds changes you made to the configuration files in

archives, software you built from source to . . . I’m not reading this. I’m

not doing this justice. What I wanted to get is . . . Actually, I’ll finish

it up, archived software you build from source to generate Puppet, Chef or

Shell code. What’s a Puppet, and what’s a Chef?

Matt: Sure.

Andrew: I don’t know why I didn’t look that up when I copied it.

Matt: That’s all right. It’s funny that we sit here today in 2011, the

world is very different. No one thinks about starting a company without

putting their infrastructure on a Cloud computing company like Rackspace or

Amazon. A lot of times we’re using several, if not dozens or hundreds of

servers, right? Basically, your infrastructure becomes an element of your

code. Puppet and Chef are two competing tools that are designed to manage

your infrastructure and the configuration behind it.

You could use a tool like Puppet or Chef, and again they’re very similar,

but they have some nuances to each of them and some different beliefs. But

they kind of achieve the same goal which is to say, Andrew, I want you to

write a Chef recipe or a Puppet manifest that has a configuration for all

of our Amazon and Rackspace servers. In any given time we can spin up more

database servers, more web servers. If we make a change to the universal

configuration, it’s pushed to all of the servers.

So if we hired somebody new, we could add a user account for them just

instantaneously. It’s a centralized way to manage your server

infrastructure, basically.

Andrew: I see. Okay. And then, that brings me back to the question I

promised I’d come back to later, which is actually to the quote where you

said, “It hasn’t taken off the way we wanted it to.” What do you mean by

that?

Matt: When we first started DevStructure, it was actually just over a year

ago. Our initial product was very different. Actually, right now we don’t

have a product. It’s a piece of open source software. Our initial premise

was that people were writing software on their laptops which was typically

a Mac, and then they were deploying to a Linux server.

We felt that it was too difficult to set up a development environment on

the Mac, and then you had to reproduce all of that on your server. So what

we wanted to do was to give people a way to kind of eliminate some of that

double work that you do and do your development work in a virtualized

environment on the server which we all the Sandbox. And then you could use

a Blueprint to reuse whatever configuration and tweaks you had done to your

development environment and your production environment.

Every person that’s looked at it has said, “Wow, that’s really cool” but,

obviously, we have not made it simple enough or useful enough because just,

to put it bluntly, people aren’t incorporating it into their work flow.

What we really tried to do over the last couple of months is to boil it

down to the simplest concepts which are Blueprints which you can see is

open source on there now and another piece of software called Sandbox that

we’re going to open source in the future. And just give those tools to

people and kind of watch how they use them.

At the same time, we’re actually working on building a hosted Puppet

service so that the smaller companies that are just getting started and

even some of the bigger companies that are already using Puppet to manage

something like Amazon and Rackspace don’t have to worry about managing it

and can stick it with us. And we can also help them and do a little bit of

consulting work there, too.

It’s been a real challenge because Slicehost . . . I’d like to say it’s

because Jason and I were so smart, but in reality I think it’s just we had

a pretty good product that was put in the market at the right time, an

explosive market.

This one, I think, is a great product, but we’re just not doing something

right. It’s been really challenging for me to try and say, “What did we do

right at Slicehost? What are we not doing here? What might be out of my

control a little bit?”

I’ve really been kind of beating my head against the wall to try and jump

start this new one because you do, you feel a lot of pressure on yourself

when you follow up with one successful company. As you know, you want to do

something great the next time around, too.

Andrew: I don’t want to look back on my life, like Al Bundy looking

back on his football career in high school and say, “Those are the best

days back then” and it’s just me looking back longingly.

Matt: Exactly. Exactly.

Andrew: That comes from inside. Is there any pressure from outside? Do

you feel like Jason Kincaid from TechCrunch is waiting to see what you’re

going to do next or, maybe, your friends or co-workers or past companies

are waiting to see what will happen to Matt? Will he fail? Will he just be

a one hit wonder? Do you feel any of that?

Matt: I really don’t. I put way more pressure on myself than anyone could

ever imagine.

Andrew: Why do you put pressure on yourself? Why not just take it and

say, whatever comes, comes at this point?

Matt: I don’t know. I tried to do the beach thing for a while. I bought a

place in Florida. I walked on the beach every day for a couple months, but

honestly it didn’t really last long. It’s funny. I had met through an

attorney an extremely wealthy individual that had sold a company at a very

young age for many multiples of what we sold. It’s the lifestyle that

everyone thinks they want.

He said I was in my 30s. I had a jet. I had a Ferrari. I had a Bentley. I

had houses everywhere. And he said, within six months I was bored out of my

skull. He said, the only thing I can tell you is to do what you really love

and what you enjoy. He said, I went back to work after six months.

He said, I’m happiest now because I’m working with my old partner. We’re

working on a new piece of software that was kind of complementary to what

we did before, and he said, I think this one is going to be a success, too.

Even if it’s not, he said, this is what I really, truly enjoy doing. You

can’t just sit around and do nothing.

For some people, that might be some new chapter in their life. That might

be, they want to go back to school, or somebody else might want to do

volunteer work or something like that. But I just really enjoy creating

companies and taking ideas and turning them into products that people can

use. Even in a sense, I’ll be hard on myself if future endeavors don’t work

out, but I can’t really complain because I really do enjoy the process.

Andrew: I hate to sound like Barbara Walters, but I’m curious about

this. The motivation, it’s the jet and the car are fun little motivators,

fun little . . . I guess, I’ll stick with motivators. . . Fun little

motivators when you’re trying to get yourself to keep working. But beyond

it, there’s something deeper. What do you think it is for you?

Matt: I don’t know. By far, the most rewarding thing that has come from all

this is just being able to help out my family and friends, telling my mom

that she doesn’t have to worry about anything, being able to help my

brother out. You can only have so many cars and fancy things.

Like I said, all of these sparkly things, believe it or not, they lose

their allure once you actually have them. They just become another trinket.

These big houses, and you see people collecting houses now and having a big

house in Aspen and in Florida and in Manhattan. That doesn’t make you any

happier.

I think for me it’s just I really enjoy business, and I really enjoy

building things. I love to look at stocks and investments, and I love to

talk with Richard, my partner, about what we’re going to do next, and I

love to write code. I just think the motivation is wired into me. It’s what

I really enjoy doing, and it’s what I’m passionate about.

I’m very fortunate that I’m passionate about the type of thing that I can

build a business around and that I’ve had some success early on. I guess I

feel compelled to keep gong and to keep trying.

Andrew: All right. If people want to stay in touch, they can check out

your Twitter account, XenMatt. In fact, before I say good-bye, I noticed

XenMatt coming up a lot in my research. Why Xen? Why do you attach that to

your name?

Matt: Oh, that’s kind of funny. I actually feel bad about this. I was on

Twitter very early on. I could have had the regular old Matt, going by my

ID. The reason for XenMatt was I had actually kind of taken the name

SliceMatt on with Slicehost, and that was the name I used in chat rooms, on

the forum, and things like that.

I kind of wanted to set up a similar identity apart from Slicehost when I

was tweeting my own rants or whatever. I didn’t want to be necessarily

affiliated with Slicehost, so I just kind of went with the same framework.

Like I said, I was into Buddhism, and it’s something I read a lot about.

XenMatt was available in all the places, and that’s what I picked.

Andrew: I see.

Matt: I do wish I could go back to whenever, 2006 and grab regular old Matt

or Matthew. That would be pretty cool.

Andrew: It would be, but you know what? There’s something to having

XenMatt. I think it’s more meaningful than just having plain old Matt.

Matt: Yeah. It’s definitely a little more tailored to my personality.

Andrew: Oh cool. Well, thanks for doing the interview. If people want

to connect with you, now they will remember to check out XenMatt on Twitter

and they can, of course, check out your new company, DevStructure.com.

Matt: Definitely. And thank you, Andrew, again. It’s really a pleasure to

be here. I’ve watched you for many, many episodes. It’s really an honor,

and I thank you for the opportunity.

Andrew: Well, thank you. Thanks for watching. Thanks for doing the

interview. It was great meeting you in person at SuperCon.

Matt: You, too. Take care.

Andrew: Cool. Bye, everyone.

Please tell me if we’re taking too long.


  • Nice, got to listen to it.

    One thing is that, I’ve been using slicehost and been good. However, ever since it was sold to Rackspace, I can see it is getting stagnant. So, I’ve since moved onto linode. I’ve written some articles about slicehost also here:
    http://www.jiansnet.com/search?q=slicehost

    It is funny that any company sold out, seldom maintained good and innovative, I guess it is the big corp syndrome, despite in this case, Rackspace is also a good company, but I fear that they are going to make more money by dedicated servers rather than vps service.

  • A Buddhist! Great. Heard about “attaching” a picture to a goal. After listening to Matt, I think that I’ll give it a try.

  • JP

    Ya, it was a great interview. I’m still a Slicehost customer soley because of their 24-hour chat. I tested out Linode and it seems that they are 50% cheaper, but it’s really nice to have that 24-hour chat when you need it.

  • It sounds cheesy, but on tough days you need a little something to keep you motivated. And achieving those goals is an unreal high!

  • Thanks JP!

  • Integrating a small company into a big company is never an easy task, maybe we can talk about some of those challenges on another show.

  • By the way, coming from China, I am not a buddhist but that’s the closest religion I am inclined to.

  • Andrew,
    The MP3 is just 3MB.

    I think you posted the wrong file or something.

  • Thanks Matt and Andrew. This is the BEST BEST interview I’ve listened to so far. Matt is down to earth and very calm and humble. I like his style a LOT. He is very honest/candid about his success with slicehost. All he talked about are very good lessons.

    Business success does come with a bit of luck, but on the other hand, passion/high motivation is the most important factor to at least achieve some level of success.

  • Yes, what I found out best during the “down” times, is to listen to classical music, or simply take a walk.

  • Meeko

    Good interview. Can I what you think the contribution of your employees was to success of Slicehost?

    This is very hard question, could you say your reasons why you and Jason didn’t share of the millions from selling with your employees?

    I have opportunity to work for new start up but not sure the hours and stress are good if selling, beyond the founding two, is nothing. I don’t know if is usual?

  • Thank you JiansNet I appreciate your kind words.

  • I was a customer of Slicehost from day 1, literally. I told everybody about them because Matt and Jason (the co-founders) were the most awesome company founders I had ever dealt with. They were beyond helpful and always went out of their way to please their users. The good things that happened to them are fully deserved.

    Thank you and best of luck with your new project, Matt!

  • Indeed Carl was one of the first people to pop up in the chatroom and helped spread the word. Thanks Carl!

  • Meeko – apologies I thought I responded to this earlier, must not have gone through. We never issued equity because our starting salaries were pretty good. At the time of our acquisition only 2 employees had been with us for a year (Paul and Jared). I believe everyone got RAX stock options in their new contracts. If you have any other questions shoot me an email.

  • Excelent Andrew! Thank you very much!!!

  • There is a “religion of Buddhism” in some cases, but Buddhism is not a religion. Nor is it even a belief system.

    It’s mostly about recognizing your ego, through different actions (practice of compassion, mindfulness, mediation, etc). Ego is what you are (in the most literal of sense) and what makes that separation between “you” and the rest of the universe.

    If you are looking for something cool, I suggest you take a look at someone called “Osho”. He is defiantly the most easily digestible form of what we are talking about…

    “My Way Of Life is Not Philosophy”
    http://www.youtube.com/watch?v=kK4aVB1uPOg

    “Love and hate are one”
    http://www.youtube.com/watch?v=KsQcaap9K_k

    “Anybody Who Gives You a Belief System is Your Enemy”
    http://www.youtube.com/watch?v=PBEIeRSLb8k

  • guest

    Matt, do you have any advice for a soon to be college grad in getting a head start in acquiring what you think are important skills, experience, (insert whatever) ? For example, do you think it’s essential for someone to know how to code – or is that just chasing the bandwagon?

    I know you talk about luck, but what are helpful ways to recognize trends, explore opportunities, the way you and Jason did with Slicehost back then? I understand that this was a problem you two had – but of all the things you two could have done, even in just the way you approached the solving your problem (cloud) – what made you two, being smart guys, make that leap and take that direction?

  • Sure.

    – It’s important to code, since most of the time founders do the initial work, otherwise you’ll always have to pay people to do it for you and will need money.

    – I’d suggest having a broad, not necessarily deep, set of skills. For instance, learn about networking, hardware, operating systems, learn a few languages. Be prepared to go deeper when necessary, but know a little bit about a lot of things.

    – Solve hard problems, do the things most people don’t want to do.

    – Look for multiple trends coming together to create bigger waves of change: we saw multiple dynamic languages and web frameworks getting popular, a greater acceptance for web applications, a rise in startups and smaller companies, etc.

    Hope that helps, feel free to email if you’d like to chat more.

  • Really inspiring Matt, thank you for doing the interview.

  • Absolutely, my pleasure.

  • +1

    Can you repost this Andrew?

  • Arun Kumar

    Thanks to Matt tanase and Andrew for presenting this vedio…may this is the first online interview that i heard about goal setting and hurdles in reaching it.
    I just want to hear from Matt that , when we are setting a goal…. weather it has to be a short term goal or a long term goal…..?
    as in the case of Matt he started the Slicehost and developed it…..but during the coarse of time due to practical problems he sold it…..does it mean that he didn’t reach his goal till now……?

  • Hi Arun, thanks for the comment and question. I believe in setting all types of goals: daily, short-term, long-term, day dreams.

    – Daily goals for me revolve around my todo list for the most part which is GTD based, as in I want to get these things done today.

    – Short-term stuff tends to be attainable goals set a few months out.

    – Long-term goals are things I really have to work for and typically take over 6 months.

    – Day dream goals are the things you lean back and fantasize about, providing motivation to work a little harder when things are getting tough.

    Hope that helps.

  • MixergyFan

    Hey, the mp3 only lasts like 2 mins?!!

  • Seems okay to me, but I’ll check the file when I’m back at my desk.

    Thanks.

  • Yep, Same here. It’s only 2 minutes in itunes.

  • great interview….its funny because about two years ago right before I started my business, I created a folder on my desktop called “dream home” where I’ve been slowly collecting inspiration that I will one day use to build this dream home I’ve been obsessed with since I was maybe 15 years old. The house itself is nothing spectacular but the landscaping is completely out of this world (I don’t think anything like it even exists and it may bankrupt me but i’m going for it anyway). I research whenever I have a little downtime and literally build this house up bit by bit like there is 100% no possible way that it isn’t going to happen (i’ve gone out scouting possible locations in the city to build & amassed a listing of possible architects…and it never once crossed my mind that this may be a little premature or abnormal planning a multimillion dollar house with $300 in the bank). But as I go through the ups and downs of running a business, I have an extra drive because in the back of my mind I know that this may be the ticket to realizing that dream. In the end, I may decide its more sensible to build something simpler or more practical but setting big seemingly unattainable goals like that can motivate like no other.

    Seun O
    Duke & Winston

  • Awesome Seun, that’s the way to do it!

  • Anonymous

    only 2mins on itunes, actually i cannot find it right now there…

  • nice one. I really liked the relaxed atmosphere. Matt’s humbleness is also very inspiring.

  • Very inspiring.

  • Welner

    Nice only 2 mins on itunes. The nicest thing is that it cuts out when you’re talking about a picture of a roll royce. LOL.

  • What a great interview Andrew and Matt!

  • Thank you Francois!

  • Great interview. Goals are great motivators!

  • Anonymous

    love the content – however it would be nice to get an episode no in the title here & in iTunes so I can find the episode there (this weeek in startups, this week in tech etc all have episode no’s) – would be really helpful.

    thx

  • That’s something people have asked for often, but there are oddly lots of issues with that.

    For example I record multiple interviews at once and don’t know in what order the interviews will be posted.

  • Anonymous

    I wonder how twist / twit do it?

    would make navigating your fantastic archive way easier!

    you’re a super sharp guy – its a solvable problem no? ;)

  • Indeed! Thanks Harry.

  • When I work on my startup I love listening to Mixergy interviews and this one with Matt is no different. Very inspirational, can totally relate, and motivational to want to achieve great success.

  • When I work on my startup I love listening to Mixergy interviews and this one with Matt is no different. Very inspirational, can totally relate, and motivational to want to achieve great success.

  • Thanks Jeremy – I listen to Mixergy while working too, best of luck.

  • Ha! A fellow STL startup that made it off this desert island. There are few angel investors in this town. What sucks is it sends a bad signaling issue to outside investors. I found my investors outside the state.

    Matt, I’ll ask Andrew for your contact info. I’m weeks away from coming out with a product everyone wants. And yes, I have an actual revenue model, large addressable market, B2B clients willing to pay, and large monthly rev per client.

    Thanks for your story!

  • Anonymous

    Great stuff Matt and Andrew. Enjoyed the emphasis in motivation on this one.

  • Thank you elramirez.

  • Thanks!

  • I’m gonna make it big, of that there’s no doubt. My real hope is that I’m young enough to pursue my lifelong dream of being a professional karst hydrogeologist. Not much of a market there, but it will keep me *very* busy in remote corners of the globe.

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