NYC Startup Packet Raised $9.4M To Make the Internet Great Again



This company is making the internet great again. Bringing the bare-metal networks to you, Packet gets your cloud server up and running in less than 8 minutes into a safe cloud optimization state with the perks of Amazon Web Services…but quicker.  Packet hosts with developers, platforms, and enterprises in mind.

AlleyWatch spoke with CEO Zachary Smith about their bare metal environment and their most recent round of funding.

Who were your investors and how much did you raise?

This was a $9.4M Series A round, led by SoftBank Group with participation as well from existing series seed investors.

Tell us about your product or service.

Packet brings public cloud style automation to physical hardware and network layers with no vendor lock in. Customers can either build on Packet’s public cloud service or leverage advanced automation software to enable their own private compute infrastructure.

What inspired you to start the company?

As veterans of the cloud business, we saw a growing gap between automation-focused public clouds (like AWS, GCE, etc.) based upon virtualization, and dedicated servers.  This gap was at odds with the exploding use of Linux containers (Docker), which don’t need or want virtualization – in fact; they run far better on bare metal servers. Our vision was to bring the developer experience of AWS to bare metal servers and networks, helping infrastructure consumers get better performance, at a better cost, by removing the hypervisor.

0916-packet-group-009How is it different?

When it comes to traditional dedicated server providers like Rackspace, SoftLayer or Intenap, Packet stands out for its automation.  It is the only bare metal cloud that supports full DevOps style automation.  This means we’re the only bare metal provider to integrate with leading tools like Mesosphere DC/OS, CoreOS Tectonic (the enterprise Kubernetes distribution), Terraform, and Ansible.

Compared to AWS, GCE and Azure – Packet offers a very similar developer focused experience. The main differences are the technology (the big clouds rely upon multi-tenancy and virtualization) and business model: Packet does not offer any lock-in services.  Everything that you can buy in our public cloud, you can take “home” and run in your own datacenter.

What market you are targeting and how big is it?

Our primary customer targets are developers, SaaS platforms, and “DevOps forward” enterprises.  The shared value proposition is a focus on automation and performance.

What’s your business model?

As a public cloud, we offer four server configurations that can be consumed on an hourly basis, as well as a block storage service and various network delivery services. We have grown in the past year to support over 3,000 users and a strong recurring revenue flow. Going forward we will also license our automation as a software service, to enable hardware automation in private datacenters.

How do you plan to compete with larger providers like AWS where your offering could be a feature set in their existing capabilities?

Since we don’t use a hypervisor (which can consume up to 50% of a server’s resources) we can be very competitive in price, and extremely competitive in terms of performance.  We also are currently benefitting from a movement towards “cross cloud” or more agile cloud deployments, where Packet is part of a mixture of infrastructure solutions. We see most of our clients moving particular workloads to us, while tapping into the packaged solutions and services (such as big data or managed databases) that AWS and other providers offer.

What was the funding process like?

After exploring a variety of VC options, we focused on a strategic investor due to our business model (debt-heavy infrastructure) and competitive landscape. We quickly connected with SoftBank, which shared a similar view of the infrastructure market and a future that includes a long-term focus on IoT, virtual reality, etc.  Since this funding came from SoftBank’s corporate group (not venture side) the funding process was quite smooth.

What are the biggest challenges that you faced while raising capital?

We are a business with over 3,000 customers and three datacenters.  Raising capital from a large company while running and growing our early stage (but very busy!) business, was a huge effort.

What factors about your business led your investors to write the check?

We are literally running the opposite direction of most of the cloud industry, who are busy chasing AWS or attempting to drive revenue through managed services. Our laser focus on automated infrastructure – delivered without virtualization, which creates problems up the stack – fits directly into their long-term vision.  As such, we have much more than a ~$10M investment, but a partnership to grow substantial business and technology solutions for the global market.

What are the milestones you plan to achieve in the next six months?

Opening datacenter in Tokyo, reaching 5,000 global customers and release the first Spot Market for bare metal (joining AWS, GCE and Azure).

What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?

Network, ask questions and form relevant opinions about the direction of your industry.  Think big and back it up with a track record of execution – everything from your monthly management memos to your product to your holiday part are opportunities to shine…and to find that investor you may need.

Where do you see the company going now over the near term?

We’re going to quickly move on our product expansion, and add modestly to our team here in NYC as well as Manila (where we do nighttime and AsiaPAC support).  We are currently most excited about providing ARMv8 compute on demand to developers in Q4 while building revenue in our core services.

What’s your favorite restaurant in the city?

All good product ideas can be developed over beers at Blarney Stone behind the Battery Parking Garage. When you don’t want to drink, head to Taqueria Diana.


About the author: AlleyWatch

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