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If the Shoe Fits: a Tale of Two Startups

Friday, April 29th, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mThis is a short post, because one of the linked articles is long and both are critical reading if you are, or planning at some point to be, a founder.

Founded in 2007, Powa Technologies is the perfect poster child for everything an out-of-control founder can do — from raising just over $200 million in debt and equity in less than three years, giving Powa unicorn status, to sending it down the drain.

At best, the collapse of Powa looks like a wildly overambitious attempt to force consumer behavior to match the ideas of a self-styled visionary. At worst, Powa seems to be a case of willful ignorance and a failure to acknowledge serious shortcomings, at a cost of hundreds of millions of dollars to investors and hundreds of jobs for staff.

NGINX (pronounced “engine X”) started as an open source project in 2002 and became an actual company in 2011. Today powers 49% of the top 1,000 busiest websites in the world, including NASA, GoGo Inflight Internet, WordPress.com and Wikipedia. Since then it has raised only $41 million in 4 rounds and although its core product is still open source, it is generating substantial revenue from its paid services.

To actually make money, Nginx has a few menu items. First, Nginx Plus, an actual paid-software product that goes beyond the free version and offers customers deeper tools for managing their web apps.
Second, it has a consulting business, where its team of experts go in and help customers install and manage their Nginx-based architectures. That’s especially important as companies move toward microservices, which can be a bold new world for companies used to building software the traditional way. That business is growing quickly, Robertson says, with 300% more revenue in 2015 compared to 2014, though Nginx doesn’t disclose specific financials and he declined to comment on whether it’s profitable.

However, neither the investment nor the revenues have led to the typical lavish, San Francisco startup style.

Still, Nginx is keeping things fairly lean. Even with all of those users, its headcount only broke 100 recently, Robertson says, and the company tries to avoid “bloat” by adding only those features that users really need.

Read the articles.

Understand the actions and reactions.

Absorb the lessons.

Just be sure to sort them correctly.

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