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1Mby1M Deal Radar: Hatsize, Calgary, Canada

Posted on Wednesday, Mar 16th 2011

The 1M/1M Deal Radar heads north to feature Hatsize, a cloud automation software company based in Calgary, Alberta, Canada. From its place at the intersection of buyer and seller, Hatsize provides hands-on demos, proofs of concept (POC), and training to technology companies’ prospects, channel partners, and customers by using virtual private cloud technology to fully automate scheduling and provisioning over the Web from anywhere in the world. The goal is to make sales more efficient; that is, to help customers make decisions faster, accelerating revenue growth and expanding market penetration while reducing travel and equipment costs as well as the time a sales engineer spends per customer.

Ten years ago, Guy Hummel, Hatsize’s founder and president, had a vision of using the Web to provide hands-on control of complex technical products for self-paced learning anywhere in the world. As a former Sun sales engineer, he knew that millions of dollars were spent annually shipping expensive products, and highly skilled people were spending their lives in airports and hotels around the world to provide demonstrations, sandbox sessions, and channel and end-user training. As a former manager of a data services company, Hummel knew that IT departments were already hard-pressed to meet production requests, so he believed a fully outsourced model was likely to be attractive.

With Hatsize co-founder and CTO, Tom Hull, Hummel started using virtual machines to deliver training on complex devices and software anywhere in the world. To do this, they created a single instance of multi-tenant software that automatically schedules and provisions complex environments in multiple data centers, using a browser-based, zero install client that tunnels through firewalls. By 2009, sensing that the market was growing faster, the company recruited CEO Sue Miller, who had in-depth experience in growing early-stage tech companies.

Hatsize has three top buyer segments:

  • Sales and marketing groups in high-tech companies use Hatsize to accelerate sales and increase close rates by providing hardware and software demos, lead generation workshops, proofs of concept, sandbox trials, sales training, and product launches.
  • Reseller and channel enablement groups use Hatsize to expand their market reach and increase market penetration by ensuring their channel is ready and able to sell their latest complex enterprise solutions. Access to demos and sandbox sessions along with access to training and certification enables the channel to reach more customers more quickly, supplementing and in some cases replacing more expensive direct sales efforts.
  • Training groups use Hatsize to provide instructor-led and self-paced virtual training with interactive access to both software and hardware.

The company has three solutions, one for each of these groups. There are also three pricing models: PAYGo, at $40 per user per day; Reserve and Grow, a reserve fee for a fixed number of concurrent licenses used in any of three regions (North America, EMEA, Pacific Rim) providing global coverage with minimum latency, with 50% license overage allowance at reduced per-user rates; and subscriptions, which range from $450/concurrent user/month for VM-only implementations to $1,000/concurrent user/month for heterogeneous complex device control, multiple data center implementations.

When Hatsize was started, the only real competitor was Mentor Technologies. They got caught when the Internet bubble burst and went bankrupt in 2001, but not before they had proved there was a viable market for online training labs.

Other early “virtual lab” competitors were Surgient and VMLogix. Surgient focused on pure virtual software implementations and VMLogix on quality assurance (QA) and IT testing, and both garnered share in these markets. As the market evolved from virtual labs to cloud automation or cloud-automated labs in 2010, both Surgient and VMLogix changed their focus to the more general market for private clouds and were acquired (Surgient by Quest and VMLogix by Citrix).

Unlike other current competitors such as CloudShare and Skytap, Hatsize has continued to focus on cloud automation of hands-on demo and training solutions rather than QA and application development testing solutions. Also, Hatsize provides cloud automation solutions that control complex hardware devices including firewalls, network switches, and storage devices, while CloudShare and Skytap were developed for pure virtual implementations and therefore do not provision and control devices at the console. Hatsize believes that this difference, along with its flexible pricing plans and its reporting capabilities, are some of the features that set it apart from the competition.

Hatsize was initially started on $600,000 of seed financing. In November 2010, the company raised a $5 million series A to expand sales and marketing. Golden Seeds and the Business Development Bank of Canada (BDC) were the primary investors in this round. As part of the Series A, Jim Estill of Golden Seeds joined the Hatsize board of directors. The company has generated over $20 million in sales since its inception and has a $5 million run rate.

The cloud automation market is estimated to grow at 38% in 2011 alone. As part of its Series A, Hatsize has expanded direct sales and marketing operations to take advantage of this market growth, including hiring a VP of marketing and building a prospect database of over 30,000 contacts. In addition, the company is actively seeking new reseller and channel partners to promote sales enablement/demo solutions. Hatsize has invested to accelerate delivery of major product innovations in 2011 to take advantage the growing market for cloud-enabled demo and training. There are other vertical markets with potential on the horizon, but the shorter-term focus is on leading enterprises and telcos. The team plans to keep building the business such that any potential exit reaps the maximum value for shareholders.

Recommended Readings
Thought Leaders In Cloud Computing: Alan Perkins, CIO of Altium
CIO Priorities: Deloitte Consulting

This segment is a part in the series : 1Mby1M Deal Radar

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