Sramana: Did you have any market validation of your new hosting business mode?
Christopher Aker: I knew that it was going to work. I was very sure of it. Success by my measure then was maybe $100,000 in revenue a year in managed wordpress plans.
Sramana: Were you doing all of this out of Nashville?
Christopher Aker: Yes, I lived by myself in a 2 bedroom apartment. I did this by myself out of my apartment. I basically said goodbye to my friends for a year and worked on Linode. It took me about seven months. I had to code the back end, the website, and the front end controls. I took the billing system that I had from my little web hosting business and extended its functionality to handle the new stuff.
I bought two machines, a switch off of eBay, remote console gear, and a remote power controller off of eBay as well. I built the machines new. I shipped all of this stuff out to the data center where I had leased a third of a rack. I think I had 14U worth of space. They installed the stuff and that was it.
I ran a beta program for a short amount of time. I had a few of my friends test it for me. On June 16th, which was seven months later, Linode opened its doors and has been going crazy ever since.
Sramana: What is the core value proposition you zeroed in on when you opened your doors?
Christopher Aker: Back then, there was no competition. The value proposition was straightforward. The benefits of cloud servers and virtualization are clear today, but back then when people thought of virtualization, they thought of a virtual PC running on your windows machine. Nobody had brought it to the server side and offered it as a service. This was in the middle of 2003 and AWS had not even come to the scene. We were way ahead of the curve.
For the first several years, we were heavily CAPEX constrained. This industry has very high capital expenditure costs. The machines are phenomenally expensive. They cost as much as a car does. We were running the race of trying to get more capacity online to increase our revenue. It was challenging and fun. It did prove to be a very popular product.
Sramana: What was your customer acquisition strategy? Who were the customers you were going after and how did you build the customer base?
Christopher Aker: There are definitely different segments and strata of our customers. There are developers and designers as well as people who want to host blogs. Today we have everybody from Joe Blogger to Fortune 50 companies. It is hard because hosting is one of those somewhat generic things. You can play with marketing gimmicks, but there is not one clear bucket to put people into and target them. We grew out the entire company through word of mouth. I consider our customer service one of the greatest marketing functions. If you do a good job, then your customer will tell one person. If you do a bad job, then that person will tell 10 people. We always try to do a very good job with our customer service.
In the past couple of years, we have gotten very serious about marketing. We have fleshed out our marketing team now. We are generating our new business through word of mouth.