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1Mby1M Virtual Accelerator Investor Forum: With Steven Mitzenmacher, Rackspace Technology (Part 3)

Posted on Thursday, Oct 21st 2021

Sramana Mitra: If we want to send you deals to look at, you are a perfectly good point?

Steven Mitzenmacher: Absolutely. Our mandate is to be knowledgeable enough that we can be a quick filter. Quick no’s are better than long maybe’s. We can help you intelligently navigate the organization in terms of where your opportunities are.

Sramana Mitra: I know you’ve recently switched to Rackspace. Have you created this map already? Do you have a sense of what is going to be your focus?

Steven Mitzenmacher: Yes. It was the first major deliverable that I committed because it’s such an important piece of the conversation. 

Sramana Mitra: What are some of the highlights of that as directional guidance to our ecosystem?

Steven Mitzenmacher: We pride ourselves on being unique on the ecosystem relative to the competitors that we face day in and day out which cover providing architecture, design, build, and deploy for the gamut of private and public cloud. There are a couple of vectors. We’d acquired Onica before I joined. They’re a leader in AWS cloud services and managed services. That has given us a phenomenal footprint in the AWS ecosystem.

We have capabilities in Azure and Google. We aspire to match our level of expertise in those public clouds as we do in AWS. Then we also see opportunity to expand in next generation sets of services that are taking advantage of the public cloud. Things like AI, ML, IoT, cloud native development. 

Sramana Mitra: Architecturally, it seems like you have one of the big public cloud providers at the very bottom. Then you have tools and technologies to manage all that. Then you have things coming on top of that.

Steven Mitzenmacher: Yes. I call them Lego block diagrams. Public cloud is the foundational layer. Then, there’re aspects of the centralized management plane layer. Then there’s these next generation services on top of that. 

Sramana Mitra: My thesis on PaaS is that the most promising players in the SaaS are going to evolve to become PaaS players. They will play in one layer and have people expanding their capabilities in the next layer. It sounds like that’s what you’re doing.

Steven Mitzenmacher: Exactly.

Sramana Mitra: Let’s talk about valuation. What role does valuation play in whether an acquisition happens or not. I’d like to focus first on the small tuck-in stuff. Then the capability extension one. The big acquisitions are unchartered territories. We deal with early-stage companies, so that doesn’t happen until much later in the game. That’s not as relevant to for my audience at the moment.

Steven Mitzenmacher: Valuation, for good or for bad, is where the rubber meets the road. What I hate to hear is when those sponsor levels say something like, “I don’t know if I have a walkaway price.” That is an uncomfortable position to navigate against in my role as an intermediary. I’m always uncomfortable going into a negotiation without clear boundaries on valuation. It’s an area that we do a lot of work in.

It’s a partnership exercise on how you size opportunities. At what point is the return on the price not sufficient to warrant proceeding? We’ll go into any negotiation with a very clear set of guideposts. We’ll do the football field where we’ll say, “Based on the work that we’ve done, here’s the map of where we can go in.”

A big part of my responsibility is to get the best deal I can for the company that I work for. We do want the entrepreneurs who put in the blood, sweat, and tears to feel like they get the appropriate reward. My goal isn’t for people to feel like they got screwed. Valuation is a critical player. 80% of the deals close at the midpoint of each side’s starting offer. 

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Steven Mitzenmacher, Rackspace Technology
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