Rackspace Startup Program Insider: Pat Condon On Inspiring The Local San Antonio Startup Ecosystem

Pat Condon is one of the founders of Rackspace. Throughout his tenure at Rackspace, he has held numerous leadership positions in marketing, business development and customer care, helping champion Rackspace’s unique flavor of customer service, Fanatical Support™. These days, Pat spends time figuring out how to expand Rackspace products and services to better serve customers and enlightening new Rackers on the company culture. And, with an entrepreneurial flame burning within, Pat has aligned with startups, sharing his business experiences as a mentor at 3 Day Startup, TechStars Cloud and as co-founder of Geekdom, the collaborative workspace in San Antonio. We are about to get inside the mind of this evangelist of the local San Antonio startup ecosystem and learn how startups defy conventional wisdom and do more with less.

What is your job at Rackspace?
Doing whatever I can to inspire Rackers, Rackspace customers and the local San Antonio startup ecosystem.

What do startups mean to Rackspace?
They are the foundation of our business. They always have been. When outsiders ask me about our customers, I tell them that a huge percentage of our customers have less than 10 employees themselves. People find this hard to believe since we have a bunch of Fortune 100 logos on our homepage, but our bread and butter customer has always been the very small business. In fact, one of the reasons we survived the dot com bust in 2000 is because we served so many very small customer who themselves were bootstrapped, profitable or close to profitable, and had never raised any venture capital themselves. If you remember many of our competitors at the time like Exodus and Global Center saw many of their VC-backed customers go out of business, which was one of the things that ultimately were their Achilles Heel. Our lack of revenue concentration and an army of small, bootstrapped startup customers helped us weather that storm. I think our customers are some of the scrappiest in the world.

Explain the entrepreneurial spirit within Rackspace?
I think great entrepreneurs are able to get way more done with way less than you’d expect. I think we have a tradition of that at Rackspace. It’s hard to see today because we’re a large, global organization, but our legacy of not over-building still exists today. We believe in “just in time.” Additionally, we’ve always been pretty good at listening to our customers and letting them pull us in new directions. This has, for the most part, prevented us from building a bunch of stuff our customers don’t want.

What is your favorite startup story within Rackspace?
There are so many good ones. I’ll briefly mention two. The first is YouTube because we all know them. They started with just two or three servers with us. Within a few days of signing up, they called and ordered 10 more. Then a few days later they called and ordered another 10. Needless to say, we love customers like this. But by the third or fourth call we knew something big was going on. What I like about the YouTube story at Rackspace was that we really learned what it was like to keep up with massive growth and we became very integrated into their team and almost felt like employees in their organization. It felt like we were much more than a vendor. I also like customer stories like YouTube because these are the customers that always pull us in new directions and help us develop new muscles as an organization.

The second story is about a company called Webmail.us (founded by now-Rackers Pat Matthews, Bill Boebel and Kevin Minick). I first met them when they were a customer and only had a few servers with us. They came to San Antonio to pitch us on selling their email product to our customers. After spending some time with Pat and Bill, I couldn’t believe how much their startup story sounded like Dirk’s/Richard’s/Pat’s did with Rackspace. It was almost the same story about friends that met in college, decided to try their hand at a startup, failed a few times and then found something that really worked. Long story short, we ended up signing a private label deal with them to resell their product to Rackspace customers. Within 18 months it had proven to be an overwhelming success. Our customers couldn’t get enough, and we ended up acquiring Webmail.us. Pat and Kevin are still Rackers today (which we’re all very proud of) and the mail business has gotten massive. To me this is the fairy tale startup story from within our customer base. The best part: When the acquisition closed there was no customer migration to do since it was all in our DC already! =)

Why was the Rackspace Startup Program conceived?
We have a tradition of serving startups with our core set of products. We figured there had to be a way to go beyond this and do even more to support the already thriving startup ecosystem within our customer base (and beyond).

What does Fanatical Support™ mean to a startup?
Everyone at a startup is wearing multiple hats, even ones they aren’t qualified for. It’s one of the most exciting parts of a startup, and also one of the scariest. There is a lack of resources all around. To me, the real value of Fanatical Support™ to a startup is knowing that a big company like Rackspace cares, is willing to get engaged with what you are doing and will jump through hoops for you at any time of the day or night. In the real world, this sort of commitment is really, really rare. It’s rare because it is hard to do at scale. It’s really valuable to a startup, however, because they know that they’re not alone and Rackspace is a lifeline for them. I think this helps create at least a little certainty in an endeavor that is usually characterized by massive uncertainty.

What advantages does Rackspace open cloud computing give a startup?
I think by far it is the ability to pay-as-they-go. For many web-based startups, their hosting/cloud spend can be a significant expense. We all know that startups are generally strapped for cash, so anything that they can do to get more out of the money they have the better. Open cloud computing and the ability to only buy what you need today and then to scale seamlessly when you need more capacity is one of the key benefits to startups.

What is the best advice that you could give to a startup?

  1. Do more with less
  2. Defy conventional wisdom
  3. Stay very focused; be narrow and deep
  4. Build something you call actually sell
  5. Don’t raise money until you absolutely have to
  6. Know yourself and your team, and be honest about what you are good at and not good at

If you could launch a startup right now, what would it be and why?
A college student asked me this last month. For a student with little subject matter expertise, I’d say (and did say to him) that I’d build a SaaS app for a totally underserved vertical. The connected world that we live in today means that things that used to be niches are now massively big…because the web has such a massive reach as a customer acquisition tool and as a distribution tool for your web service. So I’d build a SaaS app for an underserved (yet large) set of customers like dentists, veterinarians, truck drivers (Dirk Elmendorf is actually doing this, see truckingoffice.com), carpet cleaning companies, etc. Part of the magic is that often very poor desktop software packages exist to serve these customers, but they’re stuck in 1995. They need to be web-ified, and the sad truth is that desktop software companies can’t produce good web apps. I feel like this is the low hanging fruit and there are thousands of these web apps that need to be built.

Thinking more ambitiously, I think there are huge opportunities in healthcare and local food systems. Both are big opportunities that come with lots of roadblocks, but the right approach and the right entrepreneur can build something really special.

And there you have it. An Insider view of how important it is for startups defy conventional wisdom and do more with less with one of the founders of Rackspace, Pat Condon. The Rackspace Startup Program thanks Pat for all he does in growing the San Antonio startup ecosystem, educating our local entrepreneurs and his enthusiasm in helping drive the startup movement inside Rackspace! Get all of the Insider information for your startup by contacting the Space Cowboys today.

John McKenna loves startups and is a Space Cowboy with the Rackspace Startup Program. He also crafts customer stories and produces really cool videos for the Customer Reference Program. John enjoys telling stories through his writings…and loves the beach, the ranch, his dog Blue and most of all his three beautiful daughters.


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