Nginx is a highly popular caching platform used by CDNs and Internet giants. At its core, it’s a reverse proxy server, caching server, web server, and load balancer. The next phase in the company’s evolution is to build out it’s feature set, by the dozen, over the next couple of years.
With $13M in the bank, Nginx is on a mission to take its platform to the next level, by investing and developing its human capital. Gus Robertson, former VP of Business Development at Red Hat, is a great addition to the Nginx executive team. He brings tremendous experience to the table, having worked at Red Hat for the last decade, from the time Red Hat was a startup, to what it is now.
Red Hat and Nginx
Nginx is an interesting case study. For starters, they have a customer base of 128M websites. How many companies can make that claim, besides Microsoft and Apache. Although Nginx is open source, they started commercializing their Nginx support services a while back. Over time, they’ll offer software components that compliment its platform for a fee. Kaltura, and many other open source software platforms, started off in this fashion, building a large open source community around its product, then commercializing the services and features around it.
Nginx is like Red Hat in many respects. The foundation for Red Hat was the OS, and for Nginx it’s the caching platform. If Nginx plays its cards right, it will have the means to acquire companies down the road, that compliment its service offering, just like Red Hat. Interestingly, Red Hat and Nginx already compete on the load balancing software piece.
Both offer load balancing solutions, however, Nginx has more experience in large content delivery web environments, since caching and load balancing go hand-in-hand, one can’t be done without the other. The Nginx load balancing feature is battle tested, hardened, and proven, that is currently in production with an untold number of websites and CDNs.
Although Nginx has been around for a decade, the commercial side of the business is new. As a young company, the executive team is in the process of figuring out the appropriate business model. There’s a good chance it will take a couple of years before they hit their stride. Customer feedback changes things, so what’s in play now, will likely change in a year or so.
Just look at Yottaa, they started off as a pure-play CDN, then after working with customers on their requirements and challenges, Yottaa learned in the process, and adapted their business model to satisfy the needs and challenges of their customers. Today, Yottaa is a different company than when it first started. Their story is about user engagement, accelerated mobile application delivery, and robust metrics that appeal to CMO’s.
Figuring out the target market is going to be an ongoing exercise. From my point of view, I see three potential markets for the Nginx product line: Enterprises, ISPs/CDNs, and SMBs. Gus Robertson (CEO) understands the enterprise segment inside out, having worked in it for more than a decade. Igor Sysoev and Maxam Konovalov understand the CDN and SMB segment, having worked with Netflix, MaxCDN, CloudFlare, and many others. Together, the executive team will have to do knowledge transfer to a new team of sales reps and sales engineers, that are responsible for growing the top line.
Sales Skill Set
The requirements and challenges for the three prospective target markets, differ substantially. No surprises there. The SMB market, which includes small hosting companies, small successful Internet companies, and Internet startups, don’t like to spend money. Sometimes they are cash strapped, or other times they prefer to build their own functionality, because overcoming software challenges is engrained into their DNA. They are price sensitive, and there primary driver for any software purchase is affordability. An inside sales team is best for this type of customer.
The enterprise market requires experienced outside sales reps, that have the capability to visit customers onsite, talk the talk, do the demos, and hold meaningful conversations about web infrastructure. These are the big dollar sales, where sales cycles are long and drawn out. A good place to find talent for this type of role is Red Hat, Oracle, other large software companies. Finally, the ISP market has its own set of challenges. Nginx needs to recruit from the likes of Akamai, AT&T, or maybe even Rackspace. Selling to telco’s requires that reps understand the language and mindset of ISPs and CDNs.
There is nothing but huge upside for Nginx. It has a baked in customer base of 128M, and its caching platform is in use by the largest Internet companies. They should set their eye on the public market, just like Aryaka Networks, and avoid selling early along the way, regardless if they get an offer from Red Hat, IBM, or whoever. There is a small chance that Nginx may come to dominate the web front-end of the software stack, if it plays its cards right, and makes some bold moves, every once in a while. The business model will likely have to change a few times, but that’s what makes the startup life interesting, not knowing what’s in store.