September 1, 2020 –You can trace the origins of HashiCorp, maybe the most important multi-cloud infrastructure company of its generation, to a day in 2008 when Armon Dadgar decided to find “some other student” to do his drudgework for him.
Armon, who at the time was a computer science student at the University of Washington, was stuck with an impossible and inconsequential task in an otherwise fascinating research project to make the groundbreaking public cloud technologies being developed by Amazon, Microsoft, and other Seattle-based companies available to scientists. To get out of it, Armon followed up on the bulk email sent by his advisor to interview scores of fellow CS undergrads in the hopes of finding someone to take the bait. Rather than set the hook on the first taker, he asked each student who responded why they wanted the job. While most talked about school credits or possible recommendations, fellow freshman Mitchell Hashimoto said, “Because it looked fun.”
It wasn’t fun, and within a few months Mitchell had given up as well and quit. But Armon was intrigued, and kept tabs on the frosh. Soon, they were having the occasional lunch, geeking out about open source development and the future of software while becoming fast friends.
They’ve worked together ever since. After brainstorming startup ideas with other friends and moving to San Francisco to join a mobile ad company, they founded HashiCorp two years later. The startup has since morphed into a high growth, 1,000-person company with a bold mission they recognized back in college: to provide a consistent, reliable set of tools so major companies can deploy their software to any combination of cloud infrastructure platforms.
Although less than a decade old, HashiCorp has assembled one of the leading collections of cloud-computing expertise anywhere, and developed a reputation for professionalism and reliability that’s made it a trusted partner for many of the world’s leading enterprises from stock exchanges to Fortune 100 companies. In March, it raised $175 million at a valuation of more than $5 billion, up from $1.9 billion when it last raised in late 2018.
“The journey from idea to iconic company is definitely a marathon, not a sprint,” said Navin Chaddha, Mayfield managing director and board member of HashiCorp. “The team at HashiCorp did so many things right – stayed true to their open source community, built a remote-centric culture, leveraged their product-led Go-To-Market motion to deliver a digital-first customer experience. But the main reason for their breakout success has been the focus on their mission of elevating developers and practitioners to innovate in infrastructure.”
Engineers, including employees of companies like GitHub, Stripe, and Slack, began using their tools. “That’s when we realized the problems we’d been trying to solve were real problems for a lot of people,” says Hashimoto.
An Entrepreneurial Vision Turns to Reality
Armon and Mitchell developed rudimentary versions of what became two of HashiCorp’s main products for deploying software, including Vagrant, while still working for the mobile ad company. They chose an open source model because both had learned computer science through open source tools and tutorials. In 2012, the pair took the plunge and started HashiCorp, working from an Ikea desk in Armon’s apartment. They would joke that they were bound to fail and end up working at Google. The truth was that they’d seen enough to know that sooner or later the entire software world would need to adopt new ways to deploy and run cloud applications.
There were plenty of skeptics, including many venture capitalists. In these pre-Docker, pre-containerization days, software infrastructure was seen as a complex, nichey business that couldn’t scale. And while open source was taking over huge swaths of enterprise computing, large, profitable open source companies were few and far between.
Fortunately, the team at Mayfield was ready to buck convention. One of the partners emailed Mitchell after noticing rising downloads of HashiCorp’s tools. The firm had a rich history of partnering with founders at the idea stage and guiding them to become iconic companies. Soon the duo was meeting with the entire partnership for a Series A fundraising round. “Mayfield was different,” recalls Armon. “A lot of the partners are deeply technical. We were blown away when they started asking questions even about the details of the algorithms we were using.”
Evolving from Open Source Darling to Commercial Software Company
Mayfield became the lead investor in the company’s $10.2 million Series A in 2014. The founders were methodical and somewhat controversial about their evolution from an open source company with thousands of downloads to a commercial software provider. Their goal was to grow into a full-blown enterprise software company, with product breadth, sales sophistication, and robust customer service. To get started along that path, they would need two years focused entirely on developing what eventually became a six-tool portfolio of open source products.
At a time when the VC industry was enamored with founder-CEOs, Armon and Mitchell decided to hire a professional manager to lead the company. They both knew their strengths were as technologists and visionaries, and neither liked the typical responsibilities of a CEO. For months, they would throw jobs like monthly management reviews, organizational planning, and prep for board meetings back and forth to each other. “It was really ridiculous. We’d literally alternate between one-on-ones with the employees,” says Mitchell. “Hah, I’d forgotten that,” says Armon.
With minimal revenues in a challenging market, the odds of landing a proven CEO were low. But a worthy candidate soon emerged. David McJannet had never been a CEO, but had helped build a series of iconic enterprise companies through his talent for scaling sales, marketing and customer service operations. McJannet had cut his teeth at Microsoft, where he’d learned the importance of strong developer communities, and applied the lesson at VMware and then at open source vendors Hortonworks and GitHub. “It’s a really difficult decision to hand over the keys to your company and say ‘don’t wreck it,’ especially since we had a very clear sense of the kind of culture we wanted,” says Armon. But over multiple dinners over four months, says Mitchell, “it became clear he was not someone who wanted to take over and put his name on everything. He just wanted the company to succeed.”
In particular, the trio saw eye-to-eye on three ideas that, if executed simultaneously, could be extremely powerful.
The world would be multi-cloud – At the time, AWS was running away with the new cloud infrastructure market, and fast-followers like Microsoft and Google seemed equally focused on developing their own walled gardens. At least, that was their public positioning. But as students of tech history and given how fast the world’s developers and IT departments were moving to the cloud, it was becoming clear that no one infrastructure provider would be able to serve every need. “If you squinted, it was clear that multi-cloud was the new platform opportunity,” says McJannet.
The practitioner is kingmaker – In the old enterprise software market, the winners were vendors who had the money for splashy marketing campaigns and costly salespeople to convince corporate technology buyers to buy their products. But given the massive scale and real-time requirements of competing in the cloud, power had shifted to the software experts who knew what they needed.
Professionalism is key – Many start-ups boast of their easy-going, perk-filled lifestyles, while internally, oversized egos lead to internal strife. The massive companies that run the world’s financial systems, energy grids, and other systems care for neither. They need vendors they can trust, who can deliver their software and services reliably, with no excuses. “At too many companies, half the job seems to be about getting internal factions aligned,” says Mitchell. “That’s just not the culture we wanted… We want an environment where people show up because they want to deliver the right technical solution.”
Growing into a trusted partner
HashiCorp’s culture has been shaped in part by the humility of its founders. To this day, the two have rarely talked about themselves in public, preferring that results and successful customers be the story. And while HashiCorp may sound like a “vanity” corporate name, they adopted it because Mitchell had registered it years before as a placeholder and never bothered to come up with something else.
And yet, HashiCorp has delivered on its promises – and then some. By 2015, HashiCorp had developed the six products that make up the core of its lineup. The bet on the importance of a multi-cloud approach was already panning out, and the company had built a vaunted developer relations effort to attract and keep the loyalty of the growing armies of cloud application developers. The 25-person team now includes well-known evangelists from AWS, VMware, and other cloud powerhouses. “Our investment in engaging practitioners is outsized relative to most companies our size,” says McJannet.
Despite the heavy investment, the company has been able to scale its “go-to-market” (the operations that touch customers, primarily sales, marketing and customer-service) extremely efficiently. Rather than invest heavily in real-world salespeople and conferences, it’s focused on nailing the digital experience, from providing free educational content and simple tools to explaining the ROI of moving to paid products. That way, it takes advantage of the fact that millions of software professionals are already moving to multi-cloud, DevOps-based infrastructure, and would much rather buy the right tools than be sold to.
By winning over practitioners, HashiCorp began winning the people who control the corporate pursestrings as well. McJannet remembers when the account team was asked to fly to the East Coast to sign the company’s first million-dollar deal. The customer explained that while he liked HashiCorp’s products, strategy, and leadership, that’s not why he was doing such a large deal with a 40-person company. “I look around the room and I see a salesperson that understands how this game is played, and field engineers and customer support people who understand what it means to partner with an organization like us,” McJannet recalls him saying.
Now, the company is taking the next step to fulfill its goal to be a part of every large company’s software infrastructure. In June, it announced that customers could now run its tools as a managed cloud service, rather than as downloaded applications. “We’ve learned over the years that infrastructure is the last category of software big companies want to turn over to someone else to run, because if it fails, you’re on CNN,” says McJannet. While it may take years for the majority of companies to embrace the idea, HashiCorp is ideally positioned to become an essential player in this transition, which in turn will lead to a new set of opportunities. “We’re starting to invest heavily in field efforts to get ahead of the market,” he says.
Perhaps by serendipity, some of HashiCorp’s founding principles have put it farther ahead on some key trends than its leaders would have dared to guess. In many ways, it’s been operating like a post-COVID company for years. Since before McJannet arrived, the company has done what it takes to hire those “10x” talents and enable them to work remotely, such as one engineering lead who refused to move from his home in the British countryside.
But prospering with a remote culture requires far more than a change in recruiting strategy. Being geographically distributed means many processes need to be more intentional and carefully documented. “You don’t get anything for free when you’re remote,” says McJannet. Even notes from brainstorming sessions are captured, and flow into design proposals that often get blasted to the entire company for comment. As a result, decision-making is based less on what happens behind conference room doors and more via written documents. “We write things down,” says McJannet. “It’s not for everyone, but it’s working really well for us.”