Structure 08 Recap: Yo Founders! There’s Gold in Them Clouds!

GigaOM’s Structure 08 event offered a terrific opportunity to survey the changing landscape of computing infrastructure. But as with all technology shifts, innovation won’t just belong to the big established players like VMWare, Amazon, Google, Sun Microsystems, Salesforce.com and NetSuite. With that in mind, Found|READ asked a panel of conference participants to share their thoughts via email on some of the more compelling business opportunities for startups in the cloud computing space. Specifically, we asked them:

F|R: Let’s say you’re about to start, or fund, a new business. Considering the changing landscape for computing architecture, what emerging or ignored problem in cloud computing would you target? What business or service would you launch to try to address it? Read More about Structure 08 Recap: Yo Founders! There’s Gold in Them Clouds!

RackSpace IPO Filing Hints at Expansion Plans

Data center and hosting provider RackSpace Inc., has filed to raise up to $400 million in an initial public offering. Its financials seem generally sound (unlike many tech companies it’s actually profitable), although profits did drop by 10 percent in the last year.

However, rapid expansion (including its investment in the cloud) are to blame for the decline in profits. The company made $362 million last year and more details can be gleaned from its S-1 filing with the Securities and Exchange Commission. Some tidbits of interest include RackSpace spending $7.3 million in power used to operate 36,692 servers in 2007.

In the coming year, the company anticipates expanding its data center facilities by a least 72,000 square feet, and may also opt to find a new data center location outside of its existing facilities. It also plans to launch a platform product for customers who want hosted infrastructure but also have the need and skills to customize the hosted infrastructure to a high degree.

The San Antonio company follows in the footsteps of Google and NetSuite with its auction-style offering. Should the offering go well investors Sequoia Capital and Norwest Venture Partners stand to gain. The two firms hold 11.6 percent and 16.2 percent of RackSpace stock respectively.

Thoughts of the Day: from Oracle’s Ellison

larryhotdog.jpgI had separate lunches this week with two serial founders, both of whom happened to cut their teeth working at the foot of that tyrannical, yet irrepressibly successful, nearly-but-never-richest-man-in-the-world software mogul whom everyone loves to hate only slightly less respectfully than Bill Gates: Oracle founder Larry Ellison.

Say what you will about the man, they say, he’s a stellar teacher. So we’ve got Two Lessons from “The Big L” for you:

I. On startups & funding. Ellison funds startups aggressively (NIC which became Liberate Technology, Salesforce.com, NetSuite, etc.) and he has a rule about capital management.

“You eat what you kill….what do you mean you want a salary?”

My lunch date explains how this helped him: “The minute you raise VC money, you treat it like it’s yours, like you’ve earned it. [Like you’ve killed it!] Too many entrepreneurs raise money and then spend it like it’s someone else’s to lose, like they can just go out and raise more when they need to. The minute you forget the discipline of treating VC money like it’s your own, that’s when you start making mistakes.

Rule #1: Eat what you kill. Or at least, act like it you killed it.

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Question of the Day: Wanna go Dutch?

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NetSuite went public Thursday in a Dutch auction, meaning its shares were priced through an auction of would-be buyers, not by a handful of investment bankers, as is the process in a traditional IPOs. (NYSE: N)

Bankers tend to under price IPOs by a few bucks to guarantee their clients a quick pop in value on the day the shares debut. Trouble is, the “clients” best-served by old-school IPOs are the institutional investors and wealthy brokerage customers with friends on the bank’s syndicate desk — NOT the hardworking founders of the company, who are made to sell their equity at a discount to give others that instant upside.

Using open bidding, Dutch auctions aim to price equity “fairly.” The idea, first notably used by Google, was actually hatched by veteran Silicon Valley banker, William Hambrecht, of WR Hambrecht & Co. (We’ll interview Mr. Hambrecht on Found|WATCH in January, so stay tuned for more from this thought leader.)

Dutch auctions haven’t gained much momentum yet, but given NetSuite’s performance, they might finally catch on.

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Priced at $26, shares soared 77% in their first two days, closing Friday near $39. But this, then, begs our…

Question of the Day:
Despite the Dutch auction, could the post IPO run-up mean NetSuite founder, Evan Goldberg, left money on the table anyway?

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NetSuite’s Billion-Dollar Dream

[qi:101] Larry Ellison is about to get richer. He owns a big chunk of NetSuite, a San Mateo, Calif.-based software-on-demand company looking to go public and raise as much as $114 million by selling over 7 million shares for $13-to-$16 a share, giving the company a market capitalization of between $750 and $950 million. NetSuite, which competes with SalesForce.com (CRM), is still a money loser: $20.6 million in losses on sales of $76.8 million for first nine months of 2007. (more @ The Deal)