We had the chance to speak with Jay Chapel, founder of ParkMyCloud, which exited to Turbonomic in May 2019. Learnings from his journey are below.
Your original idea will change. Initially, Jay and his team set out to build a cloud platform that was completely self-service across AWS, Azure, and all the major cloud providers. They quickly realized that was impossible. As they spoke with potential customers, Jay noticed customers were excited about one particular feature which was “parking” cloud resources — turning them on/off automatically — to control costs. It was an ah-ha! moment, so the name of the company was changed and the focus shifted strictly to the automated cost control functionality.
The customer was self service. Jay and his team also realized the customer was astute and didn’t require a sales team or even customer success manager. The buyer was typically a CTO, IT Ops, engineer, or dev team leader. They understood the problem being solved and because the product was so good and specific, hand holding wasn’t required. As a result, ParkMyCloud focused only on marketing like SEO, content, and conferences, and didn’t hire a sales team.
Focus. The product has a narrow focus, but it does what it does better than anyone. PMC has an intense focus on automatically scheduling and resizing of cloud resources based on usage data. That’s it. Like Dropbox, the company wanted to do a few things really well instead of trying to do too many things just ok. Customers save 45% to 65% using the product, with an average ROI of 1200%, so customers love it.
The exit came to them. Inbound interest to acquire technology in this space was intense. Firms like Cisco, Flexera, BMC, and others were looking to fill out their cloud management portfolio or get into the multi-cloud space reached out frequently. Because interest was so strong, the PMC team wasnt keen to take the dilution of future rounds, and cloud businesses are tremendously expensive to scale to the next level, a quicker exit made sense. The Series A round would have been $5mm to $10mm, but then expectations and risk would rise, as the company would have to grow to $10’s of millions in revenue before exit.
PMC ran its own sale process. The company did not hire an investment banker to assist in the sale process because Jay felt like they had enough interest to where they didn’t need to run a competitive process with a banker. Turbonomic ended up being the best fit given their hybrid-cloud management focus and it took 6 months from the time Jay had their first meeting to the time the deal was signed. Culture fit was also important, as Jay and his team were required to stay on for at least 2 years after the acquisition, so wanting to work at the acquirer was important.
Don’t let investors watch you. Jay believes they talked to some A-round investors too early and too often. You actually don’t want investors watching and paying attention. Investors will try to find something wrong, track what deals you didn’t close, and see how much you missed the budget. Instead of focusing on the fact that you grew 100% year over year, they would instead focus on what you didn’t achieve that you said you would.
Big thanks to Jay Chapel for sharing his story and learnings with us.