Opsware (with Michel Feaster)

The episode examines HP’s 2007 purchase of Opsware from the buyer’s perspective, with Michel Feaster, who led product work on HP’s side. Opsware’s more familiar story is told in Ben Horowitz’s The Hard Thing About Hard Things; Feaster supplies the view from the enterprise-software division that made the acquisition decision. The hosts frame the deal as the endpoint of an earlier attempt to build a cloud infrastructure business, followed by a difficult pivot into enterprise automation software.

Loudcloud was founded in 1999 by Netscape veterans Marc Andreessen, Ben Horowitz, Tim Howes, and Sik Rhee. Its idea was to provide internet infrastructure as a service, so companies such as Nike or L.L. Bean could run websites without building their own server and operations teams. Andreessen compared the model to an electric power grid that companies could plug into. But the infrastructure and customer base were not ready: enterprise cloud adoption was limited, development skills were less widespread, startup costs were high, and security concerns made businesses reluctant to buy. Server virtualization, which could let one physical machine serve multiple customers, was also not yet broadly established.

The company’s financing reflected the late-1990s internet boom. Loudcloud raised $21 million at a $45 million pre-money valuation in November 1999, borrowed another $45 million from Morgan Stanley in January 2000, then raised $120 million at a $700 million pre-money valuation in June 2000. It went public in March 2001, raising $160 million at a lower valuation, but the collapse of the dot-com market also wiped out many of its startup customers. Its managed-hosting business had little demand left, so in August 2002 it sold that business to EDS for just over $60 million.