HashiCorp’s ‘behind-the-scenes’ cloud strategy is now worth almost $15 billion

HashiCorp helps companies get up and running on cloud servers, and that’s a good business to be in as demand surges for cloud infrastructure services.

Hashicorp's first day of trading on Nasdaq

HashiCorp built and maintains several popular tools that help companies get their applications up and running on cloud infrastructure.

Photo: Nasdaq

The Big Three cloud vendors don’t see eye-to-eye on too many things, but they all like HashiCorp. That support propelled the 9-year-old company to a $1.22 billion IPO Thursday, valuing HashiCorp at almost $15 billion at the close of trading on the Nasdaq.

HashiCorp built and currently maintains several popular tools that help companies get their applications up and running on cloud infrastructure, with a particular focus on the cloud holdouts who are just starting to get religion. That also happens to be a top priority for AWS, Microsoft and Google Cloud these days, and the company raised nearly $350 million over the last several years to establish itself as an impartial player in cloud infrastructure.

“We’re a behind-the-scenes company,” CEO Dave McJannet told Protocol in an interview Thursday following the start of trading. “You don’t hear a lot about us outside of the communities that we care about.”

But within those communities, tools like Terraform, Vault and Consul are very well known, both for their capabilities and for their clear delineation between the open-source versions and the commercial versions. That’s a tricky balance to strike in 2021.

“Within the DevOps community, we’ve been a household name for many years,” said Armon Dadgar, co-founder and CTO. “We always had a strong conviction that what the market wants, what our customers want, is someone that's going to be a neutral player, not only to the cloud vendors, but the rest of the technology ecosystem as well.”

HashiCorp was founded in 2012 by Dadgar and Mitchell Hashimoto, who met while studying computer science at the University of Washington. The company grew slowly during its initial years while it released some of its core products, but that changed after McJannet, a Microsoft and VMware veteran, came on in 2016 to lead operations as CEO. It now has 1,650 employees, up from 600 just two years ago.

The IPO event gives HashiCorp customers more conviction that it will be around for the long haul, Dadgar said. “When [customers are] picking an infrastructure vendor, they're picking a vendor for the next few decades,” he said.

But the demands of being a public company have forced many open-source enterprise tech startups into making decisions to satisfy revenue growth concerns as they start to mature. Companies such as MongoDB, Elastic and Confluent have made decisions over the last few years to restrict the use of their open-source products, citing increased competition from cloud vendors, which has been a sore subject within the open-source community.

“We have a very unique relationship with the cloud providers,” McJannet said. “One of our three objectives every year is to enable the cloud providers to bring more workloads under management, that is a KPI for us. And I think that's different from other open-source companies that live at the application layer stack” where cloud providers also want to provide services, he said.

Dadgar also thinks HashiCorp will avoid those situations because it has always made clear to its open-source contributors how it intends to monetize that code. Instead of offering a less-capable open-source version of its products to free users and charging for features that are essential to using the project for anything but a hobby, HashiCorp charges for collaboration and governance features: “You fundamentally only have those problems if you're using our products in a commercial setting at scale,” he said.

And in the long run, HashiCorp believes that many of its customers will opt for managed versions of its tools that they consume as a cloud service. This is a relatively small piece of its business today, but a key metric for its future growth.


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