David Skok, a venture capitalist and JBoss board member, discusses the company's history and its quick rise to financial success.
When David Skok,
a general partner at Matrix Partners in Boston, first heard about a company called JBoss, he was interested, mostly because he had also founded a company in the application server space, Silverstream Software, before becoming a venture capitalist.
But Skoks interest sharpened when some of the companies Matrix had invested in told him they were surprised by the high quality of the JBoss application server software.
"So, I started following the company and, in September 2003, we got word that JBoss was looking for outside financing for the first time. The second I heard that, I jumped on a plane and flew down to Atlanta and pursued the deal very aggressively," Skok told eWEEK.
"We were lucky and [JBoss CEO] Mark [Fleury] chose us and it has been a phenomenal and very exciting relationship since then. We raised $10 million and it finally closed in February of 2004. We participated in that funding, ended up with a board seat and got really involved with the company," he said.
Click here to read more about Red Hats acquisition of JBoss.
The JBoss that existed in early 2004 was nothing like the company that was sold to Red Hat for $350 million on April 9, 2006. At that time, JBoss had a staff of about nine and Matrix helped build its management team as well as understand the challenges the company would face as it grew.
The fact that JBoss already had a big community at that time was exciting, as this meant there was a good chance to create positive sales.
"It was exciting to find a company with a clear community and potential base of customers coming to them, since the cost of trying to get customers is incredibly high for most software firms," he said.
Skok also helped the company build what he calls its sales and marketing machine. "When I first arrived, they had five million downloads, but they had not captured a single one of those names," he said.
"While they were making $27,000 a month selling their documentation, I wanted them to give this away if users would give us their e-mail addresses. It took them a while to accept that reasoning, but once they did, tens of thousands of leads from qualified people telling us what they were doing started pouring into the company," he said.
But that was not without its own challenges. Turning all of these over in a month was not possible, so they had to figure out how to score and weigh which of these might actually be worth following and potentially turn into a paying customer.
Developers see Red Hat and JBoss as a good fit. Click here to read more.
Then, they had to look at what kind of sales force to build, how to keep the costs low and shorten the sales cycle, Skok said.
Asked if Matrix could have predicted that JBoss would be such a financial success at that early stage, Skok said that Matrix was pleased with the return on investment and "very happy" with the outcome.
But there are very few companies that are likely to match JBoss financial success story, he cautioned, although he added that there are some exciting companies working on technologies for other parts of the stack.
Once Red Hats acquisition of JBoss closes, Skok will lose his JBoss board seat, but may well continue to advise the firm on an informal basis.
But Matrix will become a Red Hat shareholder, receiving a partial cash payment for its JBoss stake and the balance in Red Hat stock.
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