VMware’s ongoing transition into the cloud era took a big step Tuesday with the acquisition of Heptio, a startup that helps companies get up and running with Kubernetes.
The Seattle startup, founded by ex-Googlers Craig McLuckie and Joe Beda, will join the virtualization pioneer and build out Heptio Kubernetes Subscription product, the companies announced at VMware’s European conference early Tuesday morning. Terms of the purchase were not disclosed, but one notable aspect of the deal was the speed at which it happened, coming just two years after Heptio was founded.
A source familiar with the deal pegged the price as “significantly more” than the $250 million that Red Hat paid for CoreOS in January, but declined to comment further. Heptio commanded a valuation of $117 million following its last funding round, according to data provided by PitchBook.
McLuckie and Beda, along with Microsoft’s Brendan Burns, designed and wrote Kubernetes, the open-source container-orchestration project that has taken the cloud computing world by storm over the last couple of years. Kubernetes allows companies that are deploying their applications in containers to manage and deploy large numbers of those containers, and it is widely seen as the glue for future multicloud applications.
Heptio had raised a lot of money for a startup that essentially provided Kubernetes services to its customers, although it was working on several products built around the project. The company had raised a total of $33.5 million in successive rounds from Madrona Venture Group, Accel Ventures, and Lightspeed Ventures.
“What the world really needs is a ubiquitous cloud-agnostic enterprise-grade (Kubernetes) offering that they can bet their businesses on,” McLuckie said on a conference call following the announcement. “It was also clear to us from Heptio that there was a lot of work to do,” and VMware’s strong position in enterprise computing would make that work a little easier, he said.
Tim Porter, a managing director at Madrona Venture Group, wrote in a blog post that Heptio faced a difficult decision to sell, refusing “multiple new, significant upround Series C offers before opting to join forces with VMware,” Porter told GeekWire.
He wrote:
In short, sometimes you receive an offer too good to refuse. Heptio had the team, momentum and plenty of funding to continue; but in VMware, they saw a partner who not only recognized Heptio’s unique insights, assets and market position, but also had the resources and reach to execute more quickly on their vision and deliver an enterprise Kubernetes service to any cloud. The excitement over this potential – and a great financial offer – drove this deal.
Porter added that IBM’s recent blockbuster purchase of Red Hat did not factor into the deal, writing that: “Market consolidation was always anticipated, and this decision was certainly not a reaction to IBM acquiring Red Hat or other market externalities.”
In a blog post, McLuckie added that Heptio and VMware shared a collective vision.
Heptio’s mission is to build a platform that accelerates IT in a multi-cloud world. We are on the precipice of a major transformation—the de-coupling of applications from the environments where they are run. And we feel a responsibility to help organizations navigate this transformation to true cloud native architecture. To realize the greatest possible impact, Heptio would need access to an entirely different level of resources and execution capabilities than we have today.
Who is best positioned to lead this transformation? The company that led a parallel transformation—the software defined data center. VMware. They have experience, execution muscle, customer trust and full leadership commitment.
Heptio will be folded into VMware, rather than operating as a standalone company, said Paul Fazzone, senior vice president and general manager of VMware’s Cloud Native Apps Business Unit, on a conference call following the announcement. Specific roles for McLuckie and Beda have yet to be decided, but they are staying with the company, he said.
VMware has adapted to the cloud computing era better than some of its legacy enterprise computing counterparts, partnering with Amazon Web Services to build products for hybrid cloud customers. VMware’s software helps companies manage their own data centers by dividing servers into virtual machines, which extracts more performance per box. Containers, and by extension Kubernetes, are the next evolution of the virtual machine.
The company already offers several Kubernetes and container-related services, including a managed Kubernetes service called VMware Kubernetes Engine. “Heptio brings a ton of IP (intellectual property) to the table,” Fazzone said, in terms of how it will fit into those products and services.
VMware recently announced plans to expand its presence in Bellevue, and it’s not clear if Heptio factored into that decision. VMware declined to comment on the number of employees it acquired as part of the deal, and said for now that Heptio will remain in Seattle, but Porter’s blog post noted that Heptio now has over 100 employees.
[Editor’s note: This post was updated as more information became available.]
