One of the more prominent startups on the cloud-native computing scene, San Francisco’s CoreOS, was acquired by Red Hat Tuesday for $250 million.
The deal will add the container-related work that CoreOS helped pioneer to Red Hat, which might be making more money off container services than the startups that helped bring containers to the masses. CoreOS has also contributed a fair amount to Kubernetes, and that expertise gives Red Hat another selling point for its array of products and services.
“There’s really no other company out there that is so like-minded in terms of the way we approach open-source software development, the way we approach delivering value to customers, and all of that,” said Alex Polvi, CoreOS co-founder and CEO, in an interview with GeekWire after the deal was announced.
CoreOS was founded in 2013 by Polvi and Brandon Philips, and developed its own container standards that quickly butted heads with Docker’s popular format. Containers are the next generation of virtual machines, allowing companies to extract more performance from their existing hardware or cloud services by packaging applications into lightweight containers that can be deployed across different machines or cloud services.
After everyone settled on a container format in 2015 that favored Docker’s approach, CoreOS seemed to lose some momentum but wound up as a big contributor to Kubernetes, the container-orchestration software open-sourced in 2015 that emerged as a de facto standard last year. Its Tectonic product was launched to service customers that need help working with the notoriously complex Kubernetes project, and some of its technology is instrumental in the push toward lighter-weight operating systems in enterprise computing.
The company’s prospects, however, were looking a bit grim after Amazon Web Services launched its own managed Kubernetes service in November at re:Invent 2017. Tectonic offers a few more bells and whistles, but with all major cloud players now offering a managed Kubernetes service within their own walls, joining forces with a large enterprise sales team and huge installed base makes some sense.
And it also gives Polvi, an outspoken critic of the growing power that AWS has come to wield over enterprise tech, a bigger platform from which to promote open-source driven cloud portability.
“We’re at this precipice of Amazon getting too embedded and making too much money,” Polvi said in an interview with GeekWire last year. “You’ll see the open-source community build around it.”
For its part, Red Hat has turned a few decades of success in commercialized open-source support into one of the stronger container product lines in enterprise tech. The technology and products developed by CoreOS will fit into its OpenShift product line.
But a lot of Red Hat’s business still comes from products designed for the last era of enterprise computing, and in Polvi and Phillips, the company acquires two product-driven engineers very much born of the cloud-native era. That could pay off down the road.
The two companies are still evaluating exactly what the new product roadmap will look like, said Matt Hicks, senior vice president of engineering at Red Hat, but it sounds like OpenShift and Tectonic will meld into one product.
CoreOS had raised $50 million in funding from blue-chip Silicon Valley investors such as Google Ventures, Andreessen Horowitz, Sequoia Capital and Kleiner Perkins, to name a few. It graduated from Y Combinator’s accelerator program in 2013, and I’m going to use this space to take a victory lap from picking a successful exit from the only YC Demo Day I ever went to.
Red Hat will also get a San Francisco office out of the deal, taking over the CoreOS space and adding a new space to its Silicon Valley presence already in Sunnyvale, Polvi said.