Engine Yard & Benchmark Capital

Early this morning, we announced an investment in Engine Yard by Benchmark Capital.

This has been in the works for several months and, in fact, our relationship with them started over a year ago when Peter Fenton (a partner at Benchmark) approached us for a lunch meeting.

We set up a financial model for Engine Yard long before we took our first customer, and that model only required relatively small amounts of capital to reach profitability.

When VCs started approaching us, we weren’t sure we wanted to follow that path. There are pros and cons, of course, to any such decision.

But the advantages of working with a first-class VC like Benchmark, with fantastic partners Peter Fenton and Mitch Lasky on our Board, outweighed any risks we had in mind. Their experience alone is very valuable!

One of the risks is that we might lose focus on our very service-oriented Rails hosting business.

Our hosting customers are core to Engine Yard and the reason for our success. Managing and scaling customer apps allows us to stay close to the community and the technology. Let me state this with absolute clarity: Supporting our hosting customers will remain our priority.

The investment allows us to strengthen the hosting business and to pursue things we think are valuable long-term, such as:

• Building new clusters in Sacramento, New Jersey, and London over the next 3 months. This is faster than we would otherwise, and allows us to stay well ahead of customer needs.

• Supporting the open-source Ruby implementation Rubinius by bringing on 4 great contributors to join Evan Phoenix’s team at Engine Yard.

• Supporting the Ruby web framework Merb by bringing on 1 full-time contributor and several part-time contributors.

• Strengthening business infrastructure at Engine Yard, such as our phone system, CRM, accounting, etc.

• Strengthening our staff to better support changing needs of customers, such as growing technical sales and account management.

• Offering new options to customers who want the same ease-of-use they find with deployments at Engine Yard, but running on their own large server farms or on various cloud computing platforms. For instance, we hired a very talented individual from Yahoo last week, who helped manage tens of thousands of servers.

We believe Ruby and Rails are very important technologies, and we see this investment as a key tool to better support both!