Greg Sandler

7 October 2020

7 min read

Hardware and software have been converging for decades, and Packet saw how they would become increasingly interconnected with the rise of open source software, more powerful silicon, and the increasing availability of low-latency wireless connectivity.

The company’s founders knew from the start that their primary customers would be developers — and that meant automation was key. With the market shifting from top-down decision-making by CIOs to a bottoms-up approach led by developers, the challenge was how to scale that idea.

“Today’s most promising startups are betting their businesses that bottom-up enterprise technology adoption will soon encompass nearly every enterprise technology product and solution,” notes Deloitte’s Tech Trends 2020 report. “The shift to bottom-up technology adoption mandates a massive shift in the way organizations adopt and purchase technology.”

Ultimately, creating an ecosystem for developers to learn about and deploy bare metal solutions enabled the Packet to hit the tech industry lottery just six years after launch. The infrastructure company was acquired by Equinix in January 2020 for $335 million.

“Increasing sales was dependent on our ability to provide automation, networking, and security solutions that users could depend on – at a cost that was competitive with the big cloud providers.” - Jacob Smith, Packet
Identifying a growing need

Packet recognized early on the growth of scalable real-time applications would create a need for more specialized and distributed infrastructure. Instead of generic and shared cloud compute and storage solutions, fast-growing digital businesses would benefit from customized solutions, dedicated hardware, and distribution at the edge.

The company approached the changing marketplace with a focus on subscale — instead of hyperscale — deployments. It developed a non-verticalized model in large part by embracing the community around open source software.

“Open source is probably the most compelling trend in technology today,” Jacob Smith, Packet founder and now vice president of bare metal strategy & marketing at Equinix. “And with so much activity, instead of going out and finding developers, you have to invite them to you, which is something our public cloud afforded us.”

Packet’s primary value proposition is technology that gives enterprise-level developers the ability to provision bare metal servers with the same speed and ease that has characterized the cloud server ecosystem. Bare metal – in which an operating system is installed directly on a dedicated physical server – has become increasingly popular with developers seeking more control, performance, flexibility, and security.

Targeting early adopters

Packet’s initial customer base included software-as-a-service (SaaS) startups and developers interested in dedicated hardware solutions. Among the company’s SaaS customers are Grafana, an open source analytics app; One Signal, a push notification solution provider; and White Ops, an ad fraud prevention service. While each of these companies adopted Packet for a different business reason, the common denominator at the start of the journey was the same: strong DevOps integrations.

Investing in well-documented developer tools and API libraries was central to Packet’s customer acquisition strategy. Potential customers often started by playing in the company’s cloud, attracted by unique options like its “Tiny but Mighty” (a surprisingly powerful $0.05/hr bare metal server) and “Armv8 Beast” (the first dedicated Arm-based server on the market) offerings. Since most developers were coming from the cloud, having a solid Terraform provider and/or API documentation made the hardware more addressable.

To serve a rapidly growing audience of developers — with 600 to 800 new signups per month — Packet created a popular community Slack channel and ensured that users received fast responses to chat or email inquiries. By testing and deploying their own solutions using Packet infrastructure, developers moved themselves deeper into the company’s sales funnel, where Packet met them with technical account managers and shared private Slack channels.

In order to convert users into scaling customers, Packet listened closely to user feedback and developed its strategic roadmap — which was publicly available on Trello at the time — around early adopters.

Finally, Packet avoided all advertising costs and instead allocated budget resources to supporting open source projects and events. Significant donations to the Cloud Native Computing Foundation (CNCF) and OpenStack Foundation — along with support for projects such as — also attracted valuable, sophisticated users onto its platform.

With an influx of highly technical users and easy channels for communication, Packet’s developers had a ringside seat for assessing how other users were using its bare metal solutions. As a result, many users converted into customers once they saw clear evidence that Packet could help them.

“I remember when Terraform’s work-in-progress became visible to other developers on our platform,” Jacob said. “At the time, the only other similar infrastructure providers were virtualized clouds. Within hours we had developers from another startup, Hashicorp, on our platform experiencing automated bare metal for the first time. That validation encouraged us to double down on the ecosystem as a way to reach our target customers.”

Packet also made scaling easy by offering features such as 60-second server deployments, reserved instances, flexible pricing, customized solutions, and, of course, 24/7 support. “Once developers understood the competitive advantages of using bare metal infrastructure, they typically sold themselves and their internal stakeholders on our platform,” Jacob said. “Increasing sales was dependent on our ability to provide automation, networking, and security solutions that users could depend on – at a cost that was competitive with the big cloud providers.”

“We named our company Packet because the one thing you have to buy from a cloud provider is network. It is fitting that the next chapter in our story is with Equinix, whose entire business is about making connections.” - Jacob Smith, Packet
Deploying enterprise-scale solutions

One of Packet’s enterprise-level customers was Sprint, which was recently acquired by T-Mobile. Packet was instrumental in Sprint’s 2019 rollout of its Curiosity Internet of Things (IoT) platform. Sprint needed to move fast. It was building the first fully virtualized network for Enterprise IoT, and that required powerful, dedicated infrastructure, battle-tested automation, and the ability to deploy anywhere in the United States.

While developers from numerous telco operators were active on Packet’s platform, Sprint was the first to move beyond evaluation and into production. “Selling to enterprise-level customers required our ability to demonstrate both the reliability and scalability of our solutions,” says Jacob.

Sprint’s customer journey started with a team of developers familiar with what Packet could offer. “Sprint’s developer team was able to conduct due diligence by working with our open source code and reviewing how different SaaS companies were using bare metal,” says Jacob. “Once we started talking with senior decisionmakers at Sprint, they had already been pre-sold by their own dev team. While this wasn’t a classic case of bottom-up decision-making, there is no doubt that that Sprint’s technical team heavily influenced the company’s decision to work with us.”

Another key factor in Sprint’s decision was Packet’s proven ability to deliver dependable, enterprise-level solutions. “With our flexible automation and ‘go anywhere’ model, we were able to offer customers like Sprint a compelling combination of edge delivery, developer automation, and single-tenant performance,” says Jacob.

Looking back and looking ahead

Packet, which was founded in 2014, launched its first public cloud data center just a year later in 2015. Today the company operates in nearly 30 regions, many of which are private edge locations. By providing a seamless API for bare metal, Packet has attracted 22,000 users and more than 800 customers, including those with stringent performance, regulatory, compliance, privacy, and/or security requirements.

“We built a global cloud focused on bare metal,” says Jacob. “We started with a vision for a developer — aka software — experience for automating physical infrastructure, no matter what it was or where it needed to go.”

Ultimately, Packet meets the needs of developers by enabling them to deploy physical infrastructure in a programmable fashion. The company’s focus on bare metal is exactly why it is a good fit for colocation giant Equinix. As a uniquely neutral provider, Equinix facilitates connectivity between more than 1,800 networks — including clouds, telecoms, and enterprises — and enables disparate systems to work together.

“We named our company Packet because the one thing you have to buy from a cloud provider is network,” says Jacob. “It is fitting that the next chapter in our story is with Equinix, whose entire business is about making connections.”

* * * * *

If you have a startup looking to connect with Next, consider joining our Global Innovators Directory. We'd love to learn how we can help you achieve your goals - whether it is through investment, partnership, or collaboration.

Join the Global Innovators Directory