One of Southern California's successful, serial entrepreneurs is Winston Damarillo, who founded Gluecode, which he sold to IBM in 2005. Earlier this month, his latest startup, El Segundo-based Morphlabs announced it had raised a Series B funding worth $5.5M. We thought we'd catch back up with Winston to hear about the Morphlabs.
Winston, nice speaking with you again. What's Morphlabs?
Winston Damarillo: We actually started Morphlabs in Asia, because we decided to try something new and initiate things in Japan and the Phillippines. Morphlabs is a cloud computing company, part of a good cluster of firms that we now have in Southern California, including 3Tera in Orange County, and Eucalyptus in Santa Barbara. It's nice to see us covering all of these cloud-enabling types of technologies in Southern California for a change. In any case, what we have, is a product that basically patterns itself on the Amazon Web Services platform and API, and stays compatible with Amazon, which allows the management of virtualizes resources so that they can be operated as a cloud platform. That runs either in the enterprise, or outside the enterprise at a service provider, basically replicating what Amazon does in a private or private implementation for a service provider. The company is about three years old, and we had our first product initially in Japan. We brought that to the U.S. earlier this year, and then got it funded, raising about $5.5 million in a Series B, which was led by Global Gateway, run by Martin Lichauco, as well as Frontera Group, led by Eric Manlunas. Martin used to work for Walden International. It looks like that round will be oversubscribed, so we may up that number.
What was the idea behind launching in Japan first?
Winston Damarillo: When we launched the product, it was just about when Amazon started. We had relationships with people in Japan, Internet service providers, who were beginning to worry about Amazon and what the impact of Amazon's AWS would be. However, they had a lack of technology vendors in the cloud. Because of the higher demand there, and because there were not a whole lot of providers, plus our good connections in Japan, we started there. CSK Ventures in Japan is on eof the largest data center operators, and they have their own venture capital firm, which provided us with our seed funding.
Why the need for your services by service providers?
Winston Damarillo: I think the demand from the service providers is obvious--if they don't do it, they will die. New clients will instead go with a provider with cloud capability, like Rackspace. It's a known market with urgency, so we started there. Also, the private cloud stuff is gaining momentum, because you have enterprises looking for a way to utilize their resource better. It's now a proven, very scalable way to manage your resources in a dynamic way. It enables customers to not worry so much about security in cloud computing, because they can put it behind a firewall, and a way to very efficiently leverage their existing resources better. There's really big demand.
All of your startups have been centered around open source projects. What's the open source connection here?
Winston Damarillo: Sixty to seventy percent of our ingredients are based on open source. I always mention that anything I do has an open core, which is, the core of what we do comes from open source. In our case, the workload manager comes from Eucalyptus, the configuration management from Puppet, and a third systems management tool. All three are open source building blocks. Our product, mCloud, puts a complete wrapper around those to add workflow and orchestration, billing, systems management, a user interface, and works as an enterprise product. What is unique about Morph, compared to my other companies, is this time we've deployed it as an appliance. Our users tend to be IT administrators, and tend not to want to touch software. Instead, they want a box which they can install in their data centers, and configure it like a router, or load balancer, or firewall.
How many companies is this now that you've started in this kind of model?
Winston Damarillo: This is my fourth company. Gluecode, my first, I sold to IBM. LogicBlaze we sold to Progress Software. Webtide, we sold to Intalio, and this is the fourth. I've also just got funding for my fifth firm, which we'll be talking about soon.
What have you learned from all of those firms, and how to build a company around open source?
Winston Damarillo: One of the things I've learned, is that open source is now an accepted ingredient for any enterprise user. People are not scared anymore of using that. On what you need to know, from the business model side, is that we realized that open source support, by itself, is a declining and diminishing return on revenue generation. The more mature the open source product or project, the less the opportunity to make money. A good example of that is the Apache web server, where no one pays for support--they just download it and use it. What a successful company does, is implement what we call an open core--the idea is, you use open source, which you expect will mature over time, but later a product on top of that commercially, which allow you to make open source more scalable. That makes it more sustainable as a product, and not just as a support service.
Any product I've done, any company which I've created, has created market value by creating an open core strategy. We've seemed to have found a formula that works repeatedly, and leverages the ability to allow everyone to play with those building blocks, self qualify their preference for technology, and when they're ready, to implement it in a reliable fashion by buying the commercial overlay on top of it. The one thing which I will continue to deviate from, and will not implement, is the GPL dual license. I think that's a perversion of the open source license, using GPL to scare people into buying a commercial product.
Finally, with many of your firms you've had a distributed organization -- this time, looks like the Phillippines and Japan. Can you talk about how that model is structured?
Winston Damarillo: Being open source, we've very, very comfortable to begin with using distributed engineering. That's always been a strength for me--we can tap the very best talent in the world, whether that's in Australia, Italy, Japan, or the Phillippines, wherever there is thought leadership. We can also tap the least-cost implementation for the generic engineering. Combining those two together, we can get the implement things very quickly--I maintain a 110 person engineering force in the Phillippines, which enables us to build any startup very quickly.