EdgeCast: From $4 million in funding to a $400 million exit

Occasionally, a rivalry will morph into a formidable partnership. In a select few instances, that partnership can thrive to the point of attracting a true industry giant. Serial technology entrepreneurs Alex Kazerani and James Segil founded EdgeCast in 2006 and accumulated an A-list of clients that included LinkedIn, Twitter, Hulu, and Tumblr. In late 2013, […]

EdgeCast: From $4 million in funding to a $400 million exit
January 1, 2015

Occasionally, a rivalry will morph into a formidable partnership. In a select few instances, that partnership can thrive to the point of attracting a true industry giant. Serial technology entrepreneurs Alex Kazerani and James Segil founded EdgeCast in 2006 and accumulated an A-list of clients that included LinkedIn, Twitter, Hulu, and Tumblr. In late 2013, Verizon came knocking, acquiring the content delivery network for more than $350 million.

Having finished a separate meeting with Verizon brass a few minutes prior, Kazerani and Segil held court in a spacious meeting room in EdgeCast offices on a temperate November day in Santa Monica. “It’s hard to get bigger than Internet infrastructure,” notes Segil without a hint of hyperbole. Assessing the pair’s early vision for the company, Kazerani explains, “We realized that down the road, it would be very possible that video just became on-demand – you would watch what you want, whenever you want, wherever you want, on whatever device.” When they discovered that existing content delivery networks (CDNs) offered poor customer service and limited options for customers, their goal was clear: Provide a scalable CDN relevant to today’s Internet.

Their shared vision of an on-demand future compelled these two engaging entrepreneurs to join forces and create EdgeCast, effectively filling a market need for an infrastructure that allowed efficient, speedy delivery of vast amounts of content to ever-growing numbers of customers. With a well-positioned core founding team they knew and trusted, James and Alex sought to build and scale networks quickly and efficiently while providing outstanding customer service. EdgeCast launched in 2007 and has never looked back.

“It’s not just about cat videos, this is about people’s lives. This is about revolution and massive sea changes around the world. People depend on us. We are stewards of the Internet.”

Today, EdgeCast is the world’s fastest, most reliable content delivery network. It is currently the most capital-efficient CDN in the history of CDNs as well as in the world. Delivering any data, anytime, anywhere, EdgeCast powers ubiquitous brands such as Atari, Mercedes Benz, Pinterest, and Yahoo!. As the support network for companies with content, EdgeCast helps those companies scale their sites and grow exponentially. Better performance for customers goes hand in hand with EdgeCast’s success, as reflected by the fact the company currently delivers more than 5 percent of the entire global Internet via 70 facilities worldwide. With Verizon’s purchase in 2013, EdgeCast is poised to achieve even more global saturation of the virtual landscape by leveraging Verizon’s powerful network.

“EdgeCast has been a stellar success,” Segil says. “We have never missed a quarter.” Kazerani chimes in, agreeing their investors consider the company “more reliable than a Swiss clock.” Back in 2006, however, this success was anything but a foregone conclusion. The pair started out with a relatively modest $4 million in funding raised from friends and family. They soon realized that to build the network they envisioned, venture capital would be vital. Their initial concern was that bringing in an outside VC would change the dynamics of EdgeCast and cause them to lose control of the company’s trajectory. Fortunately, the opposite proved to be true; EdgeCast benefitted from the wisdom and experience of its investors while maintaining its focus and culture. Scott Hilleboe, the principal at Steamboat Ventures and a close friend of Segil’s from business school, convinced the partners to accept $6 million in VC funding in late 2007. EdgeCast hit profitability after just two years in the commercial market – a rare achievement.

_Edgecast-1

EdgeCast’s journey has not been all smooth sailing. In 2008, when many companies were battening down the hatches to weather the financial crisis, Kazerani and Segil cut executive salaries rather than jobs. By July 2013, the company had raised another $54 million in funding. Despite unabated success, it remains an intense challenge to work at what Segil terms “the bleeding edge of a lot of new different business processes,” trying to overcome new challenges every day. On the subject of providing consistently reliable, split-second content delivery, Kazerani observes, “The technology stack to make it happen is just unbelievable. It’s real-time; you can’t take a break, you can’t [call] ‘time out’ … so we had to build systems behind the scenes.”

Their perseverance has paid off in a string of incredibly rewarding years. Six months after the sale to telecommunications giant Verizon was completed, Kazerani and Segil were recognized with an Ernst & Young (EY) Entrepreneur of the Year award in technology. Working within the framework of such a large corporation has proven to be an exciting opportunity, as Verizon values EdgeCast’s innovation and brand identity. The parent company’s capital budgets and reach (81 countries and counting) – along with their credibility and stability as a market leader – are synergistic with Kazerani and Segil’s desire to help shape and refine the world’s Internet capacity and quality.

Kazerani and Segil are especially pleased that the company’s technological savvy, depth, and breadth allow EdgeCast to play a pivotal role in times of crisis. After Japan was hit by a tsunami in 2011, EdgeCast’s networks allowed fundamental systems to function during the critical aftermath of the natural disaster, helping the citizens of Japan continue on despite tragedy and create order out of chaos. “It’s not just about cat videos, this is about people’s lives. This is about revolution and massive sea changes around the world. People depend on us. We are stewards of the Internet,” says Segil.

Kazerani and Segil kid around with dry humor, but their witty repartee does not overshadow the genuine passion they share for their work. They discuss overcoming challenges and building web infrastructure that can positively impact the world, and their enthusiasm becomes infectious. The partners have made millionaires of many family members and friends who invested in the company early on. While the fruits of their labor have been well distributed, the two entrepreneurs remain humble and grounded. And if success has not spoiled them by now, it’s a safe bet that more of the same have even sweeter results.

Alex Kazerani and James Segil

Alex Kazerani and James Segil

Age
41 (Alex); 43 (James)

Residence
Santa Monica (Alex); Manhattan Beach (James)

Education
Tufts University (Alex); Johns Hopkins & Harvard Business School (James)

Family
Wife Moujan, 2 sons ages 4 & 8 (Alex); Wife Donne, 4 sons ages 3 to 7 (James)

Mentors
Jill D. Smith, CEO of DigitalGlobe and Edial, COO of Micron Electronics (Alex); Parents Clive and Larraine Segil (James)

Place to Do Business Over a Drink
Vito Restaurant (Alex); Daily Pint or Casa del Mar (James)

Book on Innovation
The Lean Startup by Eric Ries (Alex); Predictable Revenue, by Aaron Ross and Marylou Tyler (James)

Must-Have Gadget
iPhone (both), Tesla (Alex); iCloud (James)

Invention
Internet (Alex); Lasik surgery (James)

Edgecast Networks

Founded
2006
Employees
350
2013 Revenue
> $100 million run rate
Clients
10,000+

edgecast.com

Want to get ahead with exclusive updates from CSQ? Join today.