William Leonard
Hey ladies and gentlemen, welcome back to the Atlanta Startup Podcast. I’m William Leonard your host and investor here at Valor Ventures. Valor is a leading seed-stage venture capital firm here in Atlanta, Georgia. This morning on a beautiful day in Atlanta, I’m really excited to sit down with Jeff Uphues, CEO of DC Blox. Jeff, thanks for joining me this morning. How are you today?
Jeff Uphues
William, I’m great. Thank you for having me. It’s exciting to see all the investment things happening around Atlanta and I’m excited to tell you a little bit more about us and make sure your audience understands that Atlanta is a great place to grow and scale business.
William Leonard
Certainly, Jeff, certainly. But before we dive into our conversation, I wanted to say congratulations to you and DC Blox for being among the top 8% of companies recognized on the Inc 5000 list. For some of our listeners who may not know, that list is an annual list that highlights some of the fastest-growing private companies in America. Congratulations, Jeff.
Jeff Uphues
Thank you. It’s not an easy list to get on but certainly, it was a great, great testament to the team that we’ve built in the market and the presence we’re creating.
William Leonard
Definitely. Well, let’s dive in here. Before we get too deep into the business, I would love for you to just give us a quick overview, the 90-second rundown on what DC Blox is doing here in the southeast to really bring that interconnectivity to data centers in a region.
Jeff Uphues
Super. At DC Blox, we design, develop, and operate a fabric of tier three rated data centers and underserved growing markets around the southeast United States. We interconnect all of them together, that when in our markets, we become the de facto Internet Exchange. We’re all content, all cloud traffic, all carriers, all enterprises, all wireless, and all governments connect through to get access to public clouds and get access into corporate networks that you know, just a core backbone of the internet. And the third thing that we do is provide in-market, in-region, high-performance computing, and platforms for research institutions, university systems, and other enterprises that need really high petabyte-scale storage and compute that really is not suited for the cloud. With those three things of what we do is we have a data center that provides space and power in a very high secure tier three type way. We provide that interconnectivity that really says if you have a data center without connectivity, you’re on an island. You can’t get to it. We provide all the connectivity and become that de facto exchange in the market. And then finally, we provide robust platform compute and storage in the markets for which we serve. Our customers are really those ones that I mentioned; large enterprises, governments, county, city, state, federal university systems, as well as a host of healthcare and banking institutions that call on DC Blox.
William Leonard
I think that’s really interesting. You said something that caught my attention. You’re serving underserved areas within the region. How do you all at DC Blox define that?
Jeff Uphues
That’s a great question. Data centers aren’t new. Data centers have been around for a number of years, but data centers predominantly within markets, they all started with leasing space, and let me put in a data center and upgrade that that facility, which in many cases wasn’t a former office building, or standalone building that somebody tried to convert into a data center, or the market has changed. The market has changed by saying these need to be purpose-built facilities with the appropriate setbacks, and security. We call it being distributed redundant, concurrently maintainable, which means that everything is engineered, and everything is purpose-built, and everything is purpose-driven. In the markets that we say are underserved, we’ve always had a presence that says if we come into a market, we want to be first with a tier-three design, and we want to be best in that market. If we can be first and we can be best, what markets can we go into you can only typically go into Atlanta to find that type of infrastructure or go into Charlotte or go into Nashville but you couldn’t find that in Birmingham, Alabama? You couldn’t find that in Greenville, South Carolina. You couldn’t find that in Huntsville, Alabama, or Chattanooga, or a number of cities that we’re in. We just launched our fifth data center now, which is in Greenville, South Carolina, so it’s all about going to a market, you want to be first, with that tier three design, you want to be first, with the purpose-driven facility, you want to be first, that you’re owning land in putting a facility that can scale over decades of time because none of us are slowing down and our dependence around laptops and mobile phones and how we access all types of software applications.
William Leonard
When you think about the region that you all are building in the southeast, was there a particular focus as to why to just focus on the southeast? Is it because of the lack of infrastructure here, the outdated infrastructure, what was the thesis around just focusing on Southeast data centers?
Jeff Uphues
A little bit of that. Number one, if you look at the population growth of what’s happening in the United States, there is a migration to the south. It’s into warmer climates, it’s where a lot of commerce is being driven. A lot of companies are moving from further north based cities, and just the growth of not only the business climate, but the climate itself is also really good for attracting companies. These companies in the South have been driving a lot of tax incentives and others to attract businesses here. When you think of the growth of cities and the growth of markets, we went and looked at about 35 markets across the southeast United States and benchmarked those against every market, from Arizona to Montana, all the way over to Maine and down to Florida. We looked at the fastest growing cities in the country, and of the top 35 cities in that entire region.,11 of those were in the southeast United States. When you take this firmographic approach of both a qualitative and quantitative analysis, and you say, where are things growing? Then you layer on in, what is happening with some of these large hyperscale data centers? Where are they going, whether it’s Amazon, or Google, or Microsoft, or Facebook, 10 hyperscale data centers are located or are planned to be located in the southeast alone and then you take those demographics, it made the southeast a logical choice. We’ve done business here in the southeast for the vast majority of our career, so we know it well. We saw a niche and we’ve been staying focused on that through a real vision of serving locally and connecting globally on behalf of our customers.
William Leonard
I was reading a survey a few weeks ago that said of the top five states that most people are migrating to three of them are here in the southeast. We’re seeing a lot of population shifts as people exit the northeast and come from the west to escape the things that are happening out there. It’s really interesting to see the growth here in a region. That’s really helpful to get the overview of DC Blox and kind of what you all are doing here. But what is your background? How did you come to understand this world of infrastructure services and really join DC Blox?
Jeff Uphues
Well, I’ve been in the communications technology business for the vast majority, almost all my career. I started in it about 30 plus years ago and started as just a frontline sales guy. In understanding how the technology works within the early days of the long-distance business, which then grew into how do you understand the communications networks for long haul fiber and what took place in the gogo days of the Internet and in how the fiber was being laid both locally and across the country and more long haul networks, I have had an I’ll just say a progression of responsibility through companies over the course of the last 30 years that I’ve been fortunate where I’ve been able to see the full lifecycle of cloud-based technologies, data centers, what’s happening in the computing side, what’s happening in the network side, and through a couple of successful opportunities, one being here in Atlanta. There was one called Cbeyond. Cbeyond was a rocket ship of a company here in Atlanta that went from zero to half a billion dollars in revenue, took the company public, and we sold the company in 2014. I got involved in DC Blox by some investors that had said, “Hey, we’re looking for a board member in Atlanta.” And that turned into the company raising a Series A, which was a pretty small amount. The company originally raised a large amount in the terms of software versus infrastructure, but a small amount in infrastructure. The company raised about $16 million in a Series A in 2016 and then I took over as CEO in 2017. Since that period of time, we’ve raised about $300 million.
William Leonard
Wow, that is a very interesting journey and a strong upward trajectory since you’ve joined the leadership. I kind of want to touch on that aspect of it, I would say, a strong portion of our listeners are founders who are in the business from day one, but you joined after the business was an operation. What is that transition like from actually being a founder of the business to joining the business in that executive fashion? How did you manage that? Because I’m sure it was not an easy transition to make.
Jeff Uphues
I’ll say, although we didn’t have our name on the original filing for the certifications of creating the entity, we refounded the company. A little size-wise, we typically don’t talk too much about our size and growth, but we were growing at about 1300% compounded over the last three years, and we’re consistently growing the company at a compounded annual growth rate over the last five years of around 160%. We’re a pretty fast-growing group. When I came into the company, it was really evident that the first thing that you had to do is you had to listen. You had to listen to the customers who had chosen or who had selected the company to entrust with their services. You also had to listen to the people of the team. When you come into something, it’s always about understanding where the company has been, understanding what the vision was, understanding the structure and the scope of trying to get to where it is, and how documented and how planned were all those things. For us and for me, when I came in, immediately, what I did is I talked to our investors. When somebody comes in and invests money into a company, you have to look at and say, “What was your investment thesis? Why did you come in? What is the profile that you typically invest in? Why would you invest more into this business? And what does success look like?” Then you have to do the same thing with the employees and say, “Why did you join this company? Where do you think it should be going? And how are we going to be able to do that together?” Quickly, you are able to determine that as an entrepreneur that has started things from day one. A lot of times you create these environments and you’re trying to convince investors, “Hey, you got to get behind my idea.” I would tell to the investor, tell to the entrepreneur, that if they take that same approach kind of like what we did, is really asking the investors not just always selling, selling, selling. I want to sell you my idea, I think I’ve got this great idea, you have to have a fair dose of that. But you also have to understand where have people been before and what does their profile looks like? Because not all investors are right for every deal and not all people that you have in the company really understand how you have to scale. You need different people at different times that’s going to help you get there. My real advice on looking at that is to understand your market, understand your investors, understand the motives of your customers. If you listen to your customers and you do what they tell you, and you do it every single time for the same price of what you said you would do it for, then most of these things work out.
William Leonard
That’s really excellent advice there. When you first join, it’s like a process of building rapport on both sides of the equation with your investors, and with the employees that you’re inheriting as a leader. That’s really strategic advice there. I kind of want to stay on this note a bit as you mentioned since you’ve joined, you’ve raised a little over $300 million.
Jeff Uphues
Just under 300.
William Leonard
That’s really impressive. Talk to us and maybe share some insights that you have into how to really navigate that fundraising process because a lot of the founders that our listeners hear on the Atlanta Startup Podcast are pre-seed, seed, maybe Series A and you joined after the series A, how do you all prepare yourself for that next big jump in fundraising as a high growth startup?
Jeff Uphues
Raising money is not any fun. I’ll say that raising money is a major distraction from really what you have to be as an entrepreneur to achieve your vision, it takes a lot of focus, and it takes a lot of time to really understand the needs of your customers, and then find some repetitive basis of, “Okay, I sold to Customer A. What happened in selling to Customer B did happen the same way, did they buy the same services, were they being supported in the same way? You really have to spend that time of understanding in the business at the same time and balance of how do you understand how you’re building a business in raising the capital and understanding what investors fit the right profile for what you are doing and at the same time, running your business. The raising of the money, it was a journey, and that the general advice that I can give people on this is you need the money to grow. Growth is expensive. It really is. With your ability to raise the money and get the right partner, you have to align the right financial interests to the stage for which you’re in. What I mean by that is, the first amount of capital that was brought into the business was debt capital, convertible debt capital, and then it went to an equity round that had some functionality like debt, in some ways. It was preferred equity in the way that the company was done. You bring in debt, you then have around preferred equity, which basically means the investors get their money back before anybody else gets their money back. Then you have the waterfall of your cap table, you have to be thinking through a series of what is going to get you to what place in what vision you have to have. Don’t worry as much about what it is costing you on the overall capital. You have to protect your equity like they’re your organs. You can’t lose a lung and still function in the same way, you can’t lose a kidney and still function in the same way. It has a cost. Watch and protect your equity like organs. But understand that don’t get caught up over the overall cost of the capital at that period in time. Because if you’re executing on your business, you’re going to need more capital, if you’re needing more capital and performing, you’re going to refinance that capital of what you’ve just brought in, and knowing that if you have flexible enough partners, and you don’t get caught up in exactly what the valuation is every single time and toil over that, you’ll end up saying, “Look, I’m going to create this platform in this business over a period of time.” Raising money is something that really you have to be doing every two or three years if you do it right.
William Leonard
A valuation can be such a dividing point in fundraising conversations. How do you, as a founder and an entrepreneur, come away with that valuation that you want? If an investor is really trying to lower that valuation on your company, is there a practical way to really get favorable terms?
Jeff Uphues
Well, it depends. The answer’s yes. It also depends on, if you are aligned with the right investors? Investors understand that it takes talent to create growth, and growth is expensive. Growth is hard. You also have to understand, do I really want to grow as fast? Or am I okay growing it a little bit slower? And in growing it faster, is important. If you’re looking at the time to market and trying to corner a certain segment of the market. In other words, there’s a first-mover advantage. We look at our business that we have some things around first-mover advantage because we know that when we come into a market, we said we want to be first in the market. If we come in and we’re number two, well, then that’s just more competition of what we’re fighting over in that market is a little bit harder. In our case, we wanted to have more capital because we wanted to carve out these places and go a little faster. It doesn’t necessarily mean that’s the right plan for everybody, you may say I want to grow methodically and slower and by growing slower, I can take less capital, and then I can get into a position where I have a happy medium of you know where that valuation meets the expectation of what the investor is. High growth, need high capital, in many cases, slower growth, you need a lower amount of capital, and then you can give up less within your company. The valuation is always a tricky piece because there are so many different levers to negotiate. It’s certainly a dance.
William Leonard
I agree. As an investor, we’re seeing an elevation in valuation. It’s been prevalent for the last six to eight months, I say even dating back to 2020 a bit. It’s definitely a point sometimes where we just have to walk away from the conversation because evaluation doesn’t match the stage of the business, sometimes. Really great advice there. As we get back to the data center world, what trends are you seeing in the space, regionally, maybe nationwide, even internationally? Are there any trends that listeners, investors, entrepreneurs who have expertise or knowledge in this space should be paying attention to?
Jeff Uphues
A couple of things. When we think of the trends that are happening, still more and more companies are embracing cloud services. They’re embracing, I’ve got workloads in multi-cloud environments where I want to have access to AWS or I want to have access to Google Cloud Platform. I want to have access to Microsoft Azure, I want to have access to Oracle, or Salesforce, or any of these apps that are out there. We are in a software-driven world in an environment that people are putting more and more things into the cloud. But not all things are meant for the cloud. Certainly, some companies are finding that the balanced hybrid approach is really happening. What you have is you have needs in the data center world for serving multiple different types of customers, the enterprise customers who want to be close to where their equipment is, get it out of their offices, put it into an environment that’s safe and secure. Put in environments where they can be close enough that they can touch it and go work on it rather than having to drive into another market. Proximity and localization matter, yet, they want to have the peace of mind and security that what they put in the cloud, they know where it is, and how resilient it is to get there. Because the cloud is traditionally running over best-effort internet capacity, and we know that the internet can be unstable at times, how do you create an environment where those customers get the best of both worlds? I want robust, always-on resilient cloud access, yet, I also want access to my equipment, and at the same time, you’re trying to do that in a region where some of the large cloud guys are not yet. What we’re seeing is, content is moving out more towards these markets of what we’re serving today. That would be your Netflix, your content creation, from your cable providers, all these streaming services, most of these streaming services come out of the major cities and then get traversed back into where those locations are like into Birmingham, Alabama, they pull a lot of things from Atlanta. We’re seeing more things go into Birmingham, Alabama because there are 1.2 million people in that market. We’ve networked the entire state, where then we can serve the entire state through that area as that central point that I talked about of having all content, all cloud all carrier. Applications are moving out. People like to refer to things that they call the edge. Where is the edge of this? Well, the edge is nothing more than where the application meets the network. And for us, getting that application closer to where it is meeting that consumer in the network is really what is important. Consumers and the apps want to have things closer to them because the performance is better. We’re seeing a shift from not just saying everything runs through Atlanta to things becoming more out into these markets, at least what we’re serving. Hopefully, that made sense.
William Leonard
Definitely. You’re wanting things more localized, right? I think that’s the trend there. That’s really interesting. As we wrap up the conversation here, Jeff, what impact do you think building DC Blox in the Metro Atlanta area has had on the success of the company? I’m from Atlanta, we were talking about this before we went live. I grew up here, this is a city that I love. Why is Atlanta so important or why is Atlanta one of the best cities to build a high-growth startup?
Jeff Uphues
Well, number one, you have great access to talent. The area here in Atlanta, Atlanta has really become the primary jewel and driver of the South. Each year you have markets like Nashville that are on fire in their growth and markets like Charlotte, North Carolina, that is just really been a good growth engine. But as many people look at why Atlanta, Atlanta really is the hub from Florida through the southeast and if you want to say it’s an SEC footprint of where we are, everything runs through Atlanta. Just like if you’re on Delta, all roads or all flights lead back to Atlanta. Atlanta has got great growth, the capital, it’s got a great opportunity for capital, great for employees, essentially located you can get to anywhere really, really quickly, you can get there on a direct flight. More and more things are happening in the southeast that just makes it a great place to do business for us. We can get to our markets, we can go west, or we can go east and northeast. Just the proximity is very, very good for us to run a command and control operation from Atlanta on all these other facilities we’re putting
William Leonard
Talent is one of the biggest pieces. You think about the local universities here, you think about the enterprises that are moving here, building East Coast headquarters here. I think it’s an exciting time and truly an inflection point for even more growth in the city and surrounding areas like Alpharetta, McDonogh, Stockbridge, those areas are going to see growth as well. Really excited about what’s happening here in the region. But Jeff, this has been a great conversation. I appreciate you joining me this morning to share a little bit more about your journey to becoming CEO of DC Blox, how DC Blox is really transforming and localizing infrastructure and cloud access, and interconnectivity here in the region. I think it’s important as we think about what this world is shifting to and hyper localization is one of those trends that we’re going to see become even more prevalent over this decade. I’m really excited that you all are really spearheading the efforts here in the region and continue to grow. Hopefully, we’ll see you on the Inc 5000 list again next year.
Jeff Uphues
We plan to do that. It’s not easy to get on it and it certainly is not easy to stay on it. But with a great team and great investors behind us, we know that it’s all about execution and our ability to do that. We’re going to continue to keep doing the right things within our markets.
William Leonard
Awesome. Jeff, thank you for your time this morning.
Jeff Uphues
Appreciate it, William.
Lisa
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