Part 3: After flirting with NC exit, Red Hat enters the Raleigh skyline
“When you have a company like (Red Hat), you’re a magnet for a certain type of driven person interested in high-flying companies.”
Would Red Hat ditch the Triangle?
In 2010, the answer wasn’t obvious. The area’s homegrown software distributor wanted larger offices, and company officials eyed sites in Austin and Atlanta, in addition to Raleigh.
“We continue to evaluate the alternatives,” said Charlie Peters, the company’s chief financial officer, as doubt over Red Hat’s future headquarters hung in the air.
Back then, Wake County didn’t typically offer financial incentives for companies to remain in the area, but local leaders said they’d make an exception for Red Hat.
In 2011, the state dangled $15 million in incentives for Red Hat to create 540 new jobs in Wake County and Wake commissioners pitched in an extra $675,000. Red Hat accepted.
At a press conference announcing the incentive deal, Gov. Bev Perdue donned a signature red fedora and defended the state’s decision to offer Red Hat tax breaks even as the company’s annual revenue approached $1 billion.
“They could have gone anywhere they wanted to go, she said. “I’m mighty glad [Red Hat CEO Jim Whitehurst] chose North Carolina, and I’m not at all unhappy that incentives were part of that decision.”
Red Hat moves to sleepy downtown Raleigh
Red Hat officially left N.C. State’s Centennial Campus in 2013, transferring more than 700 employees to a downtown Raleigh office tower vacated by the utility company Progress, which had merged with Charlotte’s Duke Energy. Up to that point, the center of Raleigh wasn’t known for vibrancy.
“There wasn’t a lot of reason to go downtown,” said Joanne Rohde, a former chief operating officer at Red Hat. “None of the things that would tend to take you there were there.”
Public officials hoped Red Hat, and its young, hip workforce, would help change.
Celebrating Red Hat’s move, Raleigh Mayor Nancy McFarlane called the company a “cornerstone that attracts and fosters other companies and small businesses.”
Harvey Schmitt, then president of the Greater Raleigh Chamber of Commerce, said adding Red Hat’s signature fedora logo to the skyline “helps us establish our case as a vibrant, growing, dynamic community.”
Red Hat had already put its name on another piece of Raleigh, buying the naming rights to the 6,000-seat downtown amphitheater in 2012 in a five-year deal that paid the city $1.175 million.
Yet, in more subtle ways, the company had already left its mark all around the Triangle.
Flights to Frisco and billions in startups and spinoffs
For years, Red Hat executives were vocal proponents of Raleigh-Durham International Airport getting a direct flight to West Coast destinations. “I would think at the top of everyone’s list in Raleigh would be a direct flight to San Francisco,” Red Hat spokesperson Leigh Day said in February 2011.
The next year, RDU announced nonstop service to the Bay Area.
CEO Jim Whitehurst, who had taken over from Matthew Szulik in 2008, would also speak up on public policy, speaking with North Carolina Sen. Kay Hagan about a bipartisan tax bill and voicing his displeasure with the state’s 2016 HB2 “Bathroom Bill.”
Then there are all the spinoff startups.
Former Red Hat intern Joe Colopy used the term “spidering effect” to describe how frequently Hatters moved on to launch their own ventures.
“When you have a company like (Red Hat), you’re a magnet for a certain type of driven person interested in high-flying companies,” he said.
In 2002, Colopy founded Bronto Software, a marketing services firm that counted the Durham Bulls, Trek Bikes and Timex as clients. By 2012, former Bronto employees themselves had gone on to form six new local startups. These companies were nicknamed “Red Hat’s grandkids.”
Pendo: The biggest Red Hat “grandkid”
Colopy, who sold Bronto for $200 million in 2015, has continued investing in the Triangle tech sector. Today, he’s a partner at the software-focused venture capital fund Jurassic Capital in Durham and founder of the technology news outlet GrepBeat.
After five years as Red Hat’s COO, Rohde founded a health care startup called Axial Exchange. In 2009, a group of ex-Red Hatters formed the marketing firm New Kind, which still exists today.
Sometimes, former employees would grow a company Red Hat would then later acquire.
In 2015, Red Hat purchased the Durham-based software firm Ansible for a reported $100 million. Started by a former Red Hat and rPath employee named Michael DeHaan, Ansible employed around 50 and served a number of Fortune 500 companies when Red Hat came calling. Its automation platform has since become strategically key to Red Hat (and now IBM) as customers seek to optimize their time and enhance security.
But the most well-known “Red Hat grandkid” has been Pendo.
In 2005, former Red Hat executives Erik Troan and Billy Marshall formed rPath, another software company that incorporated open-source principles. The company made its tools freely available online to developers who promised to share the software applications they built with rPath’s programs.
SAS Institute purchased rPath in 2012, and Troan went on to co-found another software company, Pendo, which today is one of the fastest growing tech companies in the Triangle. Last year, an Atlanta-based venture capital firm valued Pendo at $2.6 billion.
Pendo leaders haven’t hidden their desire to take the company public, and the fact that a multibillion-dollar tech firm would file for an IPO in Raleigh might be a testament to the route Red Hat paved 25 years ago.
“You did not have to move your startup to Silicon Valley to have a billion-dollar IPO,” Red Hat co-founder Bob Young said. “You can do it from Research Triangle Park and we demonstrated that.”