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Tom Daly, Dyn president, to Gov. John Lynch’s left, stands with the finalists at the NH High Tech Council’s 2009 Product of the Year awards event. Courtesy photo.




Living the Digital Dream
How a local tech company found international success and a possible recipe for NH's future

03/31/11



Kyle York had just finished a two-day multimillion-dollar sales pitch to a Los Angeles-based security company. As he gathered his breath, the executive whose business he was courting thanked York and asked if he had any questions. York, ever dauntless, dove right in: How did we do?

The executive responded: There was only one issue.

York wracked his brain. Was Dynamic Network Services, Inc. (Dyn), the Manchester-based managed DNS and e-mail delivery services provider he worked for, too small? Was his bid too high? What was the issue? The executive answered for him: You’re in New Hampshire.

This infuriated the now 28-year-old York, who is Granite State born and bred. It was an all too familiar tune. As a rising technology company, Dyn had for years heard about how it should be in New York City or San Francisco. York was sick of it. He began passionately articulating New Hampshire’s many strategic advantages.

The executive told him not to be so defensive. It wasn’t New Hampshire specifically. It was just that Dyn was in a different time zone.

“Sometimes you try to overcome issues that are not even there,” York said.

The world isn’t flat, it’s viral

In today’s information-loaded society, image is everything. And on the international stage, New Hampshire isn’t as sleek and sexy as Silicon Valley. It’s a perception many companies have had to overcome, but it is quickly becoming irrelevant. New Hampshire doesn’t have Wall Street, but it does have Internet connections, and in the burgeoning field of ideas, that’s enough to get a company off the ground. While space may be the final, the Internet is the next great frontier. And its potential is as limitless as it is unexplored.

And as with any new frontier, there are pioneers who will lead the way. But no longer must they heed the words of Horace Greely and “Go West, young man, and grow up with the country.” Now they can stay East, and help change it.

Dyn, whose early days read like an Aaron Sorkin script, is an example of just that.

The most important thing we don’t know

In less than a generation, the Internet has pervaded culture. We disregard a business without a website, ignore friends who can’t correspond via e-mail and question the existence of people who aren’t on Facebook. Yet what do we really know about the workings of the web?

Jeremy Hitchcock and Tom Daly, co-owners of Dyn, know a great deal. Their company specializes in managed Domain Name System (DNS). Typically, this is described as the Internet phone book. It is code that translates a domain name we can remember, like www.amazon.com, into an Internet Protocol (IP) address, which is often a string of numbers such as 72.21.214.128. IP addresses indicate what content you’re searching for, where it is and how to get there.

An example that York, who is the VP of Sales and Marketing for Dyn, used to explain DNS is your cell phone. You may not remember your Aunt Cindy’s phone number, but it is saved in your phone as “Aunt Cindy.” You scroll over the name, hit send, and presto, you’re talking to her. Cell phones are easier to understand because we can actually see the cell towers that receive and transmit frequencies. 

Instead of towers, the Internet uses servers, which are essentially high-powered computers. Dyn has 17 data centers strategically placed around the world full of their servers.

Websites that specialize in domain names and web hosting, like Go Daddy, also include DNS. But a company like Dyn and its major publicly traded competitors, Neustar, Verisign and Akamai, appeal to a more tech-savvy audience. If John Doe has his own website, www.JohnDoe.com, in which he shares his personal stories with 10 or 15 friends, it doesn’t really matter if his site is slow or a server crashes and his website goes down.
But companies like Netflix, Twitter and Pandora, all clients of Dyn, can’t, for all intents and purposes, crash or suffer from poor performance. That is why they outsource their DNS to a specialist. So if for some reason the server used by Pandora is attacked and goes down, it will be re-routed to the next closest one and the site would never skip a beat. All of this is happening in less than 20 milliseconds. Dyn’s DNS network is one of the fastest in the world.

But why would a DNS provider come under attack in the first place? Daly, who York said is one of 12 people in the world who knows this much about DNS and Internet routing, said it could be for a variety of reasons including cyberterrorism or a gamer’s anger at a particular website.
Sometimes a particular client becomes too big a liability.

On Dec. 2, 2010, Dyn entered the national spotlight when EveryDNS.com, which Dyn purchased in January 2010, stopped providing DNS services to Julian Assange’s controversial Wikileaks, a website that shared confidential government reports.

“It was too big a threat to come under attacks and affect over 500,000 other websites,” York said.

It is no surprise that such attacks take place. What is surprising is that more don’t, especially since the Internet is run more on good faith than on a hard set of rules. Daly said an organization like the Internet Engineering Task Force (IETF), an open international community dedicated to making the Internet better, sets guidelines on how the Internet is supposed to work. But it is loosely formed and there is no official international governing body.

There is nothing stopping, say, Amazon.com from introducing disruptive technology that would prevent its site from being accessed by users of the web browser Internet Explorer, for example, Daly said. This doesn’t happen because the Internet functions in the currency of faith.

“The Internet works today because we choose to trust it,” Daly said.

It is this trust that pioneers, like Daly, take seriously. He said everyone is trying to make money and run a business but sometimes they must take their capitalist hats off and do the right thing for the Internet. Dyn does not guard its codes in an Ivory Tower. It is active in both the business and technical side of what it does, participating in different shows, events and conferences.

“We all power Internet infrastructure, a huge distributed tree that we each have responsibility for,” Hitchcock said in a previous interview with MO.com. “A strain on one branch puts others at risk.”

For example, Dyn has stepped in when competitors have been under attack and helped out. A more cold-blooded business might have let their competition crumble and then swooped in to steal business. But as Daly pointed out, that would have damaged the public’s trust in all DNS providers, which would be bad for business.

Business is booming

It must be working — business is far from bad. In fact, it is booming. Although, in some ways, it always has been.

While it is common for start-ups to receive millions of dollars from venture capital firms, Dyn has been profitable since the day it was incorporated in 2001. Dyn has five million active users around the world, 200,000 of which are paying users. Many of those are in the United Kingdom, which is why the company plans on opening a London office.

Late last year, Dyn acquired SendLabs (one of three acquisitions it made), a Manchester-based company that specializes in e-mail delivery services. In 2008 the company employed 20 people; now it has 75 employees. In the last year, the sales department has jumped from three people to 18. Their current office on the fifth floor of 1230 Elm St. in Manchester is bursting at the seams, which is why they will be moving into a new 23,000-square-foot office, with the potential to expand an additional 7,000 square feet, at 150 Dow St.

“Dyn Inc. is a bit unusual,” said Thomas Elliott, director of the Idea Greenhouse, a business incubator in Durham. “Typically companies don’t achieve that scale of success without outside capital.”

Dyn has used a combination of success and a casual work environment to create a culture that appeals to people both locally and nationally. The average age of the employees at Dyn is 33, including the two 29-year-old co-owners. Youth is an asset when it is combined with ambition. York said while they are a New Hampshire-based company, they only have five clients in New Hampshire: Gourmet Gift Baskets, Eastern Mountain Sports, Ektron, WhippleHill and Griffin, York & Krause.

“We travel a lot,” York said. “We jump on planes all the time. Manchester is home, but if we want to be a global company, we need to be global.”

Why, then, is Dyn based in Manchester? And will other companies follow their lead?

The New Hampshire advantage

The short answer is that both Hitchcock and Daly grew up in New Hampshire and attended Manchester high schools. When they graduated from Worcester Polytechnic Institute, they could have based their company anywhere.

Hitchcock said he and Daly were honest with themselves early and realized they weren’t a New York City or San Francisco type crew. They felt the quality of life in New Hampshire was a better fit. Plus, Hitchcock’s former principal at West High School, Bob Baines, was the mayor of Manchester at the time. Hitchcock also knew his company could attract employees if he told them they’d be traveling north on Interstate-93 to get to work.

The freedom to make such a decision is a result of a change in the way business is conducted.

“The Internet is a way to reduce friction that used to exist with starting a business,” said Graham Chynoweth, VP of Business Operations and General Counsel at Dyn. “The friction to create a global company is now non-existent.”

Chynoweth is a major supporter of the state’s recruitment efforts. He previously received a gubernatorial appointment to co-chair the New Hampshire Task Force on the Recruitment and Retention of Young Workers and founded New Hampshire’s first young professionals organization (MYPN.org).

“There are plenty of jobs in New Hampshire,” Chynoweth said. “They are just geographically separated from the universities.”

Chynoweth said students at the University of New Hampshire or Dartmouth are disconnected from the jobs available in Manchester, Nashua and Concord. As a result, there is a myth that there are no jobs in New Hampshire or that the state is uncool. Consider Chynoweth a myth-buster. After graduating from Duke Law School, the Canterbury native chose a position at a Manchester law firm instead of a high-powered Boston firm for the very reason he preaches: New Hampshire’s quality of life.

The Internet is making it an easier sell. Chynoweth said in the past living in San Francisco had its benefits because it was easier to make connections there. But the Internet has flattened the world and allowed ideas to be the things that generate success.

“It’s not an evolution; it is a revolution in the way people communicate,” Chynoweth said. “The ability to do things won’t be restricted by technology.”

This is a point validated by Kate Luczko, executive director of StayWorkPlay New Hampshire, a non-profit organization focused on letting the 20- to 30-year-old demographic know the benefits of staying, working and playing in New Hampshire.

Luczko said the increase in communication has changed the way companies are perceived. For example, she said StayWorkPlay NH has no brick-and-mortar office. She works on her cell phone and computer from her house. Yet no one knows whether she’s working out of a downtown corporate office or from her couch.
This movement toward low overhead is a trend she has seen gain steam in the past year. The former Amoskeag Small Business Incubator in Manchester has been re-branded as the abi Innovation Hub and is looking to attract new high-tech start-up companies. Such movements are happening elsewhere in the state as well with the Idea Greenhouse in Durham and the NH-ICC in Portsmouth.

Carol Miller, director of Broadband Technology for the state’s Division of Economic Development, said there are many people who live in New Hampshire and telecommute with their employers in other states. And, while New Hampshire has a reputation as a high-tech state, Miller wants to ensure that broadband access is spread to even the state’s most rural areas. That is why she believes wireless carriers will be part of the solution, yet they too are faced with challenges. Putting up cell towers is done on a municipal basis, and many residents don’t want those towers in their town.

“We all want state-of-the-art telecommunications but not in our backyard,” Miller said.

Miller did say the state has come a long way and with fewer restrictions, people can choose to work where they want to live. New Hampshire’s four seasons and its proximity to the ocean, mountains, and Boston have long been championed by tourist bureaus.

Cheerleaders

The state has a new generation of champions. Luczko said she has seen a trend, one she believes will continue, of young professionals getting involved in their community. Many, and those at Dyn are no exception, are involved with boards and committees.

“It is good for the individual but it is also good for the company,” Luczko said.

It is also good for the state, which benefits from having these ambassadors who not only talk the talk but walk the walk of staying, working and playing in New Hampshire.

This flexibility has occurred in the past five years because the cost of server infrastructure has come down so much, according to Elliott. In 1965, Intel co-founder Gordon Moore speculated in what is now known as Moore’s Law that “each new memory integrated circuit contained roughly twice as much capacity as its predecessor, and each chip was released within 18-24 months of the previous chip,” according to Webster’s on-line dictionary. “If this trend continued, he reasoned, computing power would rise exponentially with time.” As capacity rose, cost fell. Whether this trend will continue or not is debatable, but it has held up remarkably well since Moore first made the prediction.

This is good news for Elliott, who, as chair of Durham’s Economic Development Committee, believes that Internet-based companies that choose to be in New Hampshire for reasons other than technology are a huge part of the future of Durham.

But Elliott realizes a company the size and breadth of Dyn is a rarity. He said modern communication helps New Hampshire in that more small, four- or five-employee companies earning $1 million to $2 million a year in revenue will locate or sprout up here. But if a company wants to do something on a larger scale, like Google or Facebook, it will need outside capital. And unless New Hampshire grows its own venture investor community, it will see many of its most promising start-ups leaving the state to be closer to the funding, which is still found in Boston, New York and San Francisco.

While this has long been discussed, action is now taking place. The New Hampshire House of Representatives has passed HB 605, which “authorizes the business finance authority to establish a New Hampshire innovation business job growth program, the purpose of which shall be to promote investment in venture capital funds that evidence a commitment to providing venture capital to New Hampshire businesses.”
The bill, which has moved on to the Senate, would create an authority that would apply for grants from the federal government and other outside sources for money, which could be used to cover the risk of investors willing to put money toward innovative businesses in New Hampshire.

Star search

Being one of the leaders in its field and having a unique company culture (can you say Wii bowling tournaments?) has allowed Dyn to not only harvest local talent but also import employees from out of state. York himself went to school in Waltham, Mass., at Bentley University, moved to California for a few years and was lured back home after being recruited by Hitchcock, a high school classmate.

“I was asked by a VP of Sales from one of our much larger competitors, ‘How are you finding good DNS sales reps in New Hampshire?’” York said. “I said, ‘I’ll tell you a secret: we’re not selling DNS.’”

But there is a certain type of person who is attracted to a business that can go from zero to 60 and back to zero in the blink of an eye. And these people aren’t reading the classifieds in the local paper.

Take Brian McCall, who spent his life in Tennessee, South Carolina and Georgia. After earning his MBA from the University of Georgia, he was trying to figure out what to do next. Ed Bender, a friend of McCall’s for 10 years, had just relocated from Seattle by way of Brooklyn to Manchester (Bender is originally from New Hampshire) to work at Dyn. Bender suggested McCall apply to the company. Taking Bender’s suggestion, McCall submitted an application, came for an interview (Bender was away on a business trip at the time), got hired and moved to Manchester just before the wild winter weather. Here’s the thing: McCall had never met

Bender in person. The two were friends through an online gaming site.

“It’s not easy to move across the country,” McCall said.

Scott Smith, a graduate of Brigham Young University, disagreed. He said he would go anywhere for a job. This is a concern for someone like York, who hired both men.

“Guys who move here could just move away if they’re unhappy,” York said. “So as an employer, you have to stay ahead of your talent.”

There is little room for mistakes in hiring, as a company like Dyn doesn’t have millions of dollars of capital on hand. That is why such companies align with organizations such as StayWorkPlay NH that specialize in bringing together young professionals.

Simba is now king

Besides changing the hiring structure, technology is now shifting the power. Young minds, intoxicated with images of The Social Network, want to be their own bosses. Ideas drive the world, not experience, so some only need to climb a single rung to reach the top of the corporate ladder.

“Now I interview kids coming out of college and they figure if Mark Zuckerberg can do it, I’ll figure it out,” York said. “Younger and younger kids are on Facebook and Twitter and they’re enterprising and starting companies at any age.”

This is why Luczko is focused on mentoring these youngest of professionals who may have great ideas but haven’t learned how to navigate through the business world. Then again, York believes that inexperience isn’t necessarily a negative.

“Age is just a number,” York said. “Eventually you realize people 20 years your senior are just figuring it out as well. You’ve just got to find out what motivates you and work hard.”

This youth revolution is also a result of a change in philosophy often credited to a Chicago-based company called 37signals (a Dyn client, it so happens), according to Elliott. This philosophy advocates for ultra-light start-ups that build web-based products or services to develop Minimum Viable Products. This means a company delivers its idea to market as quickly as possible. It doesn’t spend time building and perfecting. If it doesn’t stick, then fix it. If it does, then you throw bodies at it. Obviously, this is not a sound strategy for a pharmaceutical company, but it can be for a company developing cell phone applications.
“Dare to fail,” Elliott said. “Most major web servers started as something else.”

Elliott said some of the most vocal advocates of this strategy are industry veterans who have seen products be perfected for years and then fail because they had never gone before customers. Elliott said these veterans, who came of age before the Internet, are energized by these new strategies. For young entrepreneurs, it is second nature.

To see the possibilities of entrepreneurs paying their dues while they’re still under their parents’ curfew, look again to the founding of Dyn.

Dyn’s story

It all began with a part-time job at the web development office at Worcester Polytechnic Institute. Here Hitchcock, who intended to major in chemistry but ended up graduating early summa cum laude with a degree in Computers and Management, met up with Daly and two other students, Tom Wilde and Chris Reinhardt, who had founded something called DynDNS, which was a free DNS service, in 1998.

They say necessity is the mother of invention and that is true of Dyn. At WPI, Tuesday night was the party night and so Hitchcock and Daly wanted a little extra sleep on Wednesday morning. Unfortunately, there were those pesky lab reports.

They realized if they could write their lab report on Tuesday and then access it from the bulky computers in the school lab, they could print it off, put it in the stack at the end of class and get an extra couple hours of sleep. Thus the free DNS service was born.

Throughout college the guys worked on the company, but during the first years it was more of a hobby. In fact, Hitchcock said he was working on another business plan for a class that he thought was going to be the real success. But since they were so young, they had the advantage of time. There was no pressure to turn a profit and they were able to try several models over the years, from a free model to donation-based models, in which they received $40,000 in a matter of weeks from users around the world, to the more recent premium enterprise offering called Dynect Platform.

There was early success. Hitchcock said there was a Cheesecake Factory near where they worked and the college kids would often eat there.

“We weren’t eating Ramen noodles,” Hitchcock joked. “We were living large.”

As is the case with many new ideas, the other two guys drifted away from the project. In 2006 Hitchcock became CEO and Daly became president and CTO.

“It was a pretty gradual transition,” Hitchcock said. “There is no manual for any of this stuff.”

New rules

The two found that essentially they had to make it up as they went along. This is too easy a generalization — a lot of strategic planning and discussion went into leading the company to where it is today. Hitchcock talked of hiring the company’s first employee. He was a man twice their age who had a family. Hitchcock and Daly were 21 years old.

When they moved the company to Manchester, they wanted to look legitimate and so they went looking for office space. They found an office on Sundial Avenue in Manchester.

The first time Hitchcock and Daly met with a banker to get a $1 million to $2 million mortgage on the office space, the banker was skeptical of the two kids sitting across from him. But then he asked to look at their books.

“He had a smile on his face the entire time,” Hitchcock said. “Then he went out of the room chuckling. When he came back in he said, ‘That’s a nice little business you’ve got here.’ We got the pre-approval note the next morning.”

As time has gone on, the issues have become smaller, yet like York’s misconceptions about the bias against New Hampshire, Hitchcock and Daly tried to play the role. In 2006, they moved to 1230 Elm St. because legitimate companies worked there and it was a fairly corporate atmosphere with a grand view of Manchester.
Yet success breeds confidence. No longer needing to bow to an older generation, Dyn has developed its own brashness. Or perhaps, if all the rules have changed, the only ones to follow are your own.

For example, Hitchcock operates in a different mentality than many CEOs in that he wants to have a good time without making a fool of the company.

“I want to expand the horizon,” Hitchcock said. “A board room isn’t the only place where a business exchange can take place. Conversations are happening everywhere. What’s wrong with a seaplane in Seattle?”
Hitchcock is referring to his meeting with executives at Amazon. The meeting was supposed to be held in Amazon’s headquarters in Seattle, but at the last moment Hitchcock decided to change the meeting to be inside a seaplane as it circled the coastal city.

“The person we met with said he saw those seaplanes every day out his window and although he was raised in Seattle, he had never been in one,” Hitchcock said.

“What meeting do you think he’ll remember?” York asked. “When he looks out his window and sees those planes, he’ll think of us.” The company cannot comment on whether Amazon became a client.
Once when meeting with Gov. John Lynch, Daly was asked by the governor where he saw himself in five years. Daly joked, “The Cayman Islands.”

Such boldness flows from the head down and applies to the company’s hiring process as well. Before interviewing a potential sales representative, York makes the candidate leave him a sales pitch on his voice mail. Smith, the young man from Utah, won over the office by having pizzas delivered following his interview with a note attached, thanking Dyn for the opportunity.

This self-confidence and the culture that you don’t have to wait in line to be somebody is in high demand. It is also a concept Dyn did not invent. Hitchcock said while the company is on the early side, he acknowledged that Google is leading the way. And before Google it was Apple, and before Apple it was Xerox.

In fact, in a recent survey, nearly 25 percent of young professionals (college graduates with 1 to 8 years of work experience) want to work at Google, according to the Wall Street Journal. That was almost twice as many as chose Apple, which came in second. Disney World was third. The top write-in on the list: Facebook, Inc.

“There aren’t a lot of Googles,” York said. “But there are plenty of cool companies out there like Dyn, but you never hear about them.”

And while many young professionals probably won’t land jobs with Google, they have a likelier opportunity with companies like Dyn.

What makes these companies so attractive?

Casual is cool

In a world where the balance between work and personal lives is blurring, people want to enjoy where they work. That is why in the new Dyn office building there will be everything including a tree fort, a museum exhibit that looks like a dorm room, which represents the founding of Dyn, a television, some beer taps, Wii, and of course, a Segway or two.

“The values of this generation are a little different,” Luczko said. “In the past you may have seen a hesitancy to work from home, but now my generation is pushing to work from home one day a week. You see more and more of this changing culture now.”

While having a young boss might eliminate the age gap, it doesn’t necessarily eliminate differences. In a society of LinkedIn, where everybody knows everybody else’s positions, job titles have a certain gravity, according to York. Yet, Hitchcock often wonders why people care about job titles so much. York said it is easy for him because he’s been CEO since he was in his early 20s.

But with the big job titles also comes the pressure. Dyn swims with some pretty big fish. If it went down, a large portion of the Internet would crash alongside it. That is a great deal of pressure, and yet Hitchcock seems impervious to it all.

Once York’s wife, Katie, asked Hitchcock why he never seemed stressed. Hitchcock, perhaps only half-joking, answered, “What’s the worst that can happen? I’d have to get a real job.”

It is this is ability to look at their work as service instead of business that seems to be a defining characteristic of many of these young high-tech CEOs. Since their work is more about moving the world forward, Hitchcock and, for example, Mark Zuckerberg, don’t seem to care a great deal about money. In fact, Hitchcock is much more likely to talk about producing a quality product and creating a fun work environment than worrying about what other people speculate the company is worth.

Such a philosophy may have penalized Dyn in the tech media because it has been so reliable and hasn’t needed a huge influx of outside capital. (As Dyn is a private company, its officials declined to reveal its annual revenues.) Yet, Hitchcock must know he is sitting on a golden ticket. If he and Daly chose to sell Dyn, as co-owners, they would be in line for a multimillion-dollar payout.

As has been their business model, Hitchcock and Daly will cross that bridge when, and if, they get to it.
“Right now, I’m living the dream,” Hitchcock said. And his dreams and those of other companies like Dyn will help shape the country’s future.
 






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