A Idea just popped into my head, i am by no means saying its a good idea or that we are going to do it, just curious of what you guys thought of it, and for you to throw out your ideas.

The Idea is basically a Colocation facility coop. In its simplest form its a partnership between either many many small contributors or several large contributors, where a number of people contribute funds and then own a certian portion of the facility where they can colocate customers for free and benifit from any profits the facility should incur, as well as be responsible for any expenses the facility incurs. The facility in my mind would be professionally managed, with the management company, being paid as a independent contractor on a monthly basis. Investors/coop partners would recieve daily/weekly revenue updates, and expense reports, of course major expenses would have to have majority acceptance etc...

The idea behind this is that either a large number of small players could invest initially say 1k - 3k and have a percentage ownership which would allow them to monopolize a certain amount of space for free and also reap long term profits from the facility/company as a whole. Or a small number of large investors.

Just a idea, i havent thought it through, just thought it was interesting enough to throw out and see what people thought of it.

Interesting concept.

Sounds kinda cool. You'd need a helluva-lot of people :)

I would think the free colocation for shareholders is hard if not impossible to implement. It would have to operate as a corporation and charge competitive rates for the level of service it offers and the management would have to be accountable to the board of directors and the shareholders. Any profits for the shareholders will be realized in the form of dividents and through the increase in the value of their stock, and if the company does well and at some point down the line goes public, there will be a sizable profit. It would have a big advantage over other facilities since it would be the provider of first choice for its shareholders.

If we can get commitments for about $100,000 and 200 servers (about 6 racks) we can rent a good size suite and have room for at least another 10 racks and hire staff, etc. Equipment would be obtained through leasing to keep startup capital requirements low. Shareholders get a 10% discount while new customers will be given the opportunity to become shareholders. This allows for a capital influx to be used for expansion. I would think at about 300 servers it should be making a little bit of money and with more than that it should be profitable. In about a year, we could solicit financing for a private colocation facility. And 5 years down the line we can probably even buy WHT from Matt and let SoftwareRevue be super-moderator. Hmmm, not too far fetched . (At some point a business plan would also be a good idea)

I suggest we start a commitment list. There are two aspects to it: investment capital & number of servers each shareholder will host within the first 6 months of operation. Let's make it a minimum of $1,000 in capital and at least 3 servers. Each new participant please add the previous amounts so we can keep a running total. Here's mine:

Capital:
Previous total: $0
Commitment: $3,000
New total: $3,000

Servers:
Previous total: 0
Commitment: 3
New total: 3

Now that i've read over it again, it sounds like a pretty cool idea. I think it'll be interesting to see what kind of commitment you could get.

I'd put 3k in, if I see it's solid.

Capital:
Previous total: $3,000
Commitment: $3,000
New total: $6,000

Servers:
Previous total: 3
Commitment: 3
New total: 6


Kinda a cool way to set it out too :D

Originally posted by hilda
If we can get commitments for about $100,000 and 200 servers ... (At some point a business plan would also be a good idea)...
You wouldn't make a $100.000 project without a business plan, right? :D

Originally posted by Kiwi

You wouldn't make a $100.000 project without a business plan, right? :D

If it were my money and the investment did not exceed 5% of my liquid funds, my business plan would fit on a napkin (ok, maybe two).

Kiwi can write the business plan. :D

Any of these $ commitments are probably a bit in the air, because nobody actually knows what they'd be putting the cash into. I wouldnt want to be putting $6k into a shed with a few cable modems. :)

Will need more planning before this is actually put forward.

Aside from the sarcasm in the posts above, a business plan is essential.

The purpose of this list, however, is to gauge if there is enough interest. If so, we can all pitch in $50 to $100 to form a corporation, elect a board of directors, and asign the task of drawing up the business plan based on input from the shareholders and the realities of the marketplace.

If the end product is viable, I believe there will be a lot more hosts who would like to participate. If anyone of the initial shareholders does not like the business plan, there will be some way for them in the bylaws so they can opt out.

It is workable.

I wasn't being sarcastic. Heh!

Kiwi seems to have a good way to go about doing a business plan, as I saw in another post. He could at least help anyway :)

+


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^ That there was my lavalamp falling onto my desk & keyboard. Scared the crap outa me, sheesh.

Like I said, it's a good idea, I think hilda is right, lets see what kind of interest it gets.

Hey dont forget this is my idea :)

Originally posted by cbaker17
Hey dont forget this is my idea :)

:D I was thinkign that too

I think it is a cool idea..

One question comes to mind.

1) How much money does it cost to build (or buy), and run such a facility?

It just seems to me that this would cost more than just a pretty penny....

Then again I am running off of three hours of sleep so maybe I just completely misunderstood the whole idea...

Michael

Well if you were colo.com you would say several million, i myself can build out a good facility with carrier grade equipment for a couple thousand.

Originally posted by cbaker17
Hey dont forget this is my idea :)

Loose lips sink ships. :)

No offense, But your concept is somewhat solid. I ran the numbers last night based on using equinix in newark on an 8 x 8 ( or 8 x 10 I spilled water on my note pad ).

You are going to need about $480,000 gross
this will cover
3 staff memebers ( 50K a piece)
4 t-1 lines all different carriers (48k per year total)
1 cogent line ( 36k year)
routers, switch, some goodies 100K used equipement
about 146k for rent and other things

6 racks = 252 1/u spots
take 30 away for overhead 222 1/U spots
222 / 380,000 = $ 1,725 per U members cost for the first year

Due to the ammount of connectivity you should be able to charge one hell of a primium to the clients.

The co-op could in theory sell the bandwidth to it's members at $1.0 - 1.25. and if the FTP accounts were structured correctly you could route that traffic over cogent without affecting the entire network.

With this set up the hosting company should be able to price very well into the market and win market share from the big boys

-Sqposter / Michael

Of course you dont have experience running multiple colocation facilitys and we do :) In addition your entire plan is flawed in many ways, and since you seem to be intent on stealing ideas, i wont tell you how :)

Thought we were talking Coop :eek:


:D

Originally posted by cbaker17
Of course you dont have experience running multiple colocation facilitys and we do...

Well, if enough hosts were interested and believed that this crazy idea can actually work out, sufficient capital could be collected and experienced personnel would be hired. There are a lot of knowledgable, experienced, professional people who wouldn't sneeze at a better salary and a nice stock option package. Could even be someone from your company ;)

So, we're up to $6,000 and 6 servers, we have Kiwi's business plan outline and Charles has implied interest in being part of the management team, anyone else?

Originally posted by cbaker17
Well if you were colo.com you would say several million, i myself can build out a good facility with carrier grade equipment for a couple thousand.

Humm, I think you beeing a little optimistic there ;)

To do it the right way, I would budget 100K for it

I think it's better if you get a bunch of colocation people and bargain for a GREAT deal at a tier-one provider. Can you imagine if you went to Verio and said "I have 10 colo referrals and they all want XX amount of bandwidth and a full cabinet."

Damn I think the Verio salesman would faint in ecstacy!

I'm in LA, and the last time I checked, the Verio colo is like 60% empty!

100k would be a bare minimum, in addition, this was just a idea, i dont think people have any idea how much work goes into all the legal paperwork and structuring, not to mention the idea is not based on a caged or suite deisgn for it to work youwould need a entire built out facility where your only incurring monthly annual rent charges not colocation rent charges.... anyways :) your looking at months and months of planning and years and years of deveolping to make this concept work. Your dealing with lots of people and their money, and because of this you have to take it very slow and make sur eyou do everything right or it will be a colosal screw up...

Originally posted by cbaker17
100k would be a bare minimum, in addition, this was just a idea, i dont think people have any idea how much work goes into all the legal paperwork and structuring, not to mention the idea is not based on a caged or suite deisgn for it to work youwould need a entire built out facility where your only incurring monthly annual rent charges not colocation rent charges.... anyways :) your looking at months and months of planning and years and years of deveolping to make this concept work. Your dealing with lots of people and their money, and because of this you have to take it very slow and make sur eyou do everything right or it will be a colosal screw up...

Well, again I don't know the colo business. I think the Idea is a sound one. Co-op's when managed properly make money for the shareholders and keep the shareholders cost down. Resouce sharing is one of the first things we learn ( bill's got the car, I've got some cash to buy gas... let's get cruzing )

Screw-ups, Oh it could happen. Can you imagin the contracts that had to be redone because of the default of Enron ( given they did not default on any gas contracts that I'm aware of ). BUt you are right, a project of this size would require many specific types of lawyers ( real-estate, business structure, accounting, contracting within the bandwidth providers )

Plus this is open air test of an idea. What better place to thrash this idea. I know that I could not build a facility nor would I look at the undertaking bause of the cost. just look at the basic example http://www.hostingtech.com/howto/01_07_build.html of building a datacenter. UHHGGG it seems a nightmare

-Sqposter / Michael

A very interesting thread, in my previous job as an Accountant/Management Consultant I worked in the set up of various purchasing and marketing co-ops in the UK (combined purchasing varied from $250K to $5 million).

They are becoming very popular over here for various industries especially in industries where buyer power is low and bargaining power with suppliers is weak, which may not be the case for web hosting but...

The concept worked in a different way to that which has been proposed but the end result was the same, by grouping together companies could purchase at high discounts - we successfully negotiated discounts with electricity suppliers, telco's and fuel suppliers etc etc. There are major benefits for both sides with this and the present suggestion could be deemed a threat to some colo's, but this does not have to be the case

The business plan for these purchasing/marketing co-ops is pretty straight-forward and just requires a homogenous group of people to get it started.

I can however see some immediate problems - firstly the geographical dispersion of web hosters makes communications/decision making difficult at the start and ensuring the members were 'bone-fide' businesses and not a 13 year old in his parents basement :)