Graham Weston ’86 has faced many hurdles and hardships on his way to stunning entrepreneurial success as the founding CEO of tech giant Rackspace. But nothing compares to the one he faced at one of his first startups: A loaded gun pointed at his head. By his business partner.
Weston was a junior in agricultural economics at Texas A&M University and had already launched a few small businesses when he thought of opening an ice cream and cookie store on Northgate. The drinking age had just been raised to 21, and he thought college students under 21 would need a new place to hang out. His enterprise, Crumby’s, was set for the building next to the famed Dixie Chicken, but the day before opening, his business partner wanted to change the terms of their agreement.
“When I didn’t agree, he drew his six-shooter on me—right in my face,” Weston recalled. If there was ever a sign that the relationship was doomed, that was it. “I ran from that business,” he said.
Crumby’s, which the business partner operated for several years, is now replaced by the Dry Bean Saloon. But the impact of that early fiasco stays with Weston to this day, since most anyone with a long career knows you can gain as much from failure as from success. “I learned it really matters who you’re in business with, whether it’s your employees or your partners,” he said.
The notion that people matter has been one of Weston’s guiding forces—and later the basis for a management philosophy—as he has gone on to open a string of booming businesses and to become the
de facto face of downtown economic revitalization for the city of San Antonio.
On the Hunt
Of course, there have been many other key factors in Weston’s success, starting with pure love—a love of the challenge and excitement of finding a business that clicks. “I always felt I was going to be an entrepreneur, working for myself in some way, because I didn’t feel I would thrive in a large organization,” he said. “Even in school, I was searching for my first business.”
Weston was a member of 4-H and FFA and raised steers in high school. As one of his first entrepreneurial ventures, he took photos of participants and their show animals at stock shows.
Growing up on his family’s Santa Clara ranch in Marion, close to New Braunfels, Texas, as the son of a rancher and entrepreneur, Weston was a member of 4-H and FFA and raised steers in high school.
One of his first forays into business was selling pigs, for which he took out a newspaper ad that read, “Go Hog Wild.” He had started taking photos of participants and their show animals at stock shows. At age 16, he convinced a local stock show to require that every participant have their picture taken. “That was really my win,” he said, referring to his effective deal making.
When it came time to choose a college, he only considered Texas A&M University. “Until the end of my junior year in college, I expected to come back and work on the ranch,” he said. But ironically, his time in the College of Agriculture and Life Sciences prepared him for another path. “I think of my agribusiness degree as a small business degree,” he said. “It trained me to be on my own, doing my own business. I think it was perfect for me.”
The agriculture school also taught him how to build a culture that encourages everyone to do their best. “I found the college was tremendously personal,” he said. “Professors there really cared about me and that meant something.”
Personal relationships were one of the reasons he stayed in the college even after his junior year, when he launched what would become his first major business success. “It began in my dorm room in Puryear Hall,” Weston explained. “I saw through my studies at Texas A&M that there was a real opportunity based on comparative data to change the basis of how property tax rates were assessed.” Using available and reliable real-life data, Weston’s company could effectively dispute arbitrary tax assessments that were then the order of the day. His company, by then named Assessment Technologies, saved substantial amounts of money for commercial clients like Walgreen’s, Trammell Crow and Melvin Simon, the huge shopping mall company.
Weston remembers that his most important course in college was a sales class. “It made me realize how important sales people are to business,” he said, again reaffirming his commitment to working with good people. This would become important later at Rackspace, when he elevated the sales person as an important member of the team, while many tech companies looked down on sales staff.
After graduating, Weston set his entrepreneurial sights in a new direction. “Because it was the middle of the financial crisis in the late ’80s, I could see that many of my tax clients were being foreclosed,” he said. “There were a lot of distressed properties for sale, and that’s when I stepped out of my property tax business to focus on buying distressed real estate.”
The Big One
But in the kind of scattershot, one-thing-leads-to-another trajectory of entrepreneurial success, his real estate investing led in an indirect way to his home run—
, which was basically conceived on a San Antonio highway in the late ’90s. By then, Weston had bought what he calls his “trophy property”: the tallest office building in the city (now called Weston Centre). The internet was just becoming a real force in business. His office building was equipped with a T1 line, the fastest internet connection at the time, because it was digital rather than dial-up. Rackspace
“One weekend, I drove from my apartment to my office downtown to use the high-speed internet system,” he remembered. “The line was very expensive: $2,000 per month. So, I thought to myself, ‘I should go buy one of these for my big office building and just have all the tenants share it.’”
Rackspace became famous for its dedication to customer support, setting the company apart from the competition in this new industry.
By his own admission, Weston is not a technical person. The father of three, he offered this joke as proof: “I used to think a hard drive was taking my kids to West Texas.” At the same time, he had a friend sharing the office space who was out every day exploring business opportunities they might pursue together. When Weston mentioned his internet idea, his friend suggested they talk to the young people who had installed the high-speed internet in his building. “That was really the trigger,” said Weston.
Weston and his partner sat down with three young techies—original founders Richard Yoo, Dirk Elmendorf and Patrick Condon—at Chester’s Hamburgers on Nacogdoches Road for a six-hour conversation that resulted in the formal creation of Rackspace, with Weston in the role of ‘angel investor’ and business counsel for the nascent company.
“Our whole idea was that we would make having a web server simple. In my very simplistic real estate brain, I thought about it like how you get an apartment when you’re a student. When you don’t want the apartment anymore, you can give it back,” Weston explained. “We thought renting servers to people would be just like renting an apartment. We knew the bigger the internet got, the more people would need servers to run websites.”
Rackspace officially launched in January 1999, at the same time as Google. The prescient idea took off immediately. Within eight weeks, Rackspace had installed 100 servers and revenue was $200,000 per month. Within six months, Weston and his partner—who had only been devoting a small percentage of their time to the company—became full-time, with Weston as CEO.
Rackspace came to life at the right place at the right time, which is certainly essential to entrepreneurial success. But there Weston discovered a corollary to this maxim. “Whenever you’re at the right place at the right time, other people are too,” he said. “There were at least 150 other companies there at the same time, and we could see that it was going to be a very competitive business.” It took a visit with the preeminent marketing strategy guru of the ’80s and ’90s, the late Jack Trout, for Weston to make the decision that propelled Rackspace to success. Trout, who became a mentor for Weston, told him, “If you’re not different, you better have a lower price.”
That advice set Rackspace on a journey to determine how the company was going to stand out. “After going through multiple options, the idea of dedicated support came to us, and that’s what Rackspace became famous for,” he said. “At the time, the support most technical companies offered was terrible. Our goal was to be the most trusted company on the internet. We actually answered the phone. For 20 years, a live person answered every single phone call.”
Because of his focus on working with good people on every level, Weston wanted to ensure that both customers and employees felt appreciated. “We created a management culture that tried to bring out the best in people,” he said. Weston and his team envisioned an overarching goal: They wanted their employees to feel like “valued members of a winning team with an inspiring mission.”
In August 2008, Rackspace went public. It was the last IPO before the financial crisis.
Their approach paid off. While Weston was CEO from 1999 through 2006, the company increased from 12 people to 1,200. It grew by 50 percent per year, on average. YouTube and WordPress, among many other tech companies, got their start on Rackspace-hosted servers. In 2006, Weston stepped down as CEO (but remained chairman) and in August 2008, Rackspace went public. “The last IPO before the financial crisis,” Weston noted. By 2015, Rackspace was the largest managed hosting company in the country, with offices all over the world. In 2016, when Rackspace had 6,000 employees and $2 billion in annual revenue, the company was sold to a private equity firm for $4.3 billion.
Operation San Antonio
The next phase of Weston’s career began in 2011 with an email. Rackspace had bought a smaller company and part of the deal was that the seller would relocate to San Antonio. “He refused,” Weston reported. In an email, he told Weston that San Antonio didn’t have the software developer community, the startup network or the urban amenities he was looking for; he wanted a place where he could step out of his front door, walk his dog and go to a coffee shop. “It is not a city well suited for young people,” the email stated. Weston was bothered by the email, and sent it to Julian Castro, then mayor of San Antonio. “I said, ‘This is the city we must build.’”
At the time, Weston had no desire to get involved again with San Antonio real estate. “I had just sold some stock. I was feeling flush. I was really enjoying having money and not spending it,” he said. But over the next year, as he worked with Castro on city planning, a realization set in: Someone needed to do for San Antonio what Michael Dell had done for Austin, which was spearhead the city’s transformation into a tech center. “Over time,” he said, “I became persuaded that if anyone understood this problem and had the ability to address it, it was me.”
It wasn’t the first time Weston had risen to the occasion to help San Antonio. Former mayor Phil Hardberger recalled that when thousands of refugees arrived in the city after the twin disasters of Hurricanes Katrina and Rita, Weston offered the use of an empty shopping mall he had recently bought (which would eventually become Rackspace’s home). “It was a multimillion-dollar gift,” Hardberger said. “He has great vision; he can look into the future and then position himself so that the future fits his dream.”