F5 Networks Will Buy NGINX For $670 Million

When NGINX launched a commercial venture to capitalize off the momentum of its ubiquitous open source web application delivery software, the startup set its sights on market kingpin F5 Networks.

On Monday, F5 announced a deal to buy the upstart for $670 million, bringing into the fold perhaps its most-threatening competitor and strengthening its position as the dominant vendor in the load balancer market.

F5 CEO François Locoh-Donou, in a letter to his employees, said F5 and NGINX have "complementary strengths" and "share the same outlook on the software growth opportunities for application services."

[Related: F5 Networks CEO Locoh-Donou On Forging Customer-Focused Culture With Partners]

When the deal closes, NGINX CEO Gus Robertson; the company's founders, Igor Sysoev and Maxim Konovalov; and their team will join F5 to run the NGINX business, Locoh-Donou said, a condition that was "critical to this agreement." NGNIX currently has 250 employees.

NGNIX had raised a total of $104 million in funding from a variety of sources including Goldman Sachs, MSD Capital, NEA, Runa Capital, and Telstra Ventures, according to Crunchbase.

The F5 CEO described San Francisco-based NGINX as "the trusted open source leader in web and application server technology."

He noted NGINX support of container-based microservices environments and API management services of the kind favored by cloud-native developers. At the same time, his company, based in Seattle, Wash., offers "the broadest product portfolio of application services" for application optimization and security.

Those lines will be integrated, with F5 security adding protection to NGINX products, and NGINX load balancing software supporting F5's cloud-native solutions.

"Together, F5 and NGINX will bridge the gap from applications to infrastructure and from developer to operations," Locoh-Donou said.

The F5 CEO also stressed his company's commitment to maintaining the NGINX open source project and supporting that community with continued investment.

NGINX has been powering many of the world's most-advanced web applications for a decade and a half. The open source software is downloaded four times a second, powering some 375 million websites and “67 percent of the highest traffic sites on the internet.” Customers include Netflix, Starbucks, and McDonalds.

Igor Sysoev, a Russian engineer, first developed NGINX in 2004 after growing frustrated with existing solutions for handling high levels of web traffic.

By 2011, demands of maintaining the project became impossible to juggle with full-time employment as an administrator for a Russian internet company, and Sysoev decided to launch the startup.

The company's guiding strategy was to develop and integrate load balancers and all the other functionality that stands in front of its core open-source web server to make online applications faster, more secure and reliable—a market dominated by F5 Networks

Two years later, the startup began shipping NGINX Plus. That enterprise solution accounts for 95 percent of revenue.

Earlier this year, the startup launched a channel program, making its first serious play for partners to bring to market the ubiquitous web server.

F5 said it will leverage its channel infrastructure and partner ecosystem to scale NGINX adoption in the enterprise.

F5 dominates the load balancer market with more than 50 percent share, and offers other application delivery components for application acceleration, access control and security.

"We may talk to NetOps and they may be the choice of DevOps, but both of our customers are trying to bridge the divide between traditional and modern applications, across multi-cloud environments — to balance enough effective controls with enough freedom to innovate," Locoh-Donou said.