Acquired Episode 10: Virgin America

**David Rosenthal** (0:30)
I'm David Rosenthal.

**Ben Gilbert** (0:31)
And we are your hosts. Today, we come to you with an acquisition that is actually not a technology acquisition, but something that David and I were inclined to talk about anyway, because we both sort of have a little romantic fascination with anything involving airplanes. And this is particularly interesting. Today, we're going to be talking about Alaska airlines acquiring Virgin America right here in our own backyard in Seattle. Before we get into the acquisition history and facts, I wanted to remind you that you can sign up now at Acquired FM to get our episodes delivered via email. We also would really, really, really appreciate it if you could rate us on itunes. It will help us grow the show and expand what we can do with it from productions to new topics and guests. This is a great time to tell you about one of our very favorite companies, Crusoe.

**David Rosenthal** (1:27)
Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads. NVIDIA is one of their major partners and literally Crusoe's data centers are nothing but racks and racks of A100s and H100s. Because Crusoe's cloud is purpose-built for AI and run on wasted, stranded, or clean energy, they can provide significantly better performance per dollar than traditional cloud providers.

**Ben Gilbert** (1:52)
yes, we talked about that on our ACQ2 episode with Crusoe's CEO, Chase Lockmiller.

**David Rosenthal** (1:57)
The other element that makes Crusoe special is the environmental angle. Crusoe, of course, locates their data centers at stranded energy sites. So think oil flares, wind farms that can't use all the energy they generate, etc. And uses that power that would otherwise be wasted to run your AI workloads instead.

**Ben Gilbert** (2:15)
Yep. Obviously, it's a huge benefit for the environment and for customers on cost, since Crusoe doesn't rely on the energy grid. Energy is the second largest cost of running AI after, of course, the price you pay NVIDIA for the chips. And these lower energy costs get passed on to customers.

**David Rosenthal** (2:32)
It's super cool that they can put their data centers out there in these remote locations where quote-unquote energy happens, as opposed to the other hyperscalers such as AWS and Google and Azure, who need to build their data centers close to major traffic hubs where the internet happens because they are doing everything in their clouds.

**Ben Gilbert** (2:49)
If you, your company, or your portfolio companies would like to use the lower cost and more performant infrastructure for your AI workloads, go to crusocloud.com/acquired. That's C-R-U-S-O-E cloud.com/acquired, or click the link in the show notes. Now with that out of the way, David, you want to dive into acquisition history and facts?

**David Rosenthal** (3:09)
Indeed. Yeah, this will be a fun one.
Listeners, let us know what you think. We're... So, we're not changing the topic of the show, but we thought we'd have some fun and analyze a very different industry than technology.

**Ben Gilbert** (3:25)
Yeah, and not to mention the fact that it's not a tech acquisition. There is technology involved, but the way we're kind of breaking the mold on this one, too, is this just happened last month. It's not like this month, actually.

**David Rosenthal** (3:38)
Yeah, a couple weeks ago.

**Ben Gilbert** (3:39)
Yeah, so this is something where it's going to be highly speculative, but I think it's going to be a fun ride.

**David Rosenthal** (3:45)
All right, with that. So, Virgin America was actually founded in 2004 by Richard Branson and then had to go through a whole series of machinations to end up finally launching their airline service in the US, not until 2007 And over those three years, a whole bunch of things happened. So, one, it turns out that due to some crazy laws, US domestic airlines cannot be owned, cannot have foreign ownership greater than 25% of the company.

**Ben Gilbert** (4:25)
Crazy.

**David Rosenthal** (4:25)
Crazy. So, Branson and Virgin had to basically sell off 75% of the company before they could even have a hope of operating.

**Ben Gilbert** (4:37)
It's wild. And I think at that point when they were first starting, it was Virgin USA even, and then they rebranded a little bit.

**David Rosenthal** (4:42)
It was later that they rebranded to Virgin America. So, Branson sells 75% of the company to a couple hedge funds.

**Ben Gilbert** (4:49)
And licenses the Virgin brand to Virgin America. So, Virgin America doesn't even own Virgin that's painted on their own airplanes.

**David Rosenthal** (4:58)
Yep. And there was talk at various points in time about ditching Virgin the name. Would that help get regulatory approval earlier? Faster craziness. Anyway, they finally clear all the regulatory hurdles. They buy some aircraft. They start operations in San Francisco with SFO as their hub. They launch in 2007