To my understanding there was a runway-growth problem. Could the founders raise and spend (efficiently) enough money quickly enough to keep the business viable? It would be a big gamble and the alternatives were to shut down (no way!) or sell. So they sold.
Rackspace wanted to take Matt’s and Jason’s know how (plus customer base) and go big, really big! That defocused our efforts a bit, plus there were corporate integration headaches (though not too bad). Eventually Linode, already a competitor, and later Digital Ocean filled the void.