How Coralogix CEO Ariel Assaraf grew to $90.8M revenue and 2K customers in 2024.

hey folks my guest today is ariel aseroff he's uh had a career in the israeli intelligence unit of 8200 and later joined variant systems to work at the homeland security decision and co-founded corelogics in 2015 to change how companies analyze their data from index then analyze then analyze to index and go back and forth on what matters ariel are you ready to take to the top thank you very much nate great to be here as i say is x israeli intelligence you know monday roy mann chorus i feel like you all you just know something we don't it's interesting actually i think there was a research now in israel that showed uh where most entrepreneurs come from i think there are three specific units there's 8 200 there's 8 100 that came out of shadows recently and there's pilots so in our company we have a mix and in our board we actually have um 80 of the board members our uh uh pilots in in their past so i guess there's a there's something when everyone has to to get enlisted to the army uh that kind of ranks people on what they like to do and should do in life when they're 18 which makes decisions uh easier that's amazing all right so let's jump into corelogic what are folks paying you for today yeah um so the the thing is if i take a little a step backwards um the observability space logging metrics security uh tracing it started about almost 20 years ago or really started to explode almost 20 years ago when splunk took it from the appliance um sort of approach to actual software and then uh software as a service uh with the the concept of uh let us ingest all your data we'll index it we'll store it we'll become some sort of google for your organization or for your operations or for your uh security and it worked great uh because the the amount of data 20 years ago was was something that can be handled like that and with time we're seeing data growing exponentially what we tell our customers and our investors in the previous round was data grows faster than revenue so you'll see any company you're covering you'll notice like you'll ask them and they'll give you the the most uh uh insane kpi of growth if you ask them how much did their data grow during that time their observability data it'll be like 510x what happens is that you know data and observability tools are part of your margins they're part of the basically they're part of the unit economics of an organization and as data grows faster than revenue it becomes hard to manage super expensive hard to scale performance issues start to rise so we started a company like almost seven years ago but we didn't start where we are today 20 2014 right that was uh end of 2014 and uh we started uh with like a a lighter version of splunk you know data like a cloud cheaper splunk but with time things started evolving and we saw that customers aren't looking just for a solution that can do whatever the others can because their model started to break cost containment was impossible performance was an issue and then we kind of decided uh after three years of basically doing nothing so the first three or four years the company was zero revenue zero customers it was almost shut down so we were so hold on so between 2014 and 2017 no revenue the first dollar came in october 2017 um and we actually had a board on september 2017 where there was a decision point where the board members said you know we like you guys they were super nice and and uh patience how much have you raised to that point two million dollars and um it was okay did you do a 5.2 million dollar seed though in 2016 no not not 5.2 million dollars it was it was uh a million then another million that's why i say okay and then they kind of wondered whether they should just uh uh close a company and and and hand out the money back to the investors but there was so little that they decided not to because it doesn't really matter how much how much was in the bank 2017 before you shut down or thought about it 100 000 wow end of 2017 we're five people wow so i was i'm one of the co-founders but i was not the ceo the ceo left at that point um and how much equity did you own at that point um it was you know we just had a couple rounds so it was it was still fine and then um the cto that was an employee left after him because you know the company kind of fell apart so he went to manage a group this big company and uh yoni uh a good friend of mine who also led a group in variant uh basically became the cto became my co-founder and we restructured a company entirely and we started running from that point onwards um and within the four or five months we got to like 20 25 000 of monthly recurring so the board was very surprised because they thought they're going to shut down and they gave us 2.5 million dollars more like an extension like a uh uh um cla what evaluation the valuation back then was roughly 10 million dollars okay got it so you sold 25 yeah so we started uh running the company and uh ended that year at like a bit over a million um and then something interesting happened um we got an acquisition offer and that was for a few tens of millions uh 2018 that's beginning of 2019 okay you were really considering because you know we we had so much we we had so much uh uh trouble getting this off ground and people in the board and in the company started getting tired because we were only seven eight people back then so we gotten to a point where we had an s uh like an spa in our hands um what does that stand for like an loi sp is sure's uh purchase agreement no it's it's all the way to the actual signature oh yeah okay that is the definitive agreement now i was 29 and at that point getting a few million dollars looked like you know when when i thought about starting the company for me that was like an ultimate outcome right and but then you know we're fortunate 10 and 50 percent is that a big enough range yes okay fair enough and the offer was for in the tens of millions so like it was like 30 40 minutes yeah yeah not not 90 okay okay okay so um we were actually fortunate to be at that point because not many people get to you know everyone says i want to grow a big company i don't want to sell you know and then the acquisition offer comes and and now you're sitting in front of something that is real and we were actually there to look at how it'll feel like just signing a piece of paper and receiving a few millions of dollars and then me and yoni said you know we actually don't want to do that yep we have a lot more to do so i went to one of our board members at stage one and i said listen i know there's going to be a board meeting next week to approve the sba which means this is a definitive agreement i need your support on this so he said listen i'm part of the committee that ran this deal so i what i'll do i'll resign from the board and resign i'm sorry resign from the committee and then i'll i'll be able to do so which was a little bit dramatic and then he said and what's the alternative i mean the company is you know we bear in mind we don't have money in the bank at that point so i call a friend of mine from aleph vc um aaron and i say listen um next week we need to decide on an sba i know you know the company here are the numbers and i text the numbers and whatsapp what were they by the way high level back then it was like 1.4 million a year maybe or so that's that's mid-2019 so like after the acquisition offer it took a few months to get to the sba and then um what happens is that he tells me you know what i think i'll we'll make an offer and i said okay so when when can you make it he said you know i'm coming back to israel next week let's meet my partners i said listen man there's there's a meeting monday it's tuesday now i need to to get it so he arranges his uh partners in this room in new york we barely hear each other 30 minutes we speak and then he says you know what i'm going to send you an offer and he sends the offer again on whatsapp like this one two three four five and i said can i bring this to the board because you know they're going to turn off an offer that that's going to make like a nice income for everyone even though even the ones that got in and 10 million will they make they're still 3 4x right yeah and he says um tell the board that we are 100 behind it we're not backing off no matter what we discover in the due diligence which was very ballsy and then and what was the whatsapp this was a ten million dollar round at what valuation the same exact offer the 10 million dollar round the same valuation of the acquisition offers so we make it you know make it apples to apples uh with some nice restructuring the cap table because back then there was already because of the the bridge loan so oh that 2.5 million that was a that was a loan yeah yeah it was a cla it converted together with the the round okay and um we took that up that that uh offer and uh we signed that in i think it was like summer of 2019 and um he told me after that that conversation listen this is going to be the the hardest round you've had because you guys had such a hard time now you finally have an actual company and things are really running well and then uh just be clear i mean this is kind of incredible 1.4 million bucks in arr and you got the 10 million raise done i think what like a 30 40 million dollar valuation so that's a pretty high multiple right for a company that was struggling back in 2015. you know you i i see companies today raising uh 20 million seed rounds at 100 so i don't know i don't know anymore but uh back then it was it was a a nice sleep of uh leap of faith yeah so actually we ended that year at uh double so within like uh four or five months and that was that was great wait wait what do you mean by that you ended up 2.8 million runway in december of 2019 yep okay and then we started growing really nicely but then covet hit really bad yeah that was uh beginning of 2020. we actually opened so we everything was inbound and word to math we didn't have any sales people we hired a first sales team in new york and i went to meet them in new york on the 10th of march 2020. they had gosh training and onboarding i i went back home and everything locked down in israel in the us everything locked down no one would take our calls no one answered emails everyone were shocked new york became hell so my team part of them you know were were not uh available it was it was a mess so it took us like four or five months to get out of the shock and it started growing again but four or five months we were literally stuck nothing moved no growth and then what were you stuck at i mean you're talking like what a eight nine million run three million still okay three million um and then what happened is that um in june i met uh red dot and og tech to uh growth companies uh growth vcs here in israel and told them listen i know the numbers don't look really well but we're going to launch stream and explain what stream is and that that was critical uh because stream is is basically what we started working on ever since we got in that cla beginning of 2018 which is flipping how the ingestion pipeline looks like so everyone index all the data and then they analyze it so they run periodic queries on the data they run the aggregation on the storage they run the dashboards from the storage which makes it expensive slow and limits that the level of analytics you can provide and i told them we're launching streamer which will analyze everything in real time including stateful things so even though it's real time without storing the data i can tell you that something happened that didn't happen the past three months so that is that is something that doesn't exist today in the market at all it's stateful streaming and that will lead what i explained that will lead to cost reduction better performance easier customer acquisition um and uh broaden our use cases from logs to logs and metrics and security and traces and in the future bi and also decouples us from the storage so we can use any syntax any dashboard so corelogics today can use its own dashboard but many others like i don't know if it's it's very common but kibana grafana sql clients tableau anything can plug to corelogic so now it's a data platform play it's not just a product and it's you know it's a hard thing to explain an investor not to mention when you're not growing um but they they actually believed in it we didn't do around they just said okay we're in we got a couple offers we went with these guys we got a 25 million dollar check and uh what was the initial so i want to understand again a little bit more so you tell the story you got a television any startup founder has to do that right you get the offer at some valuation what was the initial offer and then were you able to drive the valuation up create some fomo at all or no so actually one thing that we've done in both that round and this one after was not go after the higher the highest valuation even when we got it um but to optimize to the structure of round that we felt that is the best for us so who gets to put how much how does the board look like what are the expectations from the company what's the expectation from the end of the year um how many board meetings we have what advisors we bring how much esop we leave and that you know i think wait that one i'm curious on how what was the estop police set up in this round series b after series b so there we i think we left eight percent clean esop okay after series a we left 13 percent clean esau that that were that we as founders did not did not take so the thing is that i think because of the scars we had when we founded a company and all the hardships that we went through we understood that for us to succeed what we need most from our investors is patience and believing in our vision because this is a you know you're a tiny company you're trying to fight splunk and datadog and other companies are tens of millions if you don't have a patient board that can understand technology and go a long way with you i you know let me put it this way if if our seed round was with like an american top vc we would have shut down for sure like they they'd shut us down they they they won't even ask so we understood that this is the most important part and uh ever since then so that round closed route roughly november uh uh 2020. and what valuation was that about 100 million roughly a hundred yeah and and we've got that's post money right i suppose yeah and we've done uh more than than almost forex ever since um so the round you just raised was 55 million at like a 400-ish post that's what's published in techcrunch um it's uh it's it's around the number techcrunch always get biggest wrong all the time i'd rather just hear it from you it's interesting because we we actually did not disclose any valuation of them and said that we cannot disclose uh but they guessed which was roughly around the number so we didn't care too much i mean look most of this stuff is pretty standard you're selling a certain percent in most rounds but i like talking to founders where they do something creative with the rounds for example if a big chunk of the 55 million was secondary so you could retain early employees that really wanted some liquidity so they'll stick with you longer like did you do anything creative or was it very standard so a couple things um first of all when i said 4x i meant our revenue more than 4x not just uh 12 million are then i think the the no way arrow come on 12 million ar right that's 4x 3 million that's roughly the number again he won't say it look at this this is great all right that's great spoke about 8 200 you remember nathan so um i can never correct the israelis i can never i can crack most founders ex-israeli defense you guys are the toughest but you figure out a way you know so i think by the way the round was was june um if i had to guess um we since since june we've almost doubled so revenue yeah so i mean the valuation should be higher if we were to raise around today but we have a lot of cash i don't think we'll go to around very soon you're past 24 million bucks in terms of four looking around right then right now uh we have a decent runway that can fit a bigger company than what we are for you did more than two million dollars in revenue last month um i i can't confirm or uh not confirm so we are uh at a point now where we're starting to really broaden the the opportunity the opportunity and and the offering yeah so um we're saying you know we have this technology that can analyze in real time without storage why stop with observability why stop with logs we started doing security now we're launching a security offering very powerful including a professional consulting uh including cloud posture and other things that wait uh tell me more about that most vcs would hate the the word consulting but i know some of the highest net dollar retention founders tie on consulting their to their stickiest customers how are you structuring that so the thing the thing is that that it goes with the product you know just like crowdstrike has a consulting and and ps but we're not talking about a service that will go to customers outside the corelogix uh ecosystem a customer that buys a certain amount of of of data and core logics will get without paying per hour but he will get an expert helping him on board helping them uh define the the right uh criterias for for security alerting uh help them build their incident response strategy those are things that we're seeing that are a huge gap in the market just companies really you know one of the questions so one of our advisory boards is this is yuval coin used to be the the cso at servicenow for a few years and he's asked a question on his linkedin that i really connected to before we started this and and and the answers were remarkable so he said um how much did you increase your spend in the past two years on security products and it ranges between 4 to 10x and then how much more secure do you feel uh in your organization like how how did you improve your security posture as an organization and most answers are not like none to a bit more because these tools they produce a lot of insights i don't know what to do with them i don't know how to defend myself there's there's a huge gap of information and there's a gap in knowledge so this is where we fit in to help our customers actually make the best of the product now if if this is just you know observability and logging there are many people devops and platform engineers that really know this but now as security becomes a part of the devops and platform team's responsibility these guys just don't know security so everyone talk about devsecops but there aren't really many devsec ops engineers many of them are just devops engineers that got a new responsibility to secure the cloud so this is where we fit in and how many so how many customers like that are paying you now today it's over 2 000 right how many total 2 000 customers are paying us but this is the the current platform the security product has five customers two of them are some of the biggest companies in the world um so we are actually aiming this offering for larger companies uh that have bigger infrastructure or migrating to the cloud unlike our cloud native and internet play uh for the observability uh stack let me stick on this for a second the professional services question if you have 2000 customers today what are they paying you per month on average on the sas side and and what are the professional service like setup options so today there's no professional services at all for security so today it's all sas there's full sas we have one client that is semi-on-prem uh and not sas and it's just because the amount of data they produce is not something that any cloud can handle and what's the average customer paying you per month right now to use the technology the current technology you know it really ranges because there are so many zero touch customers the top 100 are uh roughly at a 80 85 acv what's the most don't name the customer but your biggest customer pays you how much a million dollars a year okay so do you have multiple accounts in a million a year or just one we have uh 25 accounts over a hundred thousand and five accounts over five hundred thousand okay so 25 accounts over 100k and then five accounts over 500k and then one over a million yep that's a bit okay that's great the one where have you had success driving the upsell what are you upselling against to get someone to go up to a million dollar acv yeah so you know first of all the growth of data like i mentioned is exponential even though we're super efficient we have so many ways to reduce costs because we help customers prioritize data by use case and then they pay less and so on so forth there's just data growth and we have uh uh other offerings that customers buy so a customer would start with logs and then they'll buy metrics and then they'll buy security and they'll in in the near future they'll buy tracing um so you know we we expand like this uh on multiple products i think this is a game that datadog played really well they have nine products now and they just upsell and cross-sell all the time um it also gives the customer a sense of unification of data because people want to see everything in the same place the same dashboard so it helps drive the both the gross retention and the net retention what is your net retention today so since the beginning of this year over 130 130 and peel back that onion so there's gross and then expansion what was gross churn and then it was expansion gross churn this year less than two percent total that's incredible so expansion per expansion was like 32 something like that roughly wow that's pretty okay that's very impressive what's the team look like today how many people uh we're just a hundred people we just reached 100 people exactly uh the the interesting fact is that exactly uh two and a half years ago we were eight so the company is growing really fast and i think a year from now we'll cross the 200 people mark i think this company basically is a company that started in january 2018. think about it this way so we had like four lot three and a half loss years and then in january 2018 the company started and and and that gives that's just a different life you see the graphs of growth it's like this and then just boom what's more impressive to me is that you know i always look at sort of unit economics right if you've got 24 million bucks in revenue right now 100 people that's 240 thousand bucks in revenue per employee which is way it's almost triple what the average private vc backed sas company has and i'm sure you're hiring like crazy right now so that number will go down as you invest in growth we're hiring a lot more we're doing more marketing this is just a result of um our history you know you you tend to not be a huge spender when you experience four years having zero budget and almost shutting down a company how many engineers on the team the largest group is engineering uh over i think almost 70 engineers seven engineers interesting okay so what's the next move i mean again it sounds like you've almost doubled over the past like four months in terms of revenue you know this is a fast growing company obviously salesforce failed to get the data dog deal done are you in acquisition talks right now with salesforce i am not i actually mentioned that that salesforce i think will get in our space some way somehow and i think i'm fluent will also step into the observability space i think also snowflake will get there because it just that makes no sense for companies that control a lot of data and charge data to not get into the space that produces the the largest amount of data and the users have the biggest checks in the organizations now which is the r d and platform teams i we are not thinking acquisition now we already rejected an acquisition so uh our our goal now is just to grow the company we have like mentioned a pretty decent runway and a lot of freedom to grow and expand and build more products and more offerings and you know with the valuations currently in in in the vc market there is no real urge to go ahead and and sell the company um and by the way to your question regarding what have we done creatively with the money in this round we actually cleaned up a lot of the cap table from the older investors tell me more about that how did you do that we you know you sent a preemptive we'll give a good deal um people that felt like they they're going to lose their money a few years ago uh suddenly found out they're they're at 20 25 x and many sold and that made the cap table a lot cleaner so that's what you you basically said hey guys we raised 55 million we can spend x percent of this to like buy out early folks and the price we're gonna offer to buy it on say that again on top the 55 we didn't count inside the round oh okay so what was the total round size i can't remember the exact number but this is the 55 is the amount of money that we got into the company yeah i know but i want to know what the secondary part was to clean up the cap table like five to ten million or like yeah i finally need to get five to ten million okay and and um did early employee did you give the option to early employees as well who maybe wanted a little bit extra cash that's interesting yes to like five people zero well you only had five or eight people for the first five years euro zero except no one wanted no one did it no one wanted to sell actually in the previous round it was very interesting in the a round one of the employees brought a hundred thousand dollars from home and and bought that was in the 2019 10 million dollar round yes and he's already made a very nice multiplier i love that wait so today how much do employees own the business it sounds like fifteen twenty percent something fairly big um a little less than that yeah okay that's great we i mean that's obviously a great way to keep now our new people that joining today are options something you include in every offer every there's not a single employee from office admin to anyone in the company gets options yes that's great interesting uh are you i know this is gonna sound crazy because you just raised 55 million but if you've doubled revenue i mean are you raising right now probably not in the next uh five six months uh we wanna now we're really expanding the go to market team creating more predictable sales uh model uh we are focused ending this year uh where we want to end it and then which is what can you break 30 million by december in terms of run rate no problem okay probably not and and then uh after q1 we'll look at you know results we'll see where we're ending 2022 and maybe then think about a growth round yeah really interesting um anything else that you've done really creatively that like i just didn't think to ask about um no it's just great great speaking to you man i get your newsletter so many times so uh oh nice you read that you read the email yes to the person behind it is it's really cool why'd you agree to come on obviously you know i'm gonna ask a bunch of data questions which other founders appreciate we learned from you but why did you agree i get the newsletter so many times i got an email from you that looks personal i just had to open it and i said if i can speak to this guy sitting in my inbox for the past three four years then uh i might as well do that carol you're like an og man you were like back in the day all right so hey so just to put a copper on this one you turned down like called a 30 40 million dollar acquisition back in 2019. if frank at snowflake or salesforce come do you offer you a billion dollars all cash up front today do you sell this is a question to the board if there's you know if there's something it's not my company this guy always gives the right answer i guess i've tried so hard to catch him i can't do it i've tried all right let's wrap up with the famous five number one favorite business book um so it's it's all school but i really loved it um it's called spin selling um dude neil rackham that's like no one remembers that book that's very old school but i've learned so many things from this they basically tracked thousands of sales people and differentiated between the the successful ones and the non-successful ones and exactly how uh the the successful ones make it i don't think sales changed over the course of the past 200 years it's still human to human interactions and and and it's always relevant so uh this is one of the books that i i actually quote so many times when we have meetings on sales and go to market how does an 8200 unit ex-israeli defense person come across neil rackham and spin selling like a decades-old book on selling that's just i would never put those two together i actually have no idea who recommended it that is wild i love that okay number two is there a ceo you're following or studying um yeah he's actually a friend and an advisor so um he advi he actually gave me another very good book called i think it's predictable predictable revenue model something by aaron ross um that's guy bloch used to be the ceo for splunk um and now he's the ceo at bring which he took from a small company to a post billion dollar evaluation company within like two years brilliant ceo one of the best that i've met and uh we we chat every once in a while and he gives me good tips on on management and uh and the the the whole world of go to market specifically because he knows our market so well and one of our advisory board members uh one of the most uh straight up no guys that have you met he's the founder of marquis is marquis that got sold to s p for 40 billion lately uh brilliant guy that basically is uh you know he's not from our domain but he's a mentor to how to become a good ceo and how to to become someone who can actually build a company that is the size of iss marquis traded in nasdaq so there aren't many people who's done that and he's great unique folks number three besides your own what's your favorite online tool for building corelogics my favorite online tool for building corelogics that's interesting so actually it's relatively new in our tool set um i don't know why we waited so long but we just uh started using monday heavily and the great thing about it is that it's so versatile so i we you know there was always like tools for managing r d tasks and tools for sales and tools for marketing suddenly there's one from cs through marketing and it's so flexible the way that you can use it a thousand different...