How D2iq CEO Florian Leibert grew D2iq to $33.6M revenue and 140 customers in 2019.

hello everyone my guest today is florian liberty he's the co-founder at mesosphere the hybrid cloud platform company which helps companies like mbc universal deutsche telecom and royal caribbean adopt transformative technologies like machine learning and real-time analytics with ease florian you ready to take us to the top yes for sure all right so i'm sure you've done this before try and simplify this idea for us help us understand what you guys do and what the revenue model is are you pure place ass no we're not the pure play sales company so i'll give you a quick background so we started the company because i used to work with my co-founders at twitter and airbnb and we helped both of these companies actually built the next generation infrastructure that helped the company scale and we took a lot of those learnings and figured that we want to bring that same sort of technology to any company out there not just the top engineering companies out there but really any company and the companies you mentioned royal caribbean and so forth they are all customers that are now employing our technology to actually build modern products and so how do they pay you those a licensing model a sas model or something else it's a subscription-based pricing but um most of our customers run even if they run us in the cloud um they still pay us a a subscription license for support and for the proprietary version yeah so you i mean you are a sas based business then yeah i mean but it's not self-serve it's not sas and it's not just the hey swipe your credit card and and you're ready to go no no no i don't mean self-serve no i mean i've had a lot of ceos doing on you know between 100 and 400 million dollars in ar they're all selling enterprise they're all pure sass um but they're definitely not swiping credit cards on online portal exactly all right okay good so that's helpful to understand so um give me a general sense of kind of sweet spot for you then right what are companies paying on average per year to use this technology you've built so um our average pricing really varies depending on how big the customer's footprint is measuring the cloud by the number of physical servers okay or by the number of virtual machines if they're actually using our software in the cloud okay interesting so you upsell based off number of physical servers or virtual machines do you do any seat based or feature based upselling so um a product that we're actually launching pretty soon is going to be seat based that's going to be actually a mixed model between both nodes and seats um and i can unfortunately can't go into details about what that product is but yes we definitely have that um okay so so no but today you're only upselling based off number of virtual machines number of physical servers nothing based off number of seats or number of nodes well notes is basically the number of nodes is basically the number of physical servers or virtual machines we have some customers that have very special hardware and uh for them we've done pricing based on a core basis okay i want to capture i want to capture more of kind of the founding story here how you realize this was a problem you know your twitter and airbnb days before we do that though this is gonna be painful for you but we can't talk about every customer cohort what would you say a sweet spot is for you like a hundred thousand dollar years or a million a year 10 million a year what's the sweet spot uh the sweet spot is a couple of hundred thousand a year okay you feel like that's fair and let's just role play for a second if someone's signing up average customer 200 thousand dollars per year how many virtual machines might they have i mean it really depends we have a number of ways of packaging our product but i'll give you i'll give you an example so generally customers start with like an accelerator package which can start anywhere from fifty thousand to a hundred thousand dollars or so and then oftentimes they get a lot of value out of the software and embed our technology into more and more of their products because it really helps them develop their products faster and that's how we expand so it's really a land and expand strategy that our business is based on okay but generally speaking it sounds like almost all customers spending now more more more than 100 grand a year yeah exactly yeah pretty much everybody starts somewhere and then as the application footprint grows the needs to use more of our software subscriptions grows and that's how we grow our footprint yeah that's great okay let's put this on a timeline what did you launch the company um we launched the company in 2013 so i think it was march 2013 2013 and you've chosen to raise capital i'll tell everyone how much you've raised and then articulate kind of why why you had to raise why did you have to take the dilution yeah so we raised a total of 252 million uh in funding um and uh the reason is simple we're building something that's very very complicated right i mean we are basically we're basically taking a number of open source technologies and also work with some proprietary software vendors and we're basically automating all of these software components um to let our customers focus on what they're best at and that is usually building their products so um [Music] that requires dealing with all of these software components and the complexity that these run on different versions of operating systems like different versions of linux different flavors of linux is very very complex we have to create a lot of software that automates these components think for example on a cruise ship we mentioned real quick in cruise lines they use our software on the cruise cruise ships in order to power their um mobile app and some other analytics that they're running and on the cruise ship you don't necessarily have software engineers right on board that can that can actually fix something if a server for example has an outage so our software has to actually self-heal and uh building that is actually very very complex we have a lot of really talented engineers who come from the likes of twitter airbnb how many folks total are on the team we have around 390 people right now and how many are engineers i would say we have about 110 120 engineers okay fairly a fairly healthy engineering team there okay so take me back here so 2013 was when the first line of code was written well i mean really the first line of code that went into our technology was written well before then it was written um when my co-founder ben hinton was doing his phd thesis at uc berkeley he was working on a on a piece of software that really automates the data center and that software was the first product that we or the first open source project that we productized and later on of course many other technologies came into the mix but uh really the first line of code was probably written in 2008. okay 2008 and then i guess the reason i ask is i'm always curious how much money a company will sink into their building their mvp before they you know they asked for their first dollar of revenue yeah so how much i imagine is probably a hefty amount how much did you guys put into the mvp before you got your first dollar so so i mean the interesting thing is if you if you look at twitter and airbnb for example as actually contributing to this open source software project um that we were based upon i mean i think you can say hundreds of millions i mean there were large engineering teams at both of these companies that were actually creating this open source software so hundreds of millions even before the uh mvp was was uh written in mesosphere if you just look at again literally dollars out of your bank account that you had to pay essentially engineers to kind of get this thing going before the first dollar revenue what would that actual amount be you know uh i mean let's let's say we had the first product we had the first product that we built from this open source project and that was pro that probably cost us like i'd say a million dollars the first mvp that we built ever as mesosphere yeah i'd say it was probably it was probably three quarters of a year and half of our seed round on our seed round was about um 2.2 million so point two okay and did you raise that seed round right in 2013 right at the start yes exactly we raised that right away and um we wanted to we wanted to really get to know ours and was that really was that really based off the credibility of your background plus your partner's phd project yeah exactly and the and the community that was actually behind the project yeah so how do you look we had we had the the automatic focus on obviously great story there and i always ask these folks that launch company on top of an open source platform how they managed literally pr right so when you go into open source community and then you're essentially going to profit on top of an open source platform that other people contributed to it's a hard thing to balance right so how did you make sure you didn't piss a lot of people off by essentially productizing something that was open source that everyone got value from free yeah that was indeed our concern initially as well so one of the one of the things that we continue to do is to actually contribute continue to contribute to the open source project right basically spending company resources on making sure that the free free users of the software can continue to to use it and um we never tried to hold back any any major features or anything like that what we try to do is we try to provide provide additional value that uh the customers that were not naturally self-adopters and and early early adopters...