How Granulate CEO Asaf Ezra grew to $11M revenue and 50 customers in 2021.

hello everyone my guest today is assaf ezra he is a tao payot program alumni and continued his idf service as a commander an elite 8200 intelligence unit previously held positions as r d team leader and project manager where he led 30 plus researchers engineers and analysts in large scale projects today focused is a co-founder at granulate he helps to democratize performance in the building world without performance loss speaking specifically about the cloud it's off you're ready to take the top sure thing all right so help us understand who you're selling to uh and sort of how do you build are you paying sort of percentage of cloud savings saved or how do you how do you price it so grant actually uh emphasizes the performance improvements we actually help you get a lot more out of your machine so we price it on a per core per hour basis it's price per usage not per uh on the cost reduction not every one of our customers choose to take that into cost reduction uh you can think of other trading where every microsecond counts you can think of uh streaming services where the main goal is to get as many users at the highest resolution so it's not always about the costs got it so based off getting more out of each machine unit you said you built quarterly you said no on a per core uh cpu got it so you build a per cpu core basis and give me a general sense of sort of the size you're playing here when a new customer signs up for you how many cores are they onboarding typically in the first month or two well that depends on the customer uh if they choose to take that into cost reduction sometimes they'll start with a very small service just to test granular out see that it works for their own services not in general for someone out there um and then we have customers starting at 30 machines going all the way to 3 000 in two weeks so that depends on the customers and themselves and how many cores does your largest customer manage on your platform oh that's around 250 000. so see definitely power law is happening here huh yeah all right very good what's the back story when do you launch the company so we launched almost three years ago we actually started completely differently we started with load balancing opportunities we've seen a huge huge potential in the fact that load balancers today don't even have any knowledge of what happens on your back end system um so you can think of grpc or http load balancing where pretty much the only heuristics today is like this connection or at least outstanding requests but the truth is it doesn't mean how loaded the machine actually is so how much the resources are utilized and for what purpose and so we started there unfortunately it didn't go as planned we realized that a lot of people are not very enthusiastic to replace their own very easy to use infinitely scalable aws backed load balancer so we switch to something else that you can start with a single vm for the worst case and the cost benefit is like i'm risking a single vm with this unknown company and i can gain 30 40 60 uh on my performance improvements yep interesting now you get this one in 2018 you pivot a little bit you're obviously not scaling today you have again a varying use case based off me 30 cores on being on board or 250 000 for your largest customer but just for the sake of focus help me understand your sweet spot right so what's like the average maybe customer paying per month to use your technology um again that depends on the customer yeah give me an average okay just because it's a short episode i'm going to try and really focus here i understand there's a massive range but what would you say your sweet spot is on average uh i think our let's say median to average customer would be around a few hundreds of machines to a few thousands of machines okay and if i'm if i'm managing 500 machines on granularly what am i probably probably paying you per month to do that uh that's a good question that depends uh uh on which size the machines are uh that depends if uh you're seeing the performance improvements that we imagine that you're seeing if you're on kubernetes you can switch it to the service kubernetes service level or these specific containers that you want granulate to manage so it's not necessarily about how many machines granular is running on but how many actual cores granular is helping you with we have a list pricing uh again i think i think it depends on the customer itself can you give me the motion and obviously scaling at a different price which is very different if it's a grand a month a 10 grand a month or a 100 grand a month sort of average acv you know sort of level can you give me a general range of what customers are paying and then we'll move on yeah you start with uh you can start as low as a few hundreds and uh we are customers started at five hundred dollars a month and are now at three hundred uh sorry thirty five 500 uh or 30 000 right or 250 000 in terms of course yeah this is the number of calls it doesn't mean that that much a month but i'll give you i'll give you the the real number which is on average guarantee a customer if they choose to take all the benefit into cost reduction see about 75 to 80 of net savings that they keep and granulate is paid around 20 to 25 of the net savings since we don't build you on the savings themselves it's uh um it's hard to give you an actual pricing but let's say for every twenty dollars that you pay granulate on average you save eighty dollars that you would have paid uh uh extra on top of that twenty to someone else yeah do you know last year how much total savings you drove across your entire base yeah over 30 million over 30 million wow okay so i mean how fast can that scale mean can that double this year to 60 or 90 million you think we're hoping much more than that okay got it now have you talked to me about the team and how you built this is obviously a very technical product what's your team look like today how many people so we're we're around 50 today um our rnd team makes most of the company and they're all coming from the same uh pretty much the same group uh within the army that my co-founder and i came from now is this is this ex-israeli defense yeah very good you guys are always the toughest smartest entrepreneur ex is really it's like the number one thing you go if they're ex israeli defense i'm writing a check i want to get in no matter what you guys are always building interesting tools this sounds like a very bad heuristic all right so there's five zero 50 of you guys on the team how many of them are engineers uh 35 35 okay now do you have any quota carrying sales reps or no yeah of course how many um 15 or so the 12 or so by the way um and uh we're going on to 30 at the end of the year yeah so this is the reason i ask this is the second a company like yours in your space can really identify what quota a new rep should have and how many sdrs and then what's the csm to ae at am ratio you can really scale and pour fuel on the fire so take us back to the first quarter carrying rep you hired how did you determine what quota to give them so we actually started with a lot of inbound interest a lot of actual customer referrals so customers actually referred us to other customers um and we started gaining that momentum understanding how many customers each rep actually can carry themselves and how many they would need some customer success help some se help and and everything and we realize that number is pretty high but the truth is we want to make sure that we also uh hunt for new customers not just uh manage our own customers uh in our existing existing ones and we started at about 10 20 uh uh a month i think we're tripled that since but what's the actual quota target if i'm joining you as your first rep you're saying nathan you need to close a million dollars a new ar in your first 12 months or like what's the quota target for that first rep yep it's around that around okay that number okay and and do you see most of these 12 reps that carry quota hitting that quota metric or how what percent do you want to hit quota yeah i i think we're over 65 at this point interesting okay very cool now have you raised capital to scale this yeah um so we've raised uh almost 50 million dollars uh in total uh last round was a series b in december got it and how much was the series b in december 30 million 30 got it so 20 prior to that and when you raised the 30 what was the general use of funds there was it scaling the sales team or engineering or something else uh it's mostly around the sales and the engineering um this is the past four months we've grown both teams by quite a bit we were 21 or 22 i think in december um and as you can probably understand we're over double that yeah and you consider that your series b round it's always interesting to see especially the market we're in right now where there's so much capital to see what sort of series b rounds are coming in at these days can you give me a general sense of what valuation you raised at or how much of the company you sold um so unfortunately uh i can't give you that but uh the truth is we are seeing a lot of series b rounds that are much higher and and even series a rounds that are around 30 million these days so uh kudos to those who do that but unfortunately uh as as to valuation we'll keep that to ourselves at the moment can you share if you sold more or less than 10 of the business um yeah slightly more slightly more okay fair enough i won't push harder there but thank you for giving us that data point that's helpful all right a little more than 10 sold for that 30 million bucks now what do you think you need to do you know this year for you to go out and raise another competitor around next year at a premium valuations you can keep scaling on this vc track i think we should just keep doing what we're doing i think we're on track to do uh uh to have a year of incredible growth and uh i think we've been very fortunate that everything's driving cost reduction today and granulate is sort of complementary and additive to anything the organization has done in the past so we're seeing a lot of demand we need to keep hammering on that and we'll end the year over six times last year that's impressive now can you show what you did last year in terms of revenue uh unfortunately yeah we'll also prove that one no problem talk to me talk to me about about customers right so so again he said launch in 2018 how did you your first five customers do you remember uh that was hard grinding we called everyone we know in the market we called everyone who they knew um we got our two first design partners this was actually at the time that we had the load bouncer we've pre like three months in we we switched that because out of the people that we talked to around 30 people so 20 something would tell you you know what i'm not switching my load balancer but if you only had that for one machine i have tens hundreds or thousands of machines doing the same thing i'm happy to take that risk the cost benefit makes a lot of sense and as you yourself are saying i'm running over provisioned i'm happy to try that this is when we switched it we gathered all the use cases that we talked to these customers with we tried to segment these when we had something working for one segment we came back to all of them and uh started working with them unfortunately we as with everything we realized that our segmentation was a little too general so it always took like two to three uh uh iterations to actually get something going with a customer that's how you learn that's part of the process so from your first five customers what do you know today how many customers you're serving uh oh over ten times that oh okay so over 50 customers today five zero yep all right fair enough and and what do you think is going to drive your 6x growth year over year is going to be adding more customers or getting more sort of units managed more course on your current 50 customer base both uh it has to be both because a customer as we discussed earlier could lend you a deal of just a few hundreds of dollars and that's great you know they're getting the confidence they know that you can give them the value and then it's up to them to start scaling it with the organization obviously it's up to you to qualify everything and make sure that you help them progress as you move forward and to find the right candidates but it has to be both because it it's sort of like a 70 30 based model that at most you're going to get 30 percent uh of the infrastructure on your landed deal because no one's going to risk all the most sensitive workloads or the most important ones you mentioned earlier a 500 a month customer falling in love with you and expanding to 3 500 per month that obviously is a really good indicator for a healthy net dollar retention mark assuming you're keeping churn fairly low over the past 12 months what was your net dollar retention um it was obviously it in those areas by the way um i think i think the the average customer value tripled uh from existing customers over the last year again averages sort of blurs out though what any sort of revenue churn looks like is it fair to say your net dollar retention on the base that you had active a year ago is over 120 yeah okay yeah so like world-class net dollar retention in public markets is sort of like 140 150 it sounds like you're flirting with those kinds of numbers right now which is great yes but we're also in much smaller numbers so uh yeah well i just mean more green space for you more more customers for you to go after all right great and then hey last question before we wrap up you mentioned last year you saved about 30 million across your your customer base you mentioned that if your customers are saving 30 million you're usually making out a fourth of that or 25 so fair to say you guys did six or seven million dollars last year in revenue i kind of command that i'm just taking numbers you already gave me you said 30 million and you said you take 25 on average are those numbers accurate then the numbers i gave you earlier are accurate but i can't comment on the revenue and uh guys there you go esophagus basically saying you do the math for yourself he can't comment otherwise this board is going to going to grill him so you you do the math uh asap congratulations on your growth let's wrap up here with some easy stuff number one favorite business book uh the hard thing about hard things number two is there is there a ceo you're following or studying always by the way i have a few that we i use as my own uh sort of mentors um so we have all the ones that are a leg ahead of me but uh i think i think uh both dimitri from big id and if kenny from armis are great guys to consult with and i would recommend to everyone are you not an acquisition talks with dimitri right now are you no no no please check one the different areas just check hey just want to make sure just checking number three what's uh too small to to acquire big id [Laughter] number three what's your favorite online tool for building the business uh i have a few that i i really enjoy i think um one one one that we follow closely obviously is salesforce but we use uh uh on top of that we have the analytics tool ah i kinda lost it right now looker no um mode analytics no it's a it's a smaller one actually uh i don't know it's like mixpanel for salesforce where you can actually uh aggregate everything i'm sorry i would i would try and guess it but there's literally dozens of startups in that space right now so i don't know which one you're using but we'll take that as an answer number four us off how many hours of sleep are you getting every night really how yeah uh on average around five to six okay fair and what's your situation married single kids married but we live in different continents so uh oh wow any kids no no kids and how old are you so you won all right last question what's something you wishing you when you were 20 uh probably learned a lot more about what a startup actually requires i think we got into this with almost no knowledge and uh it's it's definitely different than you expected but i'm glad we did it and i would never never not do it guys granulate.io real time continuous optimization reducing your computing costs launched in 2018. uh they've raised uh well north of uh called 35 50 30 million their last round selling a little more than 10 of the business but raised over 50 million to date they're scaling fast team of 50 right now 35 engineers 12 quota carrying sales reps scaling that this year hoping to 6x year-over-year last year across their 50 customers they saved them over 30 million dollars in cloud uh sort of computing costs we'll see what sort of savings they can talk in here for them in 2021 it's off thanks for taking us to the top thank you nathan one 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