How Kong Inc CEO Augusto Marietti grew Kong Inc to $146.1M revenue and 130 customers in 2024.

hello everyone my guest today is aggie marietti he's an inventor technology entrepreneur and angel investor as the ceo and co-founder of kong the api company on a mission to intelligent broker information across all services he drives the company's vision strategy and long-term growth before this he was ceo and co-founder at mishape the largest api marketplace which was required by rapid api in 2017. again you ready to take it to the top yep all right so what is kong hq and and what's the business model how do you sustain yourself yeah yeah so kong it's uh api platforms it helps you manage secure and govern uh all the apis across your companies and it's an open source open core business model so we have our open source component which is kong api gateway which people can download and run in production on top of all your apis and then we have the enterprise product which is the service control platform that manage all those open source proxy and helps you analyze and govern and secure all your traffic so it's kind of open source sas then in that regard yep yep yep yeah think about it uh uh like building the nervous system right of the cloud uh in your body you have the nervous system which is very vertical and then you have the centro which is a brain and spine and then in similar case our peripheral components are the open source proxy and then the the central part is which is the brain the spine is the control plane that is the one that we have an enterprise commercial offering around yeah very good okay so help me understand on average what are companies paying on the enterprise side to use your technology yeah it's a six figures and up uh annual base contract value right so it's annual subscriptions uh where it's it goes from six figures an app okay so i mean is it fair to say if your average is you know 10 grand a month 120 grand a year or something like that yeah a little bit more okay fair enough good and then uh put this on the timeline for me when you launch uh so the kong inc was uh in 2017 august okay twice 2017 and that was did you jump into this right after you sold the rapid api yeah it was a spin-off of my shape inc and obviously 2016 was kind of internally uh people paying and then 2017 was also public facing a branding and reshaped organization and sell their old asset as well that's great okay and so you know walk me through your first couple customers on the platform not not the free ones but the enterprise ones how did you land those first customers yeah that's an interesting story uh so when we open source kong right from from the core engine of of the machete api marketplace uh it tooks a lot of adoptions on github but but really no commercial at that point right but five months after at uh at the end of 2016 um the phone ranked and it was uh uh the center of medicare uh healthcare.gov back then was obamacare uh they're all based in baltimore and they were using kong productions right to power all their apis with the turbo tax to do the programmatic partnership transaction with turbotax for tax credit for for health credits and then it was about end of the year and april was coming up which is obviously the end of the season for tax and they know there is a big spike there and so they decided to to call and say hey we love this we're using production but we need the uh we need supports and that's really how we started the first commercial customer we didn't have any commercial product back then just just the kong open source and uh i think in 30 days from that phone call we got got quite a good a good value um from them and um and that's how they start really the first customer by only selling support from an inbound call from baltimore uh on the center of medicare that's hysterical okay so you sign them up and then how many customers have you scaled to today uh we have about uh more than 130 large enterprise customers and then go uh more up the funnel a bit for me so how many total installs of the open source platform oh installs so it downloads is a little bit of a vanity metric right yeah because that's why i asked customers first by the way yeah that's just perfect because you get bots you get you know docker images they get pulled in from containers docker have so it's now it's quite a we have like hundred millions there right at the top of the finance and then you have we have like um i think now it's 800 000 active distances running for the one that we can track because the phone home is on and there is no firewall blocks so there is a lot that we don't track anything after they put into their own cloud so 100 million 800 000 active instances and then about 130 enterprise customers yeah yeah 800 monthly active instances uh which uh we don't know like if you decap the people we don't know really how many users is several several several dozen thousands of thousands yeah and then it is about 130 large enterprise customers right global 5000 which is the one that that we track now can i take 130 customers times you know minimum 10 grand a month you're doing north of 1.3 million a month right now yeah it's more than that yeah well yeah definitely more than that because that was a minimum value yeah yeah when do you think you break two million a month do you feel like that's doable this year or is that an uncomfortable stretch goal uh so so we we are uh well past the 10 million right but we're obviously under 100 million in arr uh so so we're tripping the business this year uh so we're getting um we're definitely passing those those points this year sorry sorry my question was when do you think you passed two million in monthly recurring revenue oh yeah we don't we don't disclose the exact states on you know when we track those those kind of numbers okay well i guess again all i'm asking is your goal by the end of this year is to like what's an uncomfortable stretch goal for you to is about tripling the business from where where we were last year but uh and you know again we're between 10 and 100 million runway but we don't we don't destroy specific numbers so we can understand growth rate over the past 12 months um again you're north of 10 million today in revenue where were you a year ago were you down at like three or uh yeah yeah we we grew five times from 2017 to 2018. and then again 18 2018 this exact month last year you feel like you were down about you said about three times smaller than you are today so somewhere north of three million an ar uh in that in their ballparks but uh yeah where's most that growth coming from is it coming from expanding the enterprise accounts or getting new customers all together um so last quarter it was half and half but it wasn't anomaly uh usually it comes from new logos because it's still uh very early days right so we grab new logos and and and a lot of custom most of the cast have been had in the last 12 months so right they're not even a renewable time and um and last quarter for example was the zero charge and was a lot of massive expansions because of too large customer really expands substantially but on average it's really is really 90 90 percent still 95 percent a new logo i think at the end of the year and we end january 1st things will change and we start to also turn in expansions but last quarter was um last 12 months average of last quarter like for example net retention really was 132 and in quarter was 195 percent so it was it was a little bit strong footing quarter but we want to stay above 130 net retention rate yeah if you look at the past 12 months have you been above 130 net retention yeah 133 and peel that onion back for me so what was gross a gross revenue churn uh well last quarter was zero so in average we we turn less than that less than five seven percent or attempts on terms of dollars value because the overall period of time monthly or quarterly last 12 last 12 months okay so seven percent revenue churn over the last 12 months if you have 130 net that means your expansion on average is about 37 percent in that cohort is that right yep that's great what upsell axes are you upselling against uh so there are two way right there is the upsell and the cross sales last quarter we got lackey got both in a way but it's usually um is usually an app sell right where you you usually to buy more of the technology and and we price by uh three different dimensions which is numbers of users that use the platform number of requests that goes through the platform like the throughput of the traffics and then numbers of microservices or services that you add through the platform and then one of those levers usually tend to go up over the over the 12 months and so that's that's they buy more of those uh kind of which one is most effective for driving expansion requests and throughput microservices or number of seats uh well the microsoft we just had it it's like so too early to say but but i think that's would be the most powerful one interesting okay round out your team for me today how many folks on the team overall globally it's about uh 140. okay 140. that's great and then have you bootstrapped the company or did you decide to raise uh we raised over 71 million augie i liked you so much and then you tell me you take all this delusion but if you think about it our company before kong it was misshape right so if you...