How Redislabs CEO Ofer Bengal grew to $209.8M revenue and 8.5K customers in 2024.

hello everyone my guest today is offer Mangal he's the co-founder and CEO of a company called Redis labs before that he's a serial entrepreneur who has founded and led several companies in the areas of data communications telecommunications internet homeland security and medical devices he was the founder and CEO of our IT technologies which is now on the Nasdaq at RIT T AB rioter of highly sophisticated telecommunications and data communication systems to major world carriers he began his career as an aerospace engineer in the Israeli Air Force and in builds own aerospace engineering consulting firm as a hobby he's also invented developed and license toy concepts companies such as Milton Bradley Hasbro and Tommy off are you ready to take us to the top I said I said are you ready to take us to the top sure very and we should end this right now you don't sound very excited so again I said we should end this right now you sort out and don't sound very excited no I'm kidding okay tell us about the company what is Redis Labs do and and what's the revenue model how do you make money so we are data based company and you know the data base wealth has changed a lot in recent years after being sort of very conservative and stagnant for it for about 40 years you know since the beginning in the mid 70s with companies like Oracle IBM Microsoft etc in the last 10 years or so the market is open from new type of databases which are called no SQL databases and you have companies in this space such as MongoDB which which went public about eight months ago data stocks ready slabs and some others this company started about seven years ago around something else as many startups do we the basic idea was to accelerate the performance of applications and we did that by building a caching system when we did that we found an open source cute open source by the name of Redis which was started by an Italian guy out of Sicily the guy was the name of Salvatori Sanfilippo and he started it sort of you know half hobby halves for something that he built for Telecom Italia and he put it as open-source and we found it and we thought hey you know this is great as the engine under the hood for what we were doing at that time and after your year we saw that it's picking up in the market and it is this is 2012 offer this is basically 20 around 2012 yeah we started in 2011 a year after we saw that Redis is becoming so popular as an open source that we better do something about it and we decided to become a Redis company so the original name of the company was something else then we became really slabs and from there on and later on this you know servitor rejoined the company as lead open-source and and today we do basically development of the open-source and what we call ready enterprise which is our commercial offering which is kind of what you upsell right and this is what we sell and basically we sell it in two major deployment options the first one is what is called database as a service so this is some sort of automated service whereby we rent thousands of cloud servers in multiple public cloud such as Amazon Google Microsoft Azure etc we put our technology on our servers and then our customers with some of them are very very big fortune ten even fortune ten customers put their data on our servers and we manage those databases for them in the fully automated manner yes please offer just be clear there you have humans on the backend as well along with code kind of managing those it's a professional service not really no we do not do professional services we are against this model we think it's not good so this is a fully automated system we have you know we manage over it hundreds of thousands of data bases across nominal how many clients well we have today approximately 8,500 enterprise clients and approximately a hundred thousand three customers on our three tiers and all that is managed by five DevOps so you know that's all and what's the total team what's what's it worth what's the total team size today so we have approximately 200 people in the company a little bit over than that this is going to grow to 270 are towards the end of the year it's basically half and half half in Israel which is R&D and then all the rest the headquarters are sales marketing and everything else is in Mountain View California it sounds like a good split there and and give me a sense to so these people that pay you right it sounds like you're approaching this from that enterprise space you talked about ten fortune fortune 100 or fortune 500 companies using you guys what is it but you have 85 of our customers so there's a long tail here happening what's your core focus kind of the long tail or the enterprise enterprise absolutely and just to give you you know some some names of customers so you know we have customers from all verticals so in banking we have American Express Charles Schwab Wells Fargo in financial services we have MasterCard Visa Intuit Fiserv ecommerce we have Walmart eBay Starbucks and social we have Twitter tweet Shutterfly in media we have a mess and DreamWorks the market fool in advertising we have harvest Rev mob in technology we have Apple Cisco Dell communication Comcast AT&T Verizon Vodafone and so on and so forth I can give you many many names like this sorry let me let me ask you go ahead yeah as you say let me let me ask my question right so I get it you you work with enterprise customers I that's clear but if I forced you to not you could on every customer cohort but if I force you just give me like an average what would you say the average customer pays you per month or per year for this database as a service so you know database as a service is our longtail where we have you know I would say around $1,000 per month I'm sorry per year and then when you go to the software side of the business which is larger we are talking about if you take the overall average it's around 60 K per year yeah if you are talking about Fortune 100 customers it's around 300 K per year yeah that's the average obviously we have customers paying millions of dollars per year yep no that makes good sense now if I take fight you know $60,000 per year price point you know monthly that comes out to about 5 grand a year and you just said you have a 500 enterprise clients if I multiply 8,500 times five grand a month that would put you at 42 million a month is that accurate so I'm just using your numbers you just said you had 8500 customers and you said the average contract value is 60 grand a year which comes out to five grand a month so five grand times 8,500 customers would put you at about 42 million bucks per month I mean you know let me let me put it straight so we have you know we have eighty five hundred customers out of them approximately 250 our software customers and these are the big enterprise customers the service customers are much smaller okay God so the service customers are the ones that you say were closer to the the a thousand bucks a month versus five thousand exactly oh I see what you're saying okay got it good so so enterprise you have 8,500 to summarize that you have 8,500 total paid customers of which 250 or enterprises with an average ACV of call it sixty the rest call it a two hundred are more around a thousand bucks a month something like that yeah I see okay good so look if I add up the same thing I can add up kind of those two revenue streams to put you at a Revenue kind of monthly recurring right around the the nine point four million dollar mark is that more accurate it's it's more accurate we are not there yet I mean we are getting there we are not when we are not there yet when we pass it you think what your goal I'm sorry when do you think when do you think you'll pass nine million a month what's your goal [Music] that will be approximately a year from now now great that's good so what's the growth rate are you looking at today year over year well the money is growing approximately sixty percent year over year and you know we we are building the company to become a major software major data based company and we think that you know in order to do to do you know a nice sizable IPO we need approximately two and a half years yep okay that's great I want to talk more about kind of the story in terms of how you're signing up these customers you just listed very impressive customer list there before I do that your goal again next year is to hit nine million a month in revenue give me a general sense of where you're at today well you know we are not sharing numbers because we are a private company but you know I think that if you take what I said about being approximately two years away from IPO you can get a you know a very general sense of where we are well if you said you said just a second ago you're generally growing about sixty percent year-over-year so if your goal your from now is to be at nine million I could kind of say okay well if his goal is sixty percent growth to get to nine million and he's probably somewhere around call it six ish right now six million per month is that accurate math you know to get the number in indirect way and you know I won't like to share it but you know take it as I said you know we are approximately two years from an IPO readiness with a nice idea so what does that mean nope some people could say you could IPO at a 50 million run rate some could say you wait until 200 million to IPO like Connor I am so so it's still a huge gap what is what is I what does IPO a mean to you well no but I'm not in your shoes I've never been in your shoes so it'd be if if I could just tell my audience what to learn from I wouldn't have you on the show the goal here is to feature you so you tell me when you think about first off why is IPO a goal at all why do you want IPO you know the idea is to build a long-term you know business and not to do a quick exit such as via position and this is a very natural way you know when you want to grow and you want to grow fast you need you know to raise money an IPO seems very reasonable there's a lot I mean you know this there's a lot of money in private markets right now and you would be so you could still raise money without the without the need to be publicly scrutinized why not just raise another round no we do so so and also you know an IPO gives some sort of exit to certain investors to some of the employees and so on so you know but you can still do that with it I mean there's plenty of growth equity firms that will come right to you a hundred million dollar check of which 80 80 million of that is going to the secondary offering to cash out early investors in our early employees so I'm still curious why IPO well many many more reasons for an IPO first of all you know you know when you look at image of the company is a V some of the enterprise customers so that's you know that's another argument yeah and I can come up with more ya know that makes good sense walk me through so you broke down your team earlier 200 people with this book between Israel Mountain View Israel is mostly R&D where are you scaling right now are you employing like an internal sales team where you're growing your sales operation via your inside sales team yes well field sales operation is growing constantly and this is where you know most of the growth in terms of HR a headcount comes from and you know the idea is that I would say 60 70 percent of the growth in headcount years to come would be incense incense and the rest is you know R&D product and other things offer its its you know a lot of people you know they scale their inside sales teams to early before they have a lot of confidence in their unit economics you haven't big enough cohort where I'm gonna bet you have some confidence there so talk to you about some of the unit economics on these customers which relates to obviously how you incentivize a sales team for example Chernus critical in a SAS company what's your turn today so Chinese relatively you know we're talking about a single-digit that's annually and you so less than 10% logo turn annual is percent more over our expansion is very good so in any given quarter half of our growth come from expansions and if you look at cohorts etc so you know typically a customer doubles its expenditure in two years in 24 months which is pretty good so you know we feel that the you know the economics of the business are you know are strong so if you take that back and you look at maybe a number that encapsulates all that which is net annual revenue retention it sounds like you're above 100% but how far above a hundred percent not sure that I can answer that I have to check okay what what do you mean by like you're not sure what that number is or it's not something you measure I'm not sure about the term oh I see I see so in a given year you'll lose some revenue but then you drive expansion revenue as well so let's say you lose five percent of your revenue but you grow accounts by twenty five percent well the growth of 25 percent minus the loss of five percent would put your net and your attention at one hundred and twenty percent yeah so you know what what I'm saying here is that in terms of this is what we call net expansion that expansion so I'm assuming you guys are bar above 100 / - take another look to get to the right not you know to get the right numbers so just ignore or do you know generally speaking mean a hundred percent as a target a lot of people go for do you know generally are you above or below 100 yeah yeah that would make sense if you're doubling customer accounts every two years assuming your turns not super high yeah very good well yeah well but you can have just to be clear off or sorry the reason I asked about turn again is because you said you have ten percent let less than ten percent logo annually correct yes okay but if you're churning well when we talk about churn normally we talk more about arr okay what's your air our churn which is which is more you know more important than lowering local trend is also important but that is way less yeah so just to be clear when you said single-digit annual churn you so less than ten percent revenue churn annually on a gross basis yes I see I see okay very good what about what about against spending a drive growth how aggressive are you being in terms of your payback period in other words how much are you willing to spend to acquire a new customer again you know these are numbers that you know we are not that you're not sharing at the moment and to be honest you know some feet we are not tracking at the moment because we are in a very aggressive growth period but offer that's more reason to track it if you're scaling it inside sales team and you know what your payback period is that would be very very nerve-racking for an investor's perspective so first of all you know we do not we do not rely on inside sales I thought you said you're scaling an inside sales team no no I said we are scaling our field organization reps reps organization okay talk to me talk me through the difference there how do you how will these reps work so these reps work the old way of you know knocking on doors talking to the customers convincing them to by maintaining their relationships and so on and so forth and you know when you talk to such big customers as we do there is no other way you cannot do that with inside sales inside sales is more for the long term you know small customers when you talk to these you know Giants you need to be in constant contact with them you need to be you know in with contact in many different you know dimensions with solution architects with salespeople with with with with finance and many other you know many other departments between those companies great so offer if we use your term which are which are field reps right you still have to have some math around it's gonna take four meetings over a year to close $100,000 per your customer so if I hire a new rep it's gonna take them six months to get on board and I have to feed them twenty leads per month now that's what I mean by economics right so that's then how you get pay back Craig do you have that seven modeled yet or any are you confident in it yeah okay so that's what I'm saying earlier you said you're driving a lot of growth use I said your team size just 200 you said yeah it'll be 270 by the end of the year and most that's gonna come from hiring these reps but you don't have a model yet I'm trying to understand where you have confidence in that model working for you if you don't have a modeled you know [Applause] [Music] what we are doing versus other companies so just just to give you an example you know we this company so far raised seventy eight million dollars okay and if we go to the market again before an IPO and we haven't decided yet we will probably raise not more than 50 million dollars which will sum the total investments at around one hundred and thirty okay if you take a company like MongoDB they raised approximately north of 300 million before they went public this means that we probably are way more efficient at MongoDB and that is considered a very successful company that does that answer your question it doesn't actually a lot of times the reason people will raise capital is because they've built an efficient machine that they know they can put that money in and get a return people who are bootstrap or haven't raised capital that's a showcase minute they don't know how to spend the money in an efficient way so I would actually argue the opposite point you just argued which is MongoDB has modeled their rep structure and they knew they could pour 300 million bucks into it to get an incredible return no it's not the way you do it because you need to you know the way to look at it is what is the AR AR that you achieved you know to get to an IPO at a certain size and how much money you raised in order to get there and what I'm saying that we will raise way less money that manga did but but you think I'm the same error yet what was there AR before they went public around I see I see got it look again if you're if you're at six ish right now and you're right so call it 70 million AR you want to get past nine million per month next year I'll put you at like 90 or about a hundred million what you're saying is you think you'll need to raise another 15 do you say one five or five zero million to get that marks five zero man okay good well hey it will be very fun to watch you as you do that it sounds like you're you built a well-oiled machine here I appreciate you being transparent and sharing kind of how you're thinking about these elements of again building a SAS business so offer let's wrap up here with the famous five number one what's your favorite business book I don't read books have you do you read it all and if so what's your last book last book you read yeah I read I read a lot last one was a book about believe it or not about Stalin that's the biography about Stalin that that I receive number two is there CEO you're currently following or studying preferably an off-the-record one no no there is none there's none that you you get you get dinner with in Israel who you really respected the rest the world doesn't know about not really Wow okay numbers I know when I go to do I try to do it without a people not CEOs okay number three what is your favorite online tool for building your business I guess that's force.com number number four how many hours of sleep to get every night seven wait that's pretty good in what your situation married single you have kids single with single with kiddos alright offer and how are you that's a secret that's a secret what secret alright well I asked that because I want it I want to know what you wish your 20 year old self knew [Music] so good I asked the age question because I want to give my audience perspective and then ask you what is something you wish your 20 year old self knew just to be at the same place where I am you know I'm very happy at where I am right now I want to go back I want to go forward yeah offer just to be clear it's not something you would change it's just a lesson you wish your 20 year old self knew there's no ice there you have an offer from a Redis lab launched in 2011 now scaling again a very similar spaces like MongoDB again database as a service model 250 enterprise clients got another 8200 which are more longtail that call it a thousand bucks per month flirting with call it the six seven inch or someone the six seven ish monthly recurring revenue range hoping to grow that six to eight year over a year to get up to call it nine or ten million per month soon uh may be eyeing an IPO and in the next two or three years using way less capital than some of its competitors of use to do it healthy economic seventy eight million dollars raised so far less than ten percent AR churn per year quarterly 50 percent of their growth is coming from expansion revenue and customers typically double their accounts every two years team a two hundred base between Israel and Mountain View offer thank you for taking us to the top Thank You Nathan [Music]