How Redis Labs Reached 8,500 Customers and 60% Annual Growth on $78M Raised (Interview with Co-Founder and CEO Ofer Bengal)

Introduction and Background

Nathan Latka

00:01Hello, everyone. My guest today is Ofer Bengal. He's the cofounder 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 RIT Technologies, which is now in the NASDAQ at RITT, a provider of highly sophisticated telecommunications and data communication systems to major world carriers. He began his career

00:26as an aerospace engineer in the Israeli Air Force and then built his own aerospace engineering consulting firm. As a hobby, he's also invented, developed, and licensed toy concepts to companies such as Milton Bradley, Hasbro, and Tomy. Ofer, are you ready to take us to the top?

Ofer Bengal

00:42I'm sorry. I didn't hear you so well.

Nathan Latka

00:44Sorry.

00:45I are you ready to take us to the top?

Ofer Bengal

00:46Sure.

Nathan Latka

00:47Very... You don't sound very...

00:48We should end this right now.

00:50You don't sound very excited.

Ofer Bengal

00:52Say again?

Nathan Latka

00:53I said we should end this right now. You so don't don't sound very excited.

Ofer Bengal

00:58Shall I start dancing?

What Redis Labs Does and How It Found Redis

Nathan Latka

00:59No, I'm kidding. Okay, tell us about the company. What does Redis Labs do and what's the revenue model? How do you make money?

Ofer Bengal

01:05So we are a database company and the database world has changed a lot in recent years after being sort of very conservative and stagnant for about forty years, you know, since the beginning in the mid seventies with companies like Oracle, IBM, Microsoft, etcetera. In the last ten years or so, the market is open for new type of databases which are called NoSQL databases. And you have companies in this space such as MongoDB which went public about

01:37eight months ago, DataStax, Redis Labs and some others. This company started about seven years ago around something else as many startups do. 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, Qt open source by the name of Redis which was started by an Italian guy out of Sicily, A guy by the name of Salvator Sanfilippo. And he started

02:14it as sort of half hobby, half for something that he built for Telecom Italia. And he put it as open source and we found it and we thought, hey, this is great as the engine under the hood for what we were doing at that time. And after a year we saw that it's picking up in the market.

Nathan Latka

02:35And this was 2012, Ofer?

Becoming a Redis Company and How It Sells Redis Enterprise

Ofer Bengal

02:37This is basically 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 Redis Labs and from that on and later on, Salvatore joined the company as lead open source. And today we do basically development of the open source

03:09and what we call Redis Enterprise, which is our commercial offering.

Nathan Latka

03:13Which is kind of what you upsell, right?

Ofer Bengal

03:16And 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 clouds such as Amazon, Google, Microsoft, Azure, etcetera. We put our technology on our servers and then our customers, some of them are very, very big Fortune 10, even Fortune 10 customers, put their data

03:53on our servers and we manage those databases for them in a fully automated manner.

04:00Yeah. So this is...

Nathan Latka

04:01Ah, for just to be clear, have humans on the back end as well along with code kind of managing those.

04:05It's a professional service.

Ofer Bengal

04:07Not 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 manage over it hundreds of thousands of databases.

Nathan Latka

04:22Across how many clients?

8,500 Customers, 100,000 Free Users and a Team of About 200

Ofer Bengal

04:27We have today approximately 8,500 enterprise clients and approximately 100,000 free customers on our free tiers. And all that is managed by five DevOps. So that's all.

Nathan Latka

04:44And what's the total team? What's the total team size today?

Ofer Bengal

04:48So we have approximately 200 people in the company, a little bit over than that. This is going to grow to two seventy towards the end of the year. It's basically half and half, half in Israel which is R and D, and then all the rest, the headquarters, sales, marketing, and everything else is in Mountain View, California.

Nathan Latka

05:10Good. It sounds like a good split there. And and give me a sense too, so these people that pay you, right, it sounds like you're approaching this from an enterprise space. You talked about 10 Fortune 100 or Fortune 500 companies using you guys. Is it... But you have 8,500 customers. So there's a long tail here happening. What's your core focus? Kind of the long tail or the enterprise?

Enterprise Customer Names Across Verticals

Ofer Bengal

05:31Enterprise, absolutely. And just to give you some names of customers. So 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. E commerce we have Walmart, eBay, Starbucks. In social we have Twitter, Twitch, Shutterfly. In media we have MSN, DreamWorks, The Motley Fool. In advertising, we have Havas, RevMob. In technology, we have Apple, Cisco, Dell, Communications, Comcast, AT&T, Verizon,

06:08Vodafone, and so on and so forth. I can give you many, many names like this.

06:14We definitely offer...

Nathan Latka

06:15Sorry. Let me let me ask go ahead.

06:16Yeah. I was gonna say, let me let me re ask my question.

06:18Right? So I get it. You you work with enterprise customers. I I... That's clear. But if I forced you to not... You have... You could go down every customer cohort. But if I force you to just give me, like an average, what would you say the average customer pays you per month or per

06:30year for this database as a service?

Pricing: Average Contract Values by Segment

Ofer Bengal

06:32So database as a service is our long tail where we have I would say around $1,000 per

06:45I'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.

Nathan Latka

06:45Yep.

Ofer Bengal

06:45If you are talking about Fortune 100 customers, it's around 300 k per year.

Nathan Latka

06:45Yep.

Ofer Bengal

06:45That's the average. Obviously, we have customers paying millions of dollars per year.

Nathan Latka

07:08Yep. No, that makes good sense. Now, if I take, you know, 60,000 per year price point, you know, monthly that comes out to about $5,000 a month, and you just said you have 8,500 enterprise clients. If I multiply 8,500 times $5,000 a month, that would put you at 42,000,000 a month. Is that accurate?

Ofer Bengal

07:28How did you get that to that again?

Nathan Latka

07:30So I'm just using your numbers. You just said you had 8,500 customers, and you said the average contract value is $60,000 a year, which comes out to $5,000 a month. So $5,000 times 8,500 customers would put you at about $42,000,000 I per

Ofer Bengal

07:43mean, know, let me let me put it straight. So we have you know, we have 8,500 customers. Out of them approximately 250 are software customers and these are the big enterprise customers. The service customers are much smaller.

Nathan Latka

08:00Okay. Got So the service customers are the ones that you said were closer to the $1,000 a month versus 5,000

Ofer Bengal

08:08Exactly.

Nathan Latka

08:08Oh, I see what you're saying. Okay, got it. Good. So enterprise, have 8,500, just to summarize that you have 8,500 total paid customers of which two fifty are enterprises with an average ACV of call it 60. The rest call it 8,200 are more around a thousand bucks a month, something like that.

Ofer Bengal

08:24Yeah.

Nathan Latka

08:25I see. Okay. Good. So look. If I add up the same thing, can add up kind of those two revenue streams to put you

08:31at a revenue kind of monthly recurring right around the the $9,400,000 mark. Is that more accurate?

Ofer Bengal

08:38It's more accurate. We are not there yet. I mean, we are getting there. We are not there yet.

Nathan Latka

08:45Will you pass it, do you think? What's your goal?

Ofer Bengal

08:48I'm sorry.

Nathan Latka

08:50Do you think you'll pass 9,000,000 a month? What's your goal?

Ofer Bengal

08:56That will be approximately a year from now.

Nathan Latka

08:59Oh, great. That's good. So what growth rate are you looking at today year over year?

60% YoY Growth and IPO Timeline

Ofer Bengal

09:04So the company is growing approximately 60% year over year. And we are building the company to become a major software or major database company. And we think that in order to do a nice sizable IPO, we need approximately two, two and a half years.

Nathan Latka

09:28Yep. Okay. That's great. I wanna 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 9,000,000 a month in revenue. Give me a general sense of where you're at today.

Ofer Bengal

09:43Well, 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.

Nathan Latka

09:56Well, if you said, you said just a second ago, you're generally growing about 60% year over year. So if your goal a year from now is to be at 9,000,000, I could kind of say, okay, well, his goal is 60% growth to get to 9,000,000, then he's probably somewhere around, call it 6 ish right now, 6,000,000 per month. Is that accurate math?

Ofer Bengal

10:11You know, you are trying to to get the number in in indirect way, you know, I 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 IPO.

Nathan Latka

10:25What what does that mean though? Some people could say you could IPO at a 50,000,000 run rate. Some could say you wait until 200,000,000 to IPO like calling it iSIM. So so it's a... Still a huge gap. What is what is I p... What does IPO ing mean to you?

Ofer Bengal

10:37Take it as you wish.

Nathan Latka

10:39Well, no. But I'm not in your shoes. I've never been in your shoes. So it'd be... If 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... Well, first off, why I... Why is IPO a goal at all? Why do you wanna IPO?

Why IPO Rather Than Stay Private

Ofer Bengal

10:54You know, the idea is to build a long term business and not to do a quick exit such as via acquisition. And this is a very natural way, you know, when you want to grow and you want to grow fast, you need to raise money. An IPO seems very reasonable for this.

Nathan Latka

11:17But there's a lot, I mean, you know this, there's a lot of money in private markets right now and you could still raise money without the without the need to be publicly scrutinized. Why not just raise another round?

Ofer Bengal

11:27No. We do so. We do so. And also, you know, an IPO gives some sort of exit to to certain investors, to some of the employees and so on. So, you know, it it it... The good of both worlds.

Nathan Latka

11:41But but you could still do that with the... With... I mean, there's plenty of growth equity firms that'll come write you a $100,000,000 check of which $8,080,000,000 of that is going towards the secondary offering to cash out early investors and early employees. So I'm still curious why IPO?

Ofer Bengal

11:52Well, are many more reasons for an IPO. First of all, when you look at the image of the company vis a vis some of the enterprise customers. So that's, you know, that's another argument. Yeah. And I can come up with more.

Nathan Latka

12:07Yep. No. That makes good sense. Walk me through... So you you broke down your team earlier, 200 people you... This, between Israel, Mountain View, Israel is mostly r and d. Where are you scaling right now? Are you employing like an internal sales team? Are you growing your sales operation via your inside sales team?

Scaling the Field Sales Organization

Ofer Bengal

12:23Yes. Well, our field sales operation is growing constantly and this is where most of the growth in terms of HR headcount comes from. And you know the idea is that I would say 60, 70% of the growth in headcount in years to come will be in sales staff. And the rest is, you know, R and D product and other things.

Nathan Latka

12:51Now, Ofer, it's... You know, a lot of people, you know, they scale their inside sales teams too early before they have a lot of confidence in their unit economics. You have a big enough cohort where I'm I'm I'm gonna bet you have some confidence there. So talk to me about some of the unit economics on these customers, which relates to obviously how you incentivize a sales team. For example, churn is critical in a SaaS company. What's

13:10your churn today?

Churn, Expansion Revenue, and Unit Economics

Ofer Bengal

13:12Churn is relatively low. We are talking about single digit churn.

Nathan Latka

13:20And that's annually?

Ofer Bengal

13:21Annual, yeah. So less than

Nathan Latka

13:2310% logo churn annually?

Ofer Bengal

13:24Less than 10%. Moreover, our expansion is very good. In any given quarter, half of our growth come from expansions. And if you look at cohorts, etcetera, so you know typically a customer doubles its expenditure in two years, in twenty four months, which is pretty good. So, you know, we feel that the economics of the business are strong.

Nathan Latka

13:53So if you take that back and you look at maybe a number that encapsulates all of that, which is net annual revenue retention, it sounds like you're above 100%, but how far above 100%?

Ofer Bengal

14:06Not sure that I can answer that. I have to check.

Nathan Latka

14:09Okay. What do you mean by, like you're not sure what that number is or it's not something you measure?

Ofer Bengal

14:13I'm I'm not sure about the term of

Nathan Latka

14:16Oh, I see. I see. So in a in a given year, you'll lose some revenue, but then you drive expansion revenue as well. So let's say you lose 5% of your revenue, but you grow accounts by 25%. Well, the growth of 25% minus the loss of 5% would put your net annual retention at 120%.

Ofer Bengal

14:36Yeah. So, you know, what I'm saying here is that in terms of... This is what we call

14:49net expansion, Net expansion.

Nathan Latka

14:56So I'm assuming you guys are above a 100%.

Ofer Bengal

14:59I'll have to take another look to get to the right numbers. So just ignore.

Nathan Latka

15:05Well, do you know generally speak, I mean a 100% is a target a lot of people go for. Do you know generally are you above or below a 100?

Ofer Bengal

15:12Think that we are better than that.

Nathan Latka

15:13Yeah. Yeah. That would make sense if you're doubling customer accounts every two years, assuming your churn is not super high.

Ofer Bengal

15:21Yeah.

Nathan Latka

15:21Very good.

Ofer Bengal

15:22Well, talked about our churn. Our churn is fairly low.

Nathan Latka

15:26Well, you can have... Just to be clear, Ofer, sorry. The reason I asked about churn again is because you said you have 10%... Less than 10% logo churn annually. Correct?

Ofer Bengal

15:36Yes.

Nathan Latka

15:36Okay. But if you're churning

Ofer Bengal

15:38didn't talk well, when we talk about churn, normally we talk more about ARR churn.

Nathan Latka

15:46Okay. What's your ARR

Ofer Bengal

15:46Which is more important than logo churn. Logo churn is also important, but that is way less.

Nathan Latka

15:54Yeah. So just to be clear, when you said single digit annual churn, saw less than 10% revenue churn annually on a gross basis.

Ofer Bengal

16:02Yes.

Nathan Latka

16:03I see. I see. Okay, very good. What about again spending to 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?

Ofer Bengal

16:14Again, know these are numbers that you know, we are not sharing at the moment. And to be honest, you know, some of it we are not tracking at the moment because we are in a very aggressive growth period.

Nathan Latka

16:30But, Ofer, that's more reason to track it. If you're scaling an inside sales team and you don't know what your payback period is, that would be very, very nerve wracking from an investor's perspective.

Field Reps vs. Inside Sales: How Enterprise Deals Get Done

Ofer Bengal

16:37So first of all, you know, we do not we do not rely on inside sales.

Nathan Latka

16:42I thought you just said you're scaling an inside sales team.

Ofer Bengal

16:45No. No. No. I said we are we are scaling our field organization. Reps. Reps organization.

Nathan Latka

16:52Okay. Talk to me talk me through the difference there. How do you... How will these reps work?

Ofer Bengal

16:55So these reps work the old way of, you know, knocking on doors, talking to the customers, convincing them to buy, maintaining the relationships and so on and so forth. And 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 tail, you know small customers. When you talk to these you know giants you need to be in constant contact

17:26with them. You need to be

17:30with contact in many different dimensions, with solution architects, with salespeople,

17:39with finance and many other departments within those companies.

Nathan Latka

17:44Great. Ofer, if we use your term, field reps, right? You still have to have some math around it's going to take four meetings over a year to close a $100,000 per year 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 20 leads per month. That... That's what I mean by economics. Right? So that's then how how you get payback period. Do do

18:06you have that stuff modeled yet or... And you're... Are you confident in it?

Ofer Bengal

18:09Not yet.

Nathan Latka

18:10Okay. So that's why I'm saying earlier you said you're driving a lot of growth. You... I said your team size is 200. You said, yeah. It'll be two seventy by the end of the year, and most of it's gonna come from hiring these reps, but you don't have it modeled yet. I'm trying to understand where you have confidence in that model working for you if you don't have it modeled.

Capital Efficiency vs. MongoDB

Ofer Bengal

18:26You know, we look at what we are doing versus other companies. So just to give you an example, this company so far raised $78,000,000 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 $50,000,000 which will sum the total investments at around 130, okay. If you take a company like MongoDB they raised approximately north of $300,000,000 before they went public. This means that

19:11we probably are way more efficient than MongoDB and that is considered a very successful company. Does that answer your question?

Nathan Latka

19:20It 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 bootstrapped or haven't raised capital, that's a showcase that 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

19:39pour $300,000,000 into it to get an incredible return.

Ofer Bengal

19:43No, it's not the way you do it because you need to you know the way to look at it is what is the ARR 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 MongoDB.

Nathan Latka

20:04But you think you're not the same ARR?

Ofer Bengal

20:07To get to the same ARR level.

Nathan Latka

20:10What was their ARR before they went public?

Ofer Bengal

20:12Around, I think, 120, a 130. Yeah.

Nathan Latka

20:16I see. I see. Got it. Well, look. Again, if you're if you're you're at right now and you're on... So call it 70,000,000 ARR, you wanna get past 9,000,000 per month next year, that puts you at, like, 90 or about a 100,000,000. What you're saying is you think you'll need to raise another 15. Did you say 15 or 50 to get that mark?

Ofer Bengal

20:3150.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

20:3250. Okay. Good. Well, hey. It will be very fun to watch you as you do that. It sounds like you're... You've built a well oiled machine here. I appreciate you being transparent and sharing kinda how you're thinking about these elements of, again, building a SaaS business. So, Ofer, let's wrap up here with the famous five. Number one, what's your favorite business book?

Ofer Bengal

20:49I don't read business books.

Nathan Latka

20:52Do you read at all? And if so, what's the last book you read?

Ofer Bengal

20:55Yeah. Yeah. I read a lot. Last one was a book about, believe it or not, about Stalin. That's the biography about Stalin that I received.

Nathan Latka

21:08Number two, is there a CEO you're currently following or studying? Preferably an off the record one.

Ofer Bengal

21:15Not... No. There is none.

Nathan Latka

21:17There's none that you you get you get dinner with in Israel who you really respect that the rest of the world doesn't know about?

Ofer Bengal

21:24Not really. No.

Nathan Latka

21:25Wow. Okay. Number three

Ofer Bengal

21:27I... You know, when I go to dinner, I try to do it with other people, not CEOs.

Nathan Latka

21:31Okay. Number three. What is your favorite online tool for building your business?

Ofer Bengal

21:39I guess salesforce.com.

Nathan Latka

21:41Number, number four. How many hours of sleep do you get every night?

Ofer Bengal

21:46Seven to eight.

Nathan Latka

21:47That's pretty good. And what's your situation? Married, single, do you have kids?

Ofer Bengal

21:52Single with kids.

Nathan Latka

21:53Single with kiddos. Alright, Ofer. And how old are you?

Ofer Bengal

21:57That's a secret.

Nathan Latka

21:59Oh, that's a

Ofer Bengal

21:59That's a secret.

Nathan Latka

22:01Alright. Well, I asked that because I wanna I wanna know what you wish, your 20 year old self knew.

Ofer Bengal

22:09Say again?

Nathan Latka

22:09I ask 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.

Ofer Bengal

22:20Just to be at the same place where I am, you know? I'm I'm I'm I'm very happy at where I am right now. I want to go back. I want to go forward.

Nathan Latka

22:28Yeah. Ofer, just to be clear, it's not something you would change. It's just a lesson you wish your 20 year old self knew.

Ofer Bengal

22:38There is none.

Nathan Latka

22:41Guys, there you have it. Ofer from Redis Labs launched in 2011. Now scaling again at very similar spaces like MongoDB. Database as a service model, two fifty enterprise clients. They got another 8,200, which are more long tail. I'd call it a thousand bucks per month. Flirting with call it the $6,000,000 to $7,000,000 ish or somewhere in the $6,000,000 to $7,000,000 ish monthly recurring revenue range. Hoping to grow that 60% year over year to get up to call it 9 or

23:0410,000,000 per month soon. Maybe eyeing an IPO in in in the next two or three years using way less capital than some of his competitors have used to do it. Healthy economics, $78,000,000 raised so far, less than 10% ARR churn per year. Quarterly, 50% of their growth is coming from expansion revenue, and customers typically double their accounts every two years. Team at two hundred, based between Israel and Mountain View. Ofer, thank you for taking us to

23:29the top.

Ofer Bengal

23:30Thank you, Nathan.