How Salto Raised $70M to Bring DevOps to SalesOps with Just 10 Paying Customers (Interview with Co-Founder and Chairman Benny Schnaider)

Introduction and Background

Nathan Latka

00:00Hey, folks. My guest today is Benny Schnaider. He's a high-tech serial entrepreneur and recently co founded salto, now serving as its president and chairman of the board in the past. He co founded Ravello acquired by Oracle in 2016, another company acquired by Red Hat and another one by Cisco twice, actually. This guy knows what he's doing. He invests in and serves as a board member in several startups. Some examples are Autonomo, Traffic Systems, and Veehive. Benny,

00:23you ready to take us to the top?

Benny Schnaider

00:25>> Yeah. Let's do it. Thank you very much for having me.

What Salto Does and the Problem It Solves

Nathan Latka

00:28So tell us about salto. I mean, are you actually in the business building it, or are you advising the co founders?

Benny Schnaider

00:33>> Yeah. So I'm part of the company. That's my day job, and that's where I go to work every day. I spending most of the time over there. The company is run by Rami Tamir, my co partner, is the CEO of the company, and Gil Hoffer, which is based he recently moved to Sunnyvale in The US.

Nathan Latka

00:54Very cool. Okay. And give us a sense of what salto does and who's paying for it. What kind of sales teams?

Benny Schnaider

01:01>> Okay. So let's start from the problem that we are trying to solve in salto. If you think about the modern world, we have the companies, the SaaS company that are developing their own product, and then there is the business operation part of it. Till now, the product itself was separate from the business operation. If you think about the methodology being used by the developer, they are like five g, fifth generation of,

01:29>> you know, technology. When you look at the technology used to develop the other tools, the business operation tools, they are like two g. So what we are trying to do in salto is bring the methodologies and the tools that we use and we are still developing in the agile development world into the biz op world.

Customer Use Case: Salesforce Change Management

Nathan Latka

01:53Interesting. Okay. Tell me a tell me just to make this real for my audience, Benny, tell me a story of how a real customer is using it, if there's one you can talk about.

Benny Schnaider

02:01>> Yeah. So let's talk admin of Salesforce that wants to do change management.

02:08>> Change management is something that's very trivial in the old world. If you think about developers, we are doing it all the time. We have multiple environments, we have multiple feature, and we have multiple developers. In the case of tools like NetSuite, like Salesforce, managing those is much more difficult. So they have to decide, they have to time what are the changes that they are going to do, how they are going to apply it, who is going

02:40>> to work on it. They are thinking more the old way of releases and moving from one sandbox to another sandbox. What we are allowing them to do, solve the biggest problem that exists today with those tools, which is to extract the configuration, put it in modern tools like GitHub, like

03:02>> CICD, and be able to make the changes and the change management with the new modern tools.

Nathan Latka

03:11I love it. I love the space. Very niche, very focused, but a very, very big market. Salesforce is huge. You're catering to any Salesforce admin that wants to manage change management.

Benny Schnaider

03:20>> Right.

Nathan Latka

03:20All right.

Platform Vision Across All SaaS Business-Operations Tools

Benny Schnaider

03:21>> I feel now we were talking between us about Salesforce, but I don't wanna get you that you will get the feeling or you're the listeners that we're only doing Salesforce. The vision of the company was that, number one, it has to be the same thing for all the SaaS tools that enterprises are using today for business operation. In reality, people will always talk to you about two, three, maybe four, one for CRM, one for finance, one

03:47>> for marketing, and maybe one for HR. But when we go and talk to customer, they have thousands of tools. So we build a generic solution, think about it like a platform that has adapters and can work with each one of those tools that we just mentioned.

Pricing and Early Sales Motion

Nathan Latka

04:06Understood. And Benny, when folks are paying you for this technology to save themselves time, energy, and money, what are they paying you on average per month to use the tech?

Benny Schnaider

04:14>> Well, they are starting from about as low as $10,000 and they can go up to probably hundreds of thousands of dollars. We just started selling, so we are at very early stages.

Nathan Latka

04:30When did you get your first customer, Benny, your first paying customer?

Benny Schnaider

04:33>> Excuse me, when

Nathan Latka

04:37did you guys get your first paying customer?

Benny Schnaider

04:40>> Earlier this year, probably in Q1.

Nathan Latka

04:43Okay. And just to be clear, you're saying the average price is $10,000 a month or a year?

Benny Schnaider

04:48>> $10,000 a year.

Nathan Latka

04:51Sorry. A year. Okay. Got it. So maybe $1,000 a month and then 12,000 dollars. But you think this is gonna be over time an enterprise motion? You're gonna stay at the $10,000, $20,000, $30,000, $50,000 a year range?

Benny Schnaider

05:01>> Right. Yeah. I see. Dimension to the pricing, features, number of users, number of transactions. We also long launched today or these days, are launching a free tier that allows the user to use the full service with all the features that with most of the features that we have. And we have also a open source version that allows people who want to use it without the managed service that we are using themselves. So think about it like

05:32>> three way in terms of go to market. Open source, great tier, and the regular SaaS selling model.

First Paying Customer and Customer Count

Nathan Latka

05:38So, Benny, you just launched, got your first paying customer this year, I guess earlier this year. How many customers are you working with now today?

Benny Schnaider

05:45>> We are working with tens of customers and we have already about 10 paying customers.

Nathan Latka

05:53Hey, congratulations. That's an exciting, you've been through this a couple of times, so you know how important it is to get those first 10, right?

Benny Schnaider

06:00>> Absolutely.

Fundraising Story and Investor Relationships

Nathan Latka

06:01The question I have for you guys is you guys did a remarkable job attracting capital before your first dollar of revenue. I mean, you've effectively raised almost $70,000,000 pre revenue. So take me back to that series A, what was the story that you were saying back in 2020 and how much did you raise?

Benny Schnaider

06:16>> We raised altogether, like you said, 70 about $70,000,000 in three rounds. One was in the first seed round in 2019.

Nathan Latka

06:26How much was that one? It

Benny Schnaider

06:28>> was about $3,500,000.

Nathan Latka

06:31Okay.

Benny Schnaider

06:32>> And then we did the series a beginning of 2020, which was about altogether with the seed, about $24,000,000, and the rest of it was earlier this year in 2021, of course.

Nathan Latka

06:53I see. And again, how are you guys able to raise so much cap? I mean, obviously you have a great background, so I'm sure you have a lot of connections here. Right? But I mean, guys are also taking a lot of dilution, right, pre pre revenue. I mean, how do you manage all that?

Benny Schnaider

07:06>> Well, the world this is probably a question for about two years ago. The world, especially here in Israel, I'm calling you from Tel Aviv, from Ra'anana actually, has changed. So, you can imagine that the raising the capital raising environment is different. I believe that, one of the reasons is that people trust us. People like what we are doing. They see the initial traction. And we used most of the VCs that we used in the past. So,

07:37>> you know, with some of the VCs, it's like the third time, some of them it's the second time. So kind of busy and we are building our ecosystem.

Nathan Latka

07:46This is Accel, Salesforce Ventures, makes sense, Bessemer, Lightspeed, folks you've worked with prior. Correct. Yep. Now, when you talk about traction that you point to, you know, if you have 10 customers today at around 1,000 or $2,000 a month, I mean, you guys are doing $10,000 to $20,000 a month in MRR right now. So is that accurate?

Benny Schnaider

08:06>> We don't talk about the numbers. The number are actually higher, but I would rather not talk about the numbers now. They are lower anyhow, but we are looking at the major expansion in the coming years.

Nathan Latka

08:18Well, I guess I won't push you hard on the numbers there, but it's fair to say you're doing less than a million dollar run rate today. Right? You just turned on pricing. Yeah. So that's the reason I asked that, so what metrics are you pointing to when you just go raise a $42,000,000 series b? What what are you pointing to? Say, look, it's growing. Most people say revenue, but you don't have that much. So what what

08:34are you using metrics wise?

Metrics Used to Raise the Series B

Benny Schnaider

08:36>> We are using mainly the market potential. We are using comparables with other companies that are playing in our space. We are using

Nathan Latka

08:46Who are some of those companies?

Benny Schnaider

08:50>> Some of the companies are Copado, for example, Gearset.

Nathan Latka

08:55Yeah, but Copado is growing like crazy. I mean, Ted Elliott is growing that business. I mean, I had him on four months ago or six months ago, were doing 40,000,000 in ARR. He just emailed me and said I could share it publicly that they passed a $52,000,000 run rate and raised at the 1,100,000,000 valuation. They've got a lot of revenue already. So how do you use that as comparable?

Benny Schnaider

09:15>> Well, they were a younger company, and when they were younger, they probably had another set of valuation, which is probably, I imagine, lower than $1,000,000,000.

Nathan Latka

09:27Well, But but but they they hadn't raised I mean, the amount of money, the capital profile of that business is way different than the capital profile currently that that you guys are on track for. In other words, what I mean by that is their first round was a $9,000,000 round in 2018. Then when they raised in 2020, which they raised a $26,000,000 round for, they already passed a 5,000,000 run rate at that point, almost a $6,000,000

09:47run rate. So I guess all I'm asking is I understand comparables, but I'm just focused on you guys. Can you point to like free usage, growth in free usage or anything? Like, what were some of the metrics you're

Benny Schnaider

09:58>> looking We just launched these days. We are only launching these days the free tier, so it's early to tell.

Nathan Latka

10:03Okay.

Benny Schnaider

10:04>> But again, I mean, when you're looking at the potential of what it is that we are doing, you are looking at the customer reaction, the customer attraction that we are having, the growth that we are already having in the accounts that expanded in the from earlier this year, these are all significant.

Nathan Latka

10:24Benny, what are some of the things you guys are expanding against? Is it number of API calls, number of seats, feature based upselling? Take us there. How does that work?

Benny Schnaider

10:31>> Right. So it's number of first of all, number of interfaces. So people will start, for example, with NetSuite, and let's say one developer or one admin, and they will expand to Salesforce. They will add developers, and then they will add features. Then they will add other tools to our offering like Jira. So the lender and expand is built in within our architecture and within our go to market and pricing strategy.

Nathan Latka

11:02Yep. That all makes good sense. That's helpful. Now when you guys raised the 42,000,000,000 the $42,000,000 I was gonna say 42,000,000,000. Maybe one day. Right? When you raised your when you raise

Benny Schnaider

11:11>> your We wanna talk about revenues at these numbers. Yes.

Cap Table Philosophy and Defining Success

Nathan Latka

11:14Yeah. When you guys raise at the 42,000,000, I mean, most people on their series b, they're selling somewhere between sort of 10 to 15% of the business. Did you guys do a pretty standard round there, or was there something unique?

Benny Schnaider

11:25>> I don't think there was anything unique, but the we are still holding interesting part in the company, the employees, the founders. So it's all good for everybody. We're not looking at the cup table. We are looking at success. I always say so that success is binary. Don't worry about how much is left. Make sure that you are successful first, and then everything will be will fall into the right place.

Nathan Latka

11:55I like that. But, Benny, if you guys raise a 42,000,000 series b and even if it's at a, you know, maybe a lower valuation of 300,000,000, right, so you're selling 10 to 20% of the business, that drastically decreases what some people would define as success. For example, you couldn't sell to Salesforce for a 250,000,000 or $250,000,000 because your last round valuation was higher than that, right? So how do you guys define success? You've actually limited your

12:15optionality because you've raised so much, right?

Benny Schnaider

12:18>> So we have a different set of mind. We worry about the success, as I said, and everything will

12:27>> organize itself in in the future. So rather than worrying about the exit, we are making sure that we have all the resources in terms of capital in this case relationship. I didn't mention it, but Salesforce is one of our investors, and they are definitely helping us within the ecosystem. So we are organizing in terms of capital to make sure that we have all the chances to be successful in this competitive market. Don't look at the competitive

12:57>> market just from the perspective of competition. We're also competing on talent. The Israeli environment is extremely competitive when it comes to talent. I believe it's also in other parts of the world. I know it is because we are recruited also in the Bay Area, in California, and elsewhere in The States.

13:18>> And I think the other part is the attention, the attention of the customers, making sure that they understand what it is that we are doing. They understand what kind of painful problem we are solving to them and how we can make their life better. And the biggest problem that you talk to business operation people is they wanna be part of the company's success. They wanna develop the tools and the processes for the company that will help

13:46>> the business be successful. Right now, the tools don't allow them to be as agile as the rest of the business is. We are empowering them to be basically a very ambitious concept. We call it company as code. So everything think about you probably heard about monolithic repository, like mono repo. Everything is one code. Your code that you are using to develop your service, whatever SaaS service you are providing, and business operation. Everything is one thing, one

14:23>> monolithic thing. You can do the CICD with this methodology consistently across all your tools. This is very powerful. Business operation people are becoming very important to the success of the business and they are running at the pace of the business. This is much bigger than trying to say we are allowing this and that tool to do change management. We are allowing those people to be more agile and help the business generate revenue, make the changes that

14:58>> they need, that they basically need.

Nathan Latka

15:00If you guys are successful, who are you putting out of business?

Benny Schnaider

15:06>> I don't know if we will put people out of business. I would define our success in people that are doing business operation today will be far more productive and far more relevant to the business. Are they currently

Nathan Latka

15:21using though where they're gonna cancel and probably switch to you guys? Mean, are they canceling Looker? Are they can't like, what are they canceling?

Benny Schnaider

15:27>> I think they're canceling manual work, and they are canceling

15:34>> It's not that they are canceling, but they are not as agile as they could be. So let's say with today, they are making changes twice a week, maybe twice, three times a month. With us, they can make changes two times a day, even more. They can make the changes in sync with whatever tools they are using to develop the product. Think about the modern SaaS. You have all kind of hooks between the product itself and whatever

16:01>> the CRM that you are using or the,

16:06>> or the financial tool that you're using. If you're breaking one field there, you'll break the entire thing, and your entire operation will be done. So I'm not thinking about this as what we are expanding. I'm thinking about this. I'll give you one example or one analogy.

Nathan Latka

16:21Benny, sorry. What I'm trying to do is connect where the vision of where you're trying to take the business to something that's common knowledge across my audience, right? So that's why I'm trying to make the connection here. It sounds to me what you're saying is basically, this is a much sexier and easier to use a more productive version of like what MuleSoft might be, or like today might be Zapier where you're connecting multiple streams, you're managing

16:40change across many streams, the pipes of the internet focused on the say on the sales structure first?

Benny Schnaider

16:46>> Correct. And we are focusing on the

16:51>> configuration. If you think about Zapier that you just mentioned, they are connecting more the data at move. We are connecting the configuration of all those tools, and we are synchronizing the configuration. So you think about this. There are three parts here. There is the configuration, the integration, and there is the business processes. Nobody has done the configuration itself so far.

Team Size and Engineering Headcount

Nathan Latka

17:18Yeah. No. Makes sense to me. Hey. We're running out of time, Benny, but last couple questions here. What's the team look like today? How many people?

Benny Schnaider

17:23>> We are about 46 people in the company.

Nathan Latka

17:2746. And how many engineers?

Benny Schnaider

17:29>> About 30.

Nathan Latka

17:31And

Israeli Tech Ecosystem and Late-Stage Funds

Nathan Latka

17:32we love, something's happening in Israel. You know, I've had a lot of great founders on. I mean, it's, know, CoreLogix is growing You've very got Yatka, you've got Guy at Check who's in New York now, but something's in the water over there. Would you credit most of this to just what the the the defense program puts people through and how it makes them think like an entrepreneur?

Benny Schnaider

17:50>> That's only part of it, but there is a lot of other good things. And recently, the big change, if you want, finally, the late stage funds have discovered Israel. So we say we we call them crossover fund, but it's really late stage that are allowing Israeli companies to run all the way and not sell themselves too early to American corporations like we did, let's say, five, ten years ago.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

18:16My friends I love think that. Well, I'm rooting for you, Benny. I hope you guys have a ton of success. In the meantime, though, let's wrap up with the famous five. Number one, what's your favorite book?

Benny Schnaider

18:25>> Okay. So I like the Michael Lewis. Always the combination of history, science, and a good story makes a good reading book, and Michael Lewis sure knows how to do it. The one that I would recommend is Flash Boys, the one that talks about high frequency trading. People know the Big Fresh or the Big Short book, but that's the one I like most.

Nathan Latka

18:49Number two, is there a CEO you're following or studying?

Benny Schnaider

18:53>> Probably in my case, it will be Bill Gates.

18:56>> Bill Gates.

Nathan Latka

18:57Number three, what's your favorite online tool for building salto?

Benny Schnaider

19:02>> The one that I'm using personally, not necessarily just in, salto, It will be unleash.so. Take a look at it. Think about

19:16>> know, we used to do desktop search like Spotlight in Mac, but most of the data right now is not there. And if you wanna look at the data, you have to look elsewhere in all your SaaS. This tool will allow you to look elsewhere.

19:32>> Unleash. Unleash dot so.

Nathan Latka

19:33Very good. And how many hours of sleep do you get every night?

Benny Schnaider

19:36>> I'm trying to get to about six.

Nathan Latka

19:38Okay. And what's situation, Benny? Married, single, kids?

Benny Schnaider

19:41>> Married with three daughters.

Nathan Latka

19:43Three kids. Great. And how old are you?

Benny Schnaider

19:46>> 63.

Nathan Latka

19:4763 years young. Last question, Benny, what do you wish you knew when you were 20?

Benny Schnaider

19:54>> I wish I would explore some more the area of life science. Now with the pandemic, the fact that you can develop molecules, cure real world problems in such a speed using this type of technology is amazing. I wish I would know more about this and be able to participate some more.

Nathan Latka

20:19Guys, salto.io based in Tel Aviv is bringing DevOps to sales ops. They've raised a war chest to do it. Over almost $70,000,000 raised, 42,000,000 series b earlier this year, really to attract great talent as they look to scale. 46 on the team today. They've got under a million bucks in revenue, but they just turned on paying customers a couple months ago as they're now looking to scale and already seeing great expansion revenue in those early sign

20:42ups. They're gonna have an exciting 2022. Benny, thanks for taking us to the top.

Benny Schnaider

20:46>> Thank you very much.

Nathan Latka

20:49One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday, 1PM

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