SaaS Interviews with CEOs, Startups, Founders
1742 How Elastic.io Sold, Got Earnout and Hit $6m ARR in PaaS Space
01 May 2020
Chapter 1: How did Elastic.io grow before its acquisition?
Elastic.io launches company in 2013, grew it to about a million dollars in revenue before selling it in 2017 to a larger company. It's now grown, obviously, the last disclosed public numbers were about 2.3 million euros in revenue. They continue to grow rapidly, and that's on $900,000 of EBITDA, which is obviously nice growth, healthy growth.
They did this all bootstrapped, which is obviously a great story, serving hundreds of customers in the Zapier kind of MuleSoft space, iPass space, scaling up to 50 folks on the team today. Hello, everyone. My guest today is Renat Zubarov. He is the CEO and co-founder of Elastic.io.
Before Talend, DHL, and Novia, he's also a geek and a father of three, but now, again, full-time focused on Elastic, which is helping bring data from apps and clouds together. Renat, you ready to take us to the top? Oh, yes. All right. Thanks. So give some context here.
First, if people missed your first interview with me, Elastic is very much in the space of kind of, you know, Zapier or more enterprise like MuleSoft. Where to kind of put yourself on the spectrum? Yeah, somewhere between Zapier and Mulesoft, I would say. Okay.
So we are more complicated, more complicated, more flexible than Zapier, but let's say less comprehensive or let's say less broadly spread across the different industries than Mulesoft and less enterprises than Mulesoft. Yep. And you are, this interview is also a little bit different because you have sold the company. You're now basically running the company inside of another company, correct?
Correct, yes. When did you launch the company in the first place? We launched in 2013. We were three co-founders, so three founders of Elastic. And we sold it in the May of 2017, actually, in Germany. Okay. So guys, if you want the story of why they sold in 2017, we cover that back in the first interview together. So you can just search Elastic Latka and that interview will pop up.
So we're not going to talk much about that, but we're not, what I'm curious about is, is what is product development? I mean, what, what have things looked like since the acquisition? You know, a lot of times when founders are acquired, they're sold on things like, you know, take our stock price as part of the deal.
Our stock's going to go up and you get less cash or stick with us for four years and you'll get an earn out. But sometimes they lose control of their ability to earn the earn out. How are these things panning out for you? So far, pretty well, I would say. I think at the time when our parent company acquired us, we were not a big company. We were a small company at the time.
And definitely, it was a strategic direction of a company, which is now a parent company called M-by-S-A-G. to become more involved in particular product, product verticals, I would say. And so far, we were able to grow like 100% year to year with the help. And it was actually playing very well for all of our companies. So for Elastic, as well as for Envise.
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Chapter 2: What challenges did Elastic.io face after being acquired?
Like, one may be iPath, but not iPath at all. And this actually means that each iPaaS vendor needs to define their own category, find their own place in the bigger market, growing market, but there still needs to be a good niche in this market. And what we see now is the specialization is kicking in. So the different areas where we specialize and different areas where our competitors specialize.
Like Zapier, for example, for small customers, MuleSoft is like for big enterprises, like a Fortune 50, and then somewhere in between. How many customers are you serving now today, paying customers? Unfortunately, I couldn't disclose this information. What's the last disclosed number?
uh i could not remember to be honest i i could not remember right now okay this is like tricky information because obviously in a bigger company we we have our current customers and it's now hard to differentiate between the customers of us and customers of envise is now obviously one of the reasons templates for acquirers that to liberate their customer base in order to resell them to our product and actually it was working very well over the last couple of years
Well, yeah, that's why I asked the question. That's usually why an acquisition happens. So, I mean, I guess, do you not remember what last publicly went out or did they not release anything publicly? I don't know, to be honest. Okay. Yeah, last time you were on the show, which was back in January 16th of 2018, you said you were past 200 customers.
So, I mean, is it safe to assume you're north of that today? Yeah. Definitely. Okay. Well, I mean, you laugh, but I don't know. It could have been small. I mean, for us, it's definitely our one-off specialization is actually OEM and white label story. And this is why we are very strong and we have very clear USP in the market and one of the market leaders in this sense.
And by playing the story, obviously, it's pretty interesting to see what is a customer. Is it a customer like our partner who is rebranding and OEMing our application? Or is it actually an end customer of this customer? So basically, calculating the customer numbers is actually not very easy. How do you look at it? We see end customers as our ultimate customers.
Our OEM partners are definitely our customers. We got paid by them through direct or revenue share or whatever. There are different models. But at the end of the day, our ultimate success is in success of our OEM customers, in success of their end customers. And this is our goal, right? We are only then successful when they are successful. And are you still kind of in that mid-market range?
Specifically, you said the average customer last time we were on the show pays about $1,000 a month or $12,000 ACVs. Is that still the sweet spot? It's pretty much, yes. Okay. Yeah. So back to your point, kind of, you know, more mid-market-y than a Zapier, but less enterprise-y than a MuleSoft. Can you explain exactly like a connection that one of your customers uses you guys to facilitate?
For example, my audience knows, or maybe they do it on Zapier, they're thinking, oh yeah, I connect my Airtable to my Google Calendar using Zapier for $10 a month. What's a connection that one of your customers might do through Elastic? Well, it's definitely, it's very, very, very, very different from our different as a direct customers or our OEM customers.
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Chapter 3: What has changed about Elastic.io's product since the acquisition?
Um, the conditions I could imagine, I could imagine when the company changed the priorities, you know, and change the strategy and this could happen for like a huge organization, which I could, which I could believe that. Um, but so far we haven't run into this problem to be honest. I couldn't really, I couldn't really, um,
imagine the situation right now as a strategy as a strategy which we agreed on and which we actually communicated and spoke before the acquisition is pretty much there yet now for our parent company they're actually even more committed to the strategies and then actually all started before before because before
we were like a bet you know it was like okay we could buy this company and see how it developed it's still small it's still like few 20 people i mean there's nothing right but now over the years we grow into the significant part of the revenue of our parent company and also significant strategic part of it
So far, I don't see this as a valid opportunity, although I could imagine for some different scenario where it could be potential possible for other software service founders or company founders. I guess one of the reasons I ask is if a private entity was really interested in Elastic and came to Envise AG and offered something that was higher quality, Let's say, for example, that you guys did.
It's reported here. I'm reading June 2019, five point two one million dollars in revenue. If someone can, you're obviously trading at a multiple rate of revenue or EBITDA. If someone came and offered the company, the parent company, a higher multiple than what they're currently trading at for specifically elastic product and elastic revenue.
Um, I'm curious how you think, obviously you can't say yes or no, or what you're thinking, but I'm curious at least that the process, the discussion process of like how that would filter down to you as the founder of the company that would potentially spin back out. Um, I understand the question.
Also, again, I think, you know, we are working with our brand company since already like two years, maybe like 30 years, we're working together and, uh, I think it's not feasible now to separate these two companies from each other.
you know because the the way how we work together the way how we actually merge together the way how we we we have a good combination of strengths and weaknesses on both parts right we were very much for the company less sales marketing less professional services the mis is actually totally opposite so there are no comparative expertise but a lot of sales project management professional services and marketing expertise and these two combination make totally sense and the interesting thing aside
we just got significantly less expensive on the market, if you could check the numbers. You know the situation right now in the market, and I think the valuation of Envise right now, including Elastic.io, is around about, if I could guess, like, okay, it's the 2nd of April today, maybe like, I don't know, 15, 16 million euros? Yeah, you're talking, obviously, we're talking about the virus, right?
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Chapter 4: How does Elastic.io differentiate itself in the iPaaS market?
They continue to grow rapidly, and that's on $900,000 of EBITDA, which is obviously nice growth, healthy growth revenue. They did this all bootstrapped, which is obviously a great story, serving hundreds of customers in the Zapier kind of MuleSoft space, iPass space, scaling up to 50 folks on the team today. Call it 80% engineers or not. You want to add something on the end?
Yeah, it's a small correction. We actually also had an investor, which was bought out by the acquisition. How much have you raised?
Chapter 5: What customer segments does Elastic.io serve today?
I think this number was also disclosed, but it's actually a small seven-digit number. Okay, so less than $100,000. Seven digits. Three, six. Oh, seven. Got it, got it, got it, got it. Okay, so less than nine million. It's less than two million in the euro. Oh, okay. Okay, fair enough. Very good. Well, hey, listen, appreciate you taking us to the top. Thank you.