People don’t buy a product now, it’s all about the ecosystem. Be careful not to think about your SaaS product or app in isolation, think about how it interoperates as part of a bigger solution and build integration capability into its core. The more your product can deliver as part of a solution, the more value it can offer to a company and the easier it is for them to see that value.
As part of my series about the “5 Things You Need To Know To Create a Successful App or SAAS”, I had the pleasure of interviewing Renat Zubairov.
Renat Zubairov is CEO and co-founder of elastic.io, where he works hand-in-hand with customers and equally closely with the technology roadmap of elastic.io’s core product development. The rise of the digital enterprise and the emergence of the software as a service (SaaS) economy created a new market opportunity for integration platforms as a service (iPaaS). This prompted Renat to form elastic.io with two friends, Igor Drobiazko and Rico zu Knyphausen, to provide a user-friendly tool capable of connecting more than 100 — and growing — commercial software applications. Prior to this venture, Renat led product management of cloud application integration products at Talend and service-orientated architecture software products at Sopera. He started his career in software design and engineering with international companies, Nokia Siemens Networks, and DHL.
Thank you so much for joining us! Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Myearly interest in computers began in the cold, dark winters of Russia! After studying computer science in Moscow, I was fortunate to win a scholarship to study in Germany at the University of Duisburg-Essen. This is one of the youngest universities in Germany and I found its approach always encouraged us to explore and innovate, which may have kindled an entrepreneurial spark.
A few years into my career, I was working as a software designer for Nokia Siemens Networks in Dusseldorf, where I met Igor Drobiazko. We became firm friends, even when our careers took us in different directions, and often bounced ideas around for starting a business together, but we never felt we had the right idea.
At this point, data integration was not a new concept but, by the time I joined service-orientated architecture (SOA) specialist Sopera in 2008, we were confident that integration was going to play a leading role in the future of enterprise IT.
Growth of the cloud and emergence of the Software as a Service (SaaS) business model was the trigger for us. It was making companies innovate around the role of technology in the business environment, as well as how data and applications could add value. The timing felt right to do something different.
What was the “Aha Moment” that led you to think of the idea for your current company? Can you share that story with us?
It was perhaps less of an “aha moment” than separate journeys joining on a common path when we also met Rico zu Knyphausen who immediately shared our passion for solving integration challenges in the cloud. By this point (2012), we were all working with different companies but had a common involvement with data integration. I was working at Talend at the time and saw that the combination of cloud adoption and the digital transformation was creating a new business opportunity.
We realized that application integration could deliver significant time and costs savings for IT managers and software vendors, so this is where we made our focus. And the rapid rise of Software as a Service (SaaS) applications was proving potential for success from the cloud-based delivery model.
elastic.io launched in 2013 as a born-in-the-cloud innovator, which is important because our solution is native to the environment in which it operates, not re-engineered to fit. We still spend a lot of time educating the enterprise environment and software vendors on the iPaaS (integration platform as a service) model, but the benefits are clear to see.
Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
Here in Germany, we don’t traditionally have the same entrepreneurial culture as other parts of the world, and the ‘start-up’ ecosystem was not as well developed as in, say, China or the U.S. People definitely thought we were a bit crazy to leave stable and well-paid jobs because Germans are naturally more conservative and risk averse. Socially speaking, it wasn’t the easiest time!
In the first year it wasn’t just tough for me and my co-founders though, it was a challenge for our families. Some things available for more ‘stable’ professions like loans or mortgages weren’t available without a regular employment contract and I was keenly aware of society’s perceptions. Plus, whilst we were all confident in our technical ability, none of us knew how to run a business and we had some steep learning experiences and harsh reality checks. I regularly had the feeling that I had jumped off a cliff and was building the airplane as I fell!
But this was a once in a lifetime chance to do something different, and not just for myself — it was for my family too. To its credit, Germany has generous social security support, so this provided a financial safety net in the first year.
The first anniversary of elastic.io was a watershed in several ways. One of our founding partners, Rico, decided the start-up life wasn’t for him and he left the company, though remains a close friend and supporter.
We also secured investment from a business angel — which was also unusual in Germany at the time. Unlike the U.S., where there seemed to be a new Silicon Valley success story every week, Germany simply didn’t have the same environment. To this point we had bootstrapped the business on our own money and the generosity of friends, so the funding was welcome but — more importantly — it was a vote of confidence that pushed us onwards.
So, how are things going today? How did your grit and resilience lead to your eventual success?
Well, elastic.io has continued to grow, we have been seeing triple-digit revenue growth year after year, which has brought its own challenges for a company of this size.
We launched our core iPaaS product in 2015 and in 2017 elastic.io became part of the mVISE group, a German publicly listed IT consulting company with over 15 years of enterprise IT consultancy and project experience. It acquired a majority stake but let us still operate independently and, most importantly, provided an injection of liquidity for the next phase of business growth.
Today, elastic.io has large and mid-sized enterprise customers across Europe that are using our iPaaS technology to connect data sources throughout their businesses for better operational efficiency and customer experience.
I realized during this journey that, although success is important, it is the support of family and friends that keeps us moving forward. Building a start-up business is so emotionally draining, that even a small ‘yes’ amongst all of the ‘no’s is a big mental boost.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
I once saw a tweet from a venture capitalist that said something along the lines of ‘I organize startup networking events, but I’d never invested in the people that attend them!’ It got me thinking about the amount of time I was spending on networking events for entrepreneurs and competing in start-up pitch competitions.
To me, the learning is that, while these events provide peer support, they don’t build the business because the people we met at these events were unlikely to ever be our customers. So, we revised our approach to spend more time with current and potential customers than on the start-up networking scene.
Secondly, I learned that readiness to pay is the only positive feedback that counts! In the early days of elastic.io, it’s fair to say that my technology skills by far outweighed my understanding — and interest — in business. I soon learned, however, that customers can be quick to verbally support your product but until you offer something they are happy to part with money for, you don’t have a business! That certainly made us focus on the commercial aspects of our product and think more carefully about where we invested in its development.
What do you think makes your company stand out? Can you share a story?
elastic.io prides itself on attention to detail. In the always-on age, it is a waning characteristic in individuals and companies, but we put it front and center of our business and our customers notice that. In part, it is a feature of the German engineering culture, but it’s also the size of our business that allows us to take care of the details and work in close partnership with our customers.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
Being an entrepreneur is a rollercoaster ride, where you are expected to deal with a vast spectrum of emotions. My advice is to take time regularly to reflect on the situation you are in. I find that mentally taking a step outside of my own role and talking to other people helps me to think about a problem from a different angle, which brings perspective and new ideas.
This is where I have found that having a mentor is invaluable. I’ve been lucky to have many people, all with different perspectives and skills, to support me and offer much-welcomed advice along the way.
Taking time out to relax and reenergize is important too. Man is not a machine, so spend time away from the business so that you can give your best when you are there.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
There are so many that have helped me get to where I am today! Rico, our co-founder, played an essential role in the early days of setting the foundations for elastic.io’s path to success.
My former boss at Sopera, Ricco Deutscher, should take the credit for encouraging me to jump off that cliff and start a new business.
But it is one of elastic.io’s investors, Fabian von Kuenheim, that has most helped me to grow personally and professionally in this role. Fabian has supported elastic.io from its early days, and I don’t just mean in financial terms — although for that we are immensely grateful! Fabian has experience as a founder himself and he always brought that perspective to the table — whether with business advice or just to help me to think differently.
Ok thank you for all that. Now let’s shift to the main focus of this interview. Approximately how many users or subscribers does your app or software currently have? Can you share with our readers three of the main steps you’ve taken to build such a large community?
Because elastic.io is part of mVISE, which is a publicly traded company, we aren’t able to disclose numbers of customers. It’s also not always straightforward to estimate because we work directly with enterprise users as well as indirectly through ISVs (independent software vendors) and OEMs (original equipment manufacturers) who then embed our technology into solutions for their customers.
In the beginning, we focused on business networking and startup events, where we won a number of awards. Our participation in programs and exhibitions in the tech space brought us our first customers.
After the first year, our content marketing tactics started to show returns, and now this is the focus for our marketing and business development engagement — along with word of mouth and our inbound sales channel.
We have an active blog and search engine orientated marketing strategy. We make sure that we post regularly on the blog on topics that are closely related to our business.
In fact, we learned a lesson early on with our blog content because there were two or three posts that brought a lot of traffic from the wrong audience, adding nothing to our business except noise and confusion. A post on why elastic.io uses Amazon CloudFront for dynamically generating the content, for example, meant that searches for this term placed us second or third on the results page. For a year or more that brought in a lot of leads…though none from our target audience and no sales leads. Eventually, we took the post down, but it served an interesting lesson!
Now we center our marketing efforts on high quality, focused content, rather than volume, to engage with the right customers. For example, one of our elastic.io team has produced an ebook on application integration that explains many of the key concepts and challenges. It is available for download from our website and we have actively publicized it through media and blog channels. Across all marketing activities, though, we rigorously measure inbound traffic to see the impact of our activities and try to quantify they deliver.
Today we also have an outbound channel for lead generation. Plus, we participate in targeted industry events like SaaStr and SaaStock and look at opportunities to amplify our presence at these forums.
What is your monetization model? How do you monetize your community of users? Have you considered other monetization options? Why did you not use those?
Our business runs on a straightforward subscription model, much like any other as-a-service vendor. This means we have a keen focus on making our product ‘sticky’ to keep customer churn to a minimum. We aim to recoup costs in the early stage of a customer relationship so that it becomes increasingly profitable over time. This also underlines our commitment to detail and quality, because long term relationships are most important to our business.
In the business to consumer segment, it is easy to find companies with double-digit customers leaving every month, but that would be fatal for business to business operations. At elastic.io we strive for negative churn but, at the same time, it is important to identify customers that are not moving from net loss into net gain as the relationship continues.
Ironically this stickiness is also what elastic.io offers to ISVs! Building integration into their software enables ISVs to offer a product that integrates seamlessly with other applications in the enterprise architecture, which in turn increases their customer retention.
Based on your experience and success, what are the five most important things one should know in order to create a very successful app or a SAAS? Please share a story or an example for each.
1) People don’t buy a product now, it’s all about the ecosystem.
Be careful not to think about your SaaS product or app in isolation, think about how it interoperates as part of a bigger solution and build integration capability into its core. The more your product can deliver as part of a solution, the more value it can offer to a company and the easier it is for them to see that value.
2) Today’s ‘land and expand’ business model for SaaS products means that products need to be sticky.
SaaS products need to incentivize users not only to subscribe for as long as possible but also expand their use of the application’s functionality. So, the big question is ‘what will make your customers stick around and build up engagement with your app?’
Often this links to the first point, in that the bigger your product’s role as part of a wider ecosystem, the more embedded it becomes within a company’s IT infrastructure and the more users will explore its capabilities to deliver value.
3) Do what you do best; partner on the rest!
For example, you could spend precious time and resources doing your own app integration for each individual customer…or you could build iPaaS into the product and never worry about integration again.
At elastic.io, we don’t partner on technology, because this is where our heritage lies. But we do engage in business partnerships. Prior to the acquisition, for example, mVISE was our business partner because of its focus on data management and consulting. We have also partnered with software vendors to promote our products as part of their offering, so there is mutual gain.
4) It is possible to grow revenue by losing customers
A concept called ‘net negative’ revenue churn means that you need to look at where your profit is coming from as you grow. The number of customers means nothing, take a closer look at the numbers and see where your positive revenue growth comes from, then focus on that market for growth.
You will see that there are some companies that never move from the phase of net loss because of their demands on the product, level of attention required to service the account, or the complexity of the product versus the scope of their subscription. Have a benchmark for time to profit and keep an eye on it so that certain customers don’t become a drain on revenues.
5) Success takes longer — and costs more — than you expect!
This is summarized nicely by the Twitter co-founder, Biz Stone, “Timing, perseverance and ten years of trying will eventually make you look like an overnight success.” If you want to succeed, you need to stick at it. Nobody said that building a business was easy!
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I embraced vegetarianism a couple of years ago now. Just as being an entrepreneur in Germany presented some social challenges, being vegetarian in a country that has more than 1,500 different types of the sausage was never going to be easy either! But it was the environmental and social impact that I was most interested in — the improvements to health were a happy side effect.
Of course, the meat-free ‘movement’ has been gathering pace long before I joined in and, whilst not a new direction, I am an advocate of increasing education on the effects of food surplus on individual lifestyle and the global economy and environment. It is as much an economic problem as much as a social one, but the balance still needs to tip for it to have a great impact on local or global markets.
Adopting a meat-free diet is a small but significant step that I have found to be far less daunting than I initially imagined — so I would challenge more people giving it a try.
How can our readers follow you on social media?
The best place to connect with me and elastic.io is on LinkedIn, where I regularly post our blogs and things that interest me in the world of data management. https://www.linkedin.com/in/zubairov/
You can also find me on Twitter https://twitter.com/zubairov
This was very inspiring. Thank you so much for joining us!