Israel's Redis Labs rides the database wave

Ofer Bengal  photo: Tamar Matzafi

Co-founder Ofer Bengal: We're spearheading global high tech; people can make an impact here.

Redis Labs CEO Ofer Bengal is looking for workers. "We have 65 employees in Tel Aviv and in Mountain View in Silicon Valley," he says, "We hope at least to double this number in the coming year."

Bengal needs workers in order to continue developing Redis Labs' database product, and in order to continue to boost sales, which "have tripled each year in the past two years, and will triple again in 2016."

Open code-based databases are a field that has been growing at the dizzying rate of 60% a year. Bengal describes business in this field as like riding a tidal wave. He is a veteran of the Israeli high-tech scene. Among other things, he founded the second company in the Rad group, RIT Technologies, and floated it on Nasdaq in 1997. Redis Labs is also not the first company for the other founder, Yiftach Shoolman. In the past, he founded Crescendo Networks. "But for all our self-esteem, we are leveraging the popularity of Redis. You feel as if you are flying on a huge wave."

"What's special about what is happening here is that we are at the cutting edge of global high tech. I'm an old high-tech animal. In no company with which I have ever been associated, including those that went public, have I found myself spearheading the global high-tech agenda. To continue succeeding we have to be up-to-date. I'm online 24/7. If someone says something, I have to tweet back. Our finger is on the pulse all the time. All the time you have to respond, change, act."

Redis Labs was founded in 2011. It has raised $28 million since it was founded ($5 million in the form of a credit line and the rest in capital) in three financing rounds. Among the investors in the company are investor groups from the Netherlands and Brazil, Zohar Gilon, Ilan Shiloah's TheTime, Benny Hanigal (founder of Lannet Data Communication and formerly with Star Ventures and Sequoia), Carmel Ventures, Bain Capital Ventures, and Silicon Valley Bank.

We started with something else

The company's business is databases, the largest field in software. Sales in this field, which is dominated by players like Oracle, IBM, Microsoft and SAP, totaled $36 billion in 2015, and are is still growing at 8% a year. The market is expected to reach $50 billion by the end of the decade.

The really fast growing field, however, is open code-based databases, which provide solutions for the inconceivably huge data needs of Internet players like Amazon, Google, Facebook, and the rest. Redis Labs operates in this area on the Redis database, developed in 2009.

Redis Labs became a Redis company by chance. Bengal: "When the company started, we began with something else. We began with a database acceleration engine that at the time was also open code. We wanted to improve it, and we looked for ready tools to shorten the development time, and that's how we came across Redis, which was just getting started. We wanted to use it as part of our engine. Our first product was another product. While we were working on it, we saw that Redis was becoming more and more popular, and we said that we were in the wrong business. Let's jettison our product and latch onto this Redis thing. We applied ourselves to it, and grew with it."

Among Redis Labs' competitors in open code-based databases are MongoDB, whose last fund-raising round was at a valuation of $1.8 billion, and which works on open code by the same name, and DataStax and Couchbase, companies based on open code called Cassandra and which raised funds at valuations of $1 billion.

Bengal says that the other companies work on the Red Hat model, that is, they provide support to enterprises that implement these open codes, whereas Redis Labs sells its own software product, which includes a heavy technological framework, and additional developments integrated into the Redis open code. He says that Redis is the fastest growing of these open codes. The person who developed it in the first place, a Sicilian called Salvatore Sanfilippo, who has become a guru in this field, now works at Redis Labs.

"When we come in, it enables corporations to make the Redis database their main system. Because what's the problem with a corporation? It needs a daddy. It needs someone who will give it help and will be the person to blame when there are problems. We don't do that. We chose this strategy because if the idea is you only do support, then in order to grow you have to make the company bigger. From the outset we wanted to sell software, and so we developed around Redis a lot of our own unique software that upgrades Redis from a product for developers and start-ups to a product suitable for large corporations."

Like an electricity bill

How do you sell?

Bengal: "On two models. The first model, with which we started, is without salespeople. Everything is on the Internet. We have thousands of servers on various clouds, in 45 data centers around the world. We lease servers, put our technology on them, and our customers maintain databases on our servers. We manage them, and we charge according to the size of the database. Every hour, the system measures the size of your database, and at the end of the month you receive an account, like an electricity bill.

"The second method is software sales on the old model, only we sell a license for a year and not forever. We have a sales office in the company's headquarters in Mountain View, and they are all Americans there. The manager is Jason Forget, who managed sales at Imperva and brought it to sales of $250 million. He manages a large team, with people all over the US. The marketing department is also there and generates demand. The sales method is simple: we look for those who have Redis as open code, and persuade them that it's worth their while to switch from open code to us. It works in 95% of cases. The hit rate is amazing.

"In 2013, we started by selling service only, because we were a poor company with no money, and to take on people is expensive. We started with a no-contact model whoever came along was welcome. During this time we developed the software itself, and we started to sell it in the second quarter of 2015, and it's going like a bomb. We closed fifty large deals in three quarters. An average deal is $60,000-70,000 a year.

"Today, sales are 30% software and 70% service. Next year it will be fifty-fifty, and software will continue to grow more rapidly by orders of magnitude. Service is suitable for smaller companies. Large corporations prefer to buy a license. Sales are progressing by leaps and bounds."

So presumably you need to recruit salespeople.

"We recruit both development people in Israel and salespeople in the US. Both things are very difficult. In the US, we are located in Silicon Valley, which is the most expensive place in the US and the most competitive in the US. There are so many successful companies there, all chasing after the talent. Fortunately we are considered a hot company there too, and we manage to recruit good people."

A hot company in Silicon Valley needs money from sexy investors

"Venture capital funds that want to invest are courting us all the time. Up to now, we haven't needed it, because we have another $9 million in the bank and a credit line we haven't utilized."

What happened to raising money when you can?

"We might do that. We're considering it."

I read that this is the end of the high valuations. At what valuation did you raise money? At what valuation do you think you will raise money?

"I read that too. I'm not sure it's true for anyone for whom sales are going as well as they are for us. There will certainly be a decline, but it won't be 2001 and 2008. The last round was at about $100 million. I presume that the next round will be at a much higher valuation."

But raising money is easier than recruiting workers. And at least from what you say, it sounds as though recruiting workers in the US is easier than in Israel.

"The problem is that we are not all that well-known in Israel, even though we have here an elite unit of Israeli high tech, PhDs and super-talented people. We aren't a couple of ex-8200 intelligence unit enthusiasts giving it a go. I don't look down on anyone, but here we have more mature people. I'm altogether a dinosaur. If I hadn't founded the company, it wouldn't have accepted me. But we are looking for talented people of any age.

"There's a bunch of software people here at a super high level, and it's very hard to recruit good people because Israel is limited from the point of view of quantity of talent. There are a lot of companies and a lot of entrepreneurs, and a lot of good people going into entrepreneurship. It's not easy, but we're coping with that as well.

"Working here is an opportunity because we are at the cutting edge of global high tech, and because you really can influence things here. I remind you: I've already made an exit, I'm not in a hurry, and I don't need quick money. We are veteran entrepreneurs. We think there's an opportunity here to build a really big company because we latched onto something so big. And that is the challenge for anyone here; to be part of a big technology company. This is deep technology. For anyone who finds software technology appealing, this is a great place.

"There are people who vacillate between a great job at Google and us. And I ask, how much impact will you have at Google? Here you have an impact and there's the promise of a very big company."

But there's great food at Google

"We're right opposite Hudson Brasserie."

Published by Globes [online], Israel business news - www.globes-online.com - on January 18, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Ofer Bengal  photo: Tamar Matzafi
Ofer Bengal photo: Tamar Matzafi
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