Intro

Mike: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is episode 64 with Idit Levine, Founder and CEO of Solo.io, an API Gateway and Service Mesh company with a product called Gloo – not to be confused with Gluu – the company that I lead, who sponsors this podcast.
I’ve been trying to get Idit on the podcast for many years ever since I spoke with her at an Open Source Conference in 2019, and finally, her PR agent reached out to me a few months back, and, of course, I agreed immediately.

Solo is not your typical startup journey, it’s sort of a miracle it got off the ground, but once it did, they didn’t waste any time – they’re already breaking 10 million in sales.

To avoid spoiling the story, I should just stop here, so let’s cut to the interview.
Idit, thank you so much for joining us today.

Idit: Thank you so much for having me, Mike.

Did Solo Join an Incubator?

Mike: My first question, and this is sort of a different one, but it’s something I’ve been thinking about, is when you first started Solo.io – which was not that long ago, I think five or six years ago – did you join an incubator and why or why not?

Idit: I did not. I wasn’t even aware that they exist, honestly. When I started the company, what I knew is that I had some “technical” friends that I knew that I can start it, and basically started doing this – the software was more about the technology. So, I needed to learn that while I was raising money, and so on.
Honestly, Mike, I think the first VC that I met, they asked me about a pitch, and I asked, “What is a pitch, what am I supposed to do?” I really didn’t know much, I needed to learn.
I wasn’t aware of a long incubation, definitely not in those days, because it’s not very popular.
I just basically started the company around software and just tried to get some money in order to kind of like bootstrap the company. But that’s basically the things I would do. Honestly, mainly because I wasn’t aware of it.

Mike: Do you think if you could do it again, you’d use an incubator?

Idit: No. Now, I feel that they learn so much from those processes. I think it’s very good if a first founder maybe is not aware of a lot of stuff, that’s really helpful to be kind of like protected by team that has done it before and knows how to help you and guide you.

Today, I think I learned enough of the process, and I’m doing it for a while right now. I made a mistake, I learn from them, so now, I’m feeling that I’m more free to actually do it myself again, if I need to.

State of Company at Seed Funding

Mike: At the time you raise your seed funding, was the open-source project started, did you have any technology, did you have any initial customers or team? Like, what was the state of the business when you closed, let’s say, that seed round?

Idit:  No, there was nothing, honestly. Before that, I worked in the EMC. Part of the EMC, my job was to basically do cool stuff on open source. I was in business, I was in the city office, and my job was to basically, if I had a new technology and we had to figure out how we can play that. Basically, we did a lot of open source and invent development. We immediately knew that we were playing back then, in Kubernetes, Mesosphere and Mesos, and all that great kind of technology. Docker was just a new thing back then, so, again, playing in that ecosystem was immediately a thing that we’ve done.

When I started the company, there were two things that I started pitching in the beginning. The first thing that I was pitching was unikernel. It took me a few months to understand that that’s something that I would not be able to ever raise money on. Probably for good reasons.

By the time we were at home, I was pretty bored, so I built another open-source project called Squash. And that was an open-source project that related to debug microservices in Kubernetes.

And that was relatively successful project, but mainly, as I said, I think that there is a good money on it because the work that I was doing before in the open-source, I literally built a reputation of someone who is capable of doing a cool project.

How Many VC’s Pitched?

Mike: How many VC’s did you pitch in your initial seed funding round?

Idit: Oh, man, a lot. I mean, as I’ve said, again, you remember, I was on the east coast, but once I decided to do it seriously, I left the EMC, and then, I basically went to the west coast, where there is VC that is more in that space and that, yeah, I got a lot of those, a lot. I think like every founder as well.

Products?

Mike: I don’t want to go too deep into the tech, but when I look at the Solo website, I see there are a few products. I am wondering if there’s like an 80/20 rule here, where one of the products accounts for 80% of the revenues?

Idit: We don’t have 20/80, actually, that’s interesting. I think it’s probably 50/50. And the reason is because of the packages, a lot of time we’re selling them together. If you look at all the projects, the main two markets that we’re going after is, the Gateway and the Mesh market. We started with a Gateway mainly because the Mesh wasn’t — you know, we couldn’t sell it.

So, we started from the Gateway, and we knew that this is kind of like an entry point and kind of like a stepping stone to a Service Mesh, so that felt very in the area. And I believe that in the future the Mesh will grow more.

First Customer

Mike:  So, one of the challenges of a start-up is always the first customer, especially if you’re selling in the Enterprise space. How did you convince this customer to be first? What did they actually buy? And whatever they bought, does that resemble your current offering today?

Idit: Yes, actually, as I said, we started selling the Gateway, and that was a flagship product of the company. When we started, basically what we did is, we had three design patterns in a way. I didn’t do it the regular way, we did it from open source. We didn’t go and talk to customers and say, “What do you want us to build?” And then, we built it. We were more like, we’re in the open-source and kind of like say, “Okay, that seems like the right thing to do.”

Kubernetes came, you needed a new API Gateway, you wanted probably an Envoy – that’s what we believed people wanted – and then, we went to pitch.  And a lot of those customers came to us from the open-source community.

So, we learned a lot from that process. What we did, and we did it differently, because we are coming from open source, we basically managed all our relationships with our customers through Slack. Then, understood what we need to do in order to make that very, very successful in their infrastructure. And we basically got all those requirements and built them into the product. It’s very different to build an open-source project versus an Enterprise environment.

Value Prop

Mike: So, what would you say is the most important thing that motivates your customers to buy your product?

Idit: I think that today Solo is kind of like three things that we are very good at. Number one is, we really, really understand the marketing really, really well, and the technology in it, so we know what’s coming up. We know what is 20 and what is not, we’re looking at adoption – we really understand that very well.

So, we always compromise with the customer that we will bring them to the edge of the technology. If there is a new technology that is relevant, we’ll probably put it in our product. I think that’s one thing that customers like, so the perception of Solo is that it is an innovative company, which it is – it’s what we are.

The second one I think is customers in sales, which was always one of the things that is the most important to us. This work with Slack, when I started it, everybody told me that’s not going to scale. And surprisingly today, when we have hundreds of customers, it is still scaling, and the technology itself, if you look at it right now, there was a lot of shifts in the market in terms of the infrastructure that you’re running, most likely running in something like Kubernetes.

So, it makes sense that you would have a Cloud native Gateway, and when you start scaling and scaling and scaling, it makes sense that you will take care of something like MPLS and Security and Zero-Trust and Observability, and all those microservices – it’s just that this is the needed technology when you are going to scale. And that’s where the market of microservices like Kubernetes is right now.

Is Solo a Distribution of existing Open-Source Components?

Mike: Solo is an interesting company in that, in a way, you write software, you write a lot of software. But you also have a curated distribution of open-source components that you give your customers a control plane to manage and take advantage of. So, it’s not just the software that you’re writing, but without Envoy and without Kubernetes and without Cilium, you really maybe couldn’t even build a product. So, do you think that maybe this is a new model, where you add a little software on top of this huge curated distribution of other very complicated components?

Idit: Instead of creating the open-source project – we do have one, for instance, Gloo Edge is a technology that is an API Gateway based on our technology, and it is based on Envoy. I think that what we were good at was identifying, pretty much at the beginning, which of those technology would be better on Envoy, when honestly Envoy was relatively a very small community no one really knew about it, and NGINX was the chosen proxy.
We chose Istio, even though we could have competed like everybody else and tried to build a better service mesh, but I knew that that will be the choosing mesh, even though when we looked at it, it was pretty messy, and we knew that it would take you a while to get there.

I was very, very aggressive to my team saying we are not going to be competitive, we are going to use that.

And the reason is because the software that wins is not always the best software. It is the software that most people are leaning to because they will make it eventually the best software. And I think that that was something that Solo has recognized very well. All that technology, all those products that we are doing is basically we are building – and I will not say a little – we are building quite a lot of logic, ease of use and enhanced technologies on top of those — let’s call it basic component that you need.

There is a lot of complexity actually in the control plane, way more than in the data plane, for instance. But, yeah, as I said to you, this is my model, hopefully sellers will succeed with it, but yeah, I believe that open source is building an amazing technology, and that we should leverage the best.

We are also contributing a lot of those technologies. I mean, if you look at the Istio right now, the new thing that we did with Ambient that we and Google contributed to it, it’s mainly we are the main contributor to it. And Istio, we are contributing a lot to it, we have a full team that is responsible to contribute to it. If you look at this, probably I think the most engineers that are working today on Istio are coming from Solo.

How to Decide What Features Are Open Source?

Mike: I was looking at the open-core model, but I’m actually more curious about, there’s always this friction between what do we put in the community version and what do we open-source. What’s the decision process behind deciding whether a plug-in will be commercial or non-commercial?

Idit: In the beginning when we started, we had nothing, we put everything in the open source, but then at one point, we understood that that’s a problem. Because eventually, somehow, you’re not going to exist as a company if you are not going to make a little bit money at least. So, we needed to figure out that what we’re putting on to double it will make sense, we are not hard to open source because it’s very important to us that open source will be successful.

It’s why we continue contributing constantly to the open source, but we also need to make sure that we will have something that differentiates it on top of it. And the decision in the beginning when we thought about it, the Enterprise feature that people actually really, really wanted to have a provider helping them was security or stuff that will let that do. You know, Enterprise feature like HA.

So, that’s the stuff that we put in Enterprise. The question is, you are usually around technology, would it make sense to be in the core open-source project because that is where it belongs. It’s kind of like a core feature, or it’s actually an extension to that open-source project.
And therefore, it’s going to be that Enterprise edition. To us, it was very important that the core should be open. That’s the way we’re doing it.

Pricing

Mike: I always worn entrepreneurs that pricing is one of the most challenging aspects of a tech start-up in particular. Can you share maybe some of the lessons you learned about how to price in the first few years, did you get pricing right initially, did you have to do a major pivot – what was your experience there, and do you have any lessons learned in pricing?

Idit: As I said to myself, okay, maybe the real unit of contribute for instance in the Gateway is supposed to be the API call, but honestly, that will take a lot of time for me, and it’s also going to be a pain for my customers, so how can I still value how much they use it, without actually interfering too much with the customer and with my engineering team.

And what I came with in the beginning is that the data plane is usually a good assumption, because if you have a lot of call, you’d probably want to scale that data plane. And in the data plane, it’s easy to call, the customer tells me I have five clusters, this is a data plane I am using – it is very easy to measure it and if people use it more, that’s fine.

So, that was the beginning. When we added the service mesh, there was a way more data plane and there was also a way more potentially change. Because you have cycles, and the cycle is basically going directly with the application, the microservices. The microservices going up and down, so very hard to basically figure it out. We needed to change that model and we went to the cluster model.

We said, just let’s keep it simple, we don’t want it – again, it’s all about keeping it simple. That’s what was important to me. I don’t want my customer to need to have a PhD in order to understand the way we were pricing.

That’s what I did. And again, it’s probably cost me some money. I probably left some money on the table and that was fine. But again, it was all about and it is still all about Solo as the partnership. It’s all about the relationship that we have with our customers, it is a real partnership, we are seriously the extension of their team.

But, you know, stuff changing all the time, so you always need to adjust. And honestly, you are learning that from your customer. So, for instance, what we saw right now is that some of the customers that are basically using us, it is more like advanced development center kind of thing.

Innovation centers like city offices or the innovation center on the ITN, and when they are starting, usually what they want, their job is to basically build something to offer to the businessmen. So, the question is, the money is not going to come from them, you cannot expect them to have tons of budget to pay you to run it.

So, what they really want is more of the consumption model. What they want is to create something and get the platform available everywhere, without paying millions of dollars, but then, they will basically enable teams to come after. And that’s different. The model should be different, it can be how much clusters you’re running. Because it could be that you’re running an empty cluster in the beginning. So, we needed to adjust based on the customers. So, it’s always moving kind of like we are learning from the customer how we can make it better.

But again, to me, the way I’m looking at this and that’s always my motto – whether it is truthful building, writing software or selling product – I want to take the challenges on my team. For instance, I prefer right now to build a sophisticated metering that will make the best customer end-user experience for my customer, even if it’s harder.

How to Maintain High Growth

Mike: You know, I was reading an article, and it said that you were projecting five to six times growth for the next year, what is a key to obtaining this high rate of growth? How is that possible?

Idit: First of all, the market – and that’s very, very important. Like for instance, when we started, we had the Gateway that was very popular and everybody needed it, and then the Mesh came, but it took us a while until Mesh would be everywhere. Right now, there is a lot of stuff that is going really, really well for us, and that’s what is allowing us to go.

What number one is, for instance, that is still going to the graduation. So, we actually choose the right service mesh, and not only this, it is going right now to graduation which has shown maturity.
So, that by itself means that there is more demand from the market. You just need to have the right market product to sell, and when a customer wants it, it would be really lazy to grow. But I’m not going to say that there are no challenges, in economy, it could be that we have an amazing product, we have tons of money – that’s not really helpful if our customer doesn’t have money. They’re not going to buy it. Again, that point – you need to make sure that the product is a necessary, that people will need to spend money for it.

Just, again, listen to the market, make sure that you have the right market fit, which I think is the most important, thinking about the packaging, make it very, very easy for people to consume your product.

Metrics and Data?

Mike: You’ve mentioned that you’re data-oriented, and I’m wondering, what are some of the most important metrics that you track?

Idit: This is a good question. I mean, if you ask my CFO, who is a very, very data-oriented person, a lot of the metrics that is running is metrics is numbers – how many VCs we are doing, how much of it is in production and that kind of stuff. Data that I’m looking at is different than the data that my CFO, the metrics that they’re looking at. I think in every business, it’s all about people, it’s all about the people in the business, it is all about the people in the market. Why has AWS decided to do this, why has Google decided to do this, what’s going on inside this organization – all this information is not metrics, but it’s data that you need to collect in order to make the right decision.

How do I predict it five or six years ago that there is going to be a lot of clusters and that people will need a service mesh for each and Istio will be that service mesh. That was pretty crazy to do five years ago.

But I had enough data that would lead me to believe, a lot of data that would lead me to believe that this is the direction that we need to go. So, we do have the metrics of how many customer success, otherwise you cannot scale – you need to know when something is wrong and, you know, big enough organization right now that “I’m not everywhere and I don’t know everything anymore.”

What Gives You Joy as CEO?

Mike: What gives you the most joy as a CEO?

Idit: It is always your job to basically kind of like try to cover the gap that you have in the company. As in the beginning, we had engineers, but we didn’t have anybody to do evangelism, and kind of like after that, we grow, and then we got that evangelism, so I’m not doing evangelism anymore. You are always doing more stuff, and to me, the way I’m looking at this, honestly, when I’m waking up in the morning is, what is the next fire that I need to put off, like where do I have a problem with, what is not working well the way it is working right. It is seriously like that’s how you should think about it – where is the next fire will come from and how am I covering it.

And to me, I’m a person that is easily being bored, so, I like learning, I like seeing what the problem is, I’m dangerous in every position in the company, potentially. I’m dangerous enough now after six years that I learned all of those.

So, I think that, the fact that it’s never boring, but I wish it was a little bit more boring. I mean, I heard a joke from someone that said, “A founder that started a company in the last five years, what did they need to overcome?” We needed to overcome Covid, we needed to overcome the SVB with the Silicon Valley Bank fall, we needed to overcome the fact that all our competitors suddenly could have raised 100 million dollars, you know, like crazy variations with seed money.

And so, there was a lot to overcome since then and it is never boring. And I think that as someone that likes challenges, that drive “I want to be the best, I want to win.”, so, that’s what I’m enjoying.

And I’ve got an advice from Diane Greene, who was the founder of VMware. And she was one of the people that started Google Cloud, so, one of the feedbacks that she gave me when I started. She basically said to me, “You can decide which type of CEO you should be.” Keep the stuff that you really like to do or you really feel that you’re a huge differentiator. And my guess is, it is that technology is the strategic, that is my strength.

And bring strong people next to you to cover the stuff that you can give away. So, my advice is to go to market. That to me is kind of like the way I’m looking at this, but honestly as a CEO, you really do a lot of the stuff that you don’t want. I mean, your job is to fix the problem or to cover stuff and to enable the other teams. If I need to help my engineers, I will do that if I need. You know what I mean? I will do everything I need to enable the team base. That is I think very important.

What Advice Would You Give Yourself If You Could Go Back in Time?

Mike: If you could go back five years or six years and give Idit some advice, what would that advice be? It doesn’t have to be at the very founding, it could be in the early stages too.

Idit: Wow. I learned so much. It’s very challenging to run a big team and make everybody aligned. As the company’s growing more and more and more – that’s become more than another. I think that the advice that I would tell my younger Idit is basically, just follow your instincts, listen to people, but eventually, make your own decision. I think the thing that I was doing wrong in the company was, a lot of times, I’d hire a leader for market and he’d go to market. And I knew that this is not my strength.

So, even though I didn’t believe always that what they thought were doing is wrong, I let them do it because I said, “Look, they are the expert. I’m not an expert in marketing, so let them do this.” I paid a big price for it because I felt that actually a lot of times, they were wrong and it’s within the company.
So, I think that what I learned today and why I think that I would be a better leader than I was back then is because I’m going to die or succeed on my mistake, honestly. Because there’s nothing faster than us to come and take responsibility for someone else’s mistake.

Again, it doesn’t mean that you’re not going to listen, but after all the data at the beginning, if you believe, like trust your instincts, don’t assume that someone else knows your business better than you. I think that this is something that I made a mistake a lot of time, actually multiply times. Before I said, “Okay, that’s it.”

Close

Mike: Idit, thank you so much for sharing all that experience and know-how and best of luck with Solo. Although it doesn’t look like you need it, you look like you’re doing amazing, so, congrats.

Idit: You always need more luck, but thanks.

Mike: Special thanks to Idit and the Solo team for reaching out. Cool graphics from Kamal Bhattacharjee. Music from Broke for Free, Chris Zabriskie and Lee Rosevere.

Next episode’s expected Jan of 2024, an interview with Nick Schrock of Dagster. I’m slowing down a little bit, but I’m still trying to do four episodes a year.
Don’t forget the State of Open Conference is returning to London, Feb 6^th and 7^th. So, until next time, this is Mike Schwartz, and thanks for listening to Open Source Underdogs.