Instaclustr helps organisations of all sizes deliver applications at scale by managing their open-source data infrastructure. Founded in 2013 by Ben Bromhead and Adam Zegelin, Instaclustr is a one stop shop for deploying, managing, and monitoring all components of the data layer and related infrastructure.
With offices in Australia, Europe and the United States, Instaclustr has grown by 389% in the last3 years and ranked 283 in 2020 on Deloitte’s Technology Fast 500™, a ranking of the 500 fastest-growing technology, media, telecommunications, life sciences and energy tech companies in North America.
Adam ZegelinAcquiring a business during COVID
The COVID-19 pandemic has done nothing to slow Instaclustr’s accelerated growth and in March 2021 it acquired the Germany- and U.S.-based credativ business.
There is a new level of complexity to doing due diligence in the current environment where meeting face-to-face is impossible. This can make site inspections, legal processes and building relationships with the seller’s team particularly challenging.
“It was a very interesting experience on how to acquire a company in a COVID year, when you can't get anywhere to actually meet anyone,” said Peter Lilley, CEO of Instaclustr.
“It has been a very exciting time and has been a step change to our business”.
The business went from 130 to 200 people almost overnight, going from having a predominantly Australian technical presence to now adding a deep European and North American technical presence.
“We still do all our engineering in Australia, but from a customer service perspective, we now have a distributed global team of support engineers that actually help our customers deal with the most difficult challenges of getting the value out of the very powerful open-source technologies that are on our platform”.
Peter says their addressable market has greatly expanded.
“We talked about a total addressable market prior to this acquisition of around $16 billion, and that's jumped up into the mid-20s. We now have the capacity to deliver a whole range of new and interesting capabilities and solve a whole lot of new open-source problems for customers. This really puts us ahead of the competition in terms of the way that we operate at global scale”.
Doug StuartA product-led growth company
Instaclustr’s growth is customer driven. Peter says their platform speaks for itself and customers want to use it because it solves a particular problem they have.
“An important part of being a product-led growth company is listening to customers and keeping an eye on the market and what's happening with those trends. And so, when we run our quarterly business review process with our key customers, we talk to them about what they're using now and what more we could be doing for them. We ask what open-source technologies at the data services layer are they exploring because those are particularly valuable insights to us in terms of what we should be doing in the next wave of technologies that we bring onto our platform.
“There are also open-source integration tools and capabilities that that our customers are looking to use, and we bring those into our roadmap for the next three or four years in terms of what we plan to do”.
Born Global also means adapting to local requirements
Peter believes that they were very fortunate to be one of those businesses that were born global.
“As soon as we released our first edition of the platform we had signups globally, so we immediately started to have that global customer experience influencing what we did in the development of our platform solution.
“There are always interesting things that happen though when you're dealing with different jurisdictions and markets. In the European market, you've got a very strong GDPR compliance mindset. In the North American market, while they talk about it being North America, it's more like 50 independent countries in the way that you have to deal with the different requirements of each jurisdiction”.
Peter says that from a general product perspective, Instaclustr’s product and platform is broadly consumable because its use case driven.
“Our biggest challenges are more related to jurisdictional requirements around data privacy. In a European context, our customers are often concerned about who has eyes on the data and who can't have eyes on the data. So, we design and build our platform to engineer those risks out of the solution. That's a continuous exercise because you deal with different enterprises with different risk appetites”.
Local requirements not only influence the technical direction of the platform, but from a global business perspective, there are things that get impacted by cross jurisdictional requirements including what the company does from a sales and marketing perspective.
“In some ways, the sales and marketing can be a bit of an easier problem to solve because we're very content driven in terms of how we market our business. The main way we market ourselves globally is via our website, our console, which has user experience, and deep technical content that we publish”.
At the moment, the stories Instaclustr tells through their content is written in English, however Peter thinks multilingual content might be something they will start to think about.
“Just acquiring a business that's based in Germany and seeing contracts and all the marketing and PR material written in German, I think it’s important to get the sales and marketing language right for the cultural fit that you're selling into.
“In terms of the nitty gritty side of supporting international business and growth, there are also the contracting and commercial processes. When Instaclustr first started, our contracts were based on the Australian Capital Territory contracts. However, in a global context, you've got to have sophisticated capability to be able to deal with some of the cross jurisdictional requirements. You need people on your team that are knowledgeable and can do that”.
Peter says you can distribute those sorts of functions globally. If you decide to manage it centrally, then you can still have your Australian based commercial team running it, but you're going to need to plug into service providers in local markets.
Peter stresses the importance of being able to manage the risk that comes with establishing points of presence in jurisdictions all over the world.
“We look at a combination of strategies to evolve those business processes as we develop jurisdictional expertise in the North American labour market or in the German labour market.
“One solution is when you're not at scale in those particular markets is to use or engage People Employment Organisations (PEO) type services to facilitate that. This helps to access talent and local HR services without necessarily having to establish a full presence. And then, as you grow and you scale, the natural evolution is away from a PEO into a fully operational Point of Presence. That’s when you need local HR expertise to augment what you're trying to do in that market.
Peter also stresses the importance of financial management when working in different jurisdictions.
“When you're selling deals in different jurisdictions, you have to be mindful about tax and compliance requirements that come with that - VAT/GST, sales and use tax requirements in particular. You may have multiple registrations that you have to deal with as an entity across multiple jurisdictions with multiple returns and compliance requirements”.
Peter says that acquiring this knowledge can involve a steep learning curve.
“I would say that my team are second to none in terms of their knowledge and their ability to learn about the different jurisdictions. One of the people in my team, our in-house tax accountant, has become a sales and use tax expert in the North American market.
How do you get there?
“Again, I think it's how you scale and grow that capability in your businesses and that combination of using service providers for some aspects but not necessarily fully outsourcing it. I think we take an approach of using the service providers to augment what we're doing while we develop capability”.
Strategies driving Instaclustr’s success
Peter believes product market fit is very important. Instaclustr hit the market with their platform solution at a time when open source has become very topical. As a transformational type capability, the move away from traditional licenced software to open source, particularly at the infrastructure layer and into the data services, has been very important. While competitors are also enjoying the same benefits of this move, what differentiates Instaclustr is the customer experience on the platform itself and the deep open-source expertise in our customer support organisation. Listening to customers and continuing to innovate in the platform will continue to be important to gaining and maintaining competitive advantage.
The second thing that Instaclustr has done is understand the persona of the buyer that they are targeting. Peter says they talk about two core personas for the business. One is the developer persona. Developers want a solution that’s relevant and easy to use. They want to be able to just get in and do what they want to do quickly. This is a very strong part of viral adoption and getting into larger enterprises. The other persona is what Peter refers to as the ‘technology manager’, a more senior person that's looking for strategic advantage, the ability to manage costs and move to a new model to get access to more powerful capability, quickly and efficiently while reducing operational risk. Peter says they produce very good content targeted at these personas. “We look for how we engage with these two kinds of communities and how our content resonates. We’re constantly evaluating and producing new content. As much as you're innovating on your platform, you've got to be innovating in your content as well. If you stay static and drop out of the norm, you get into the noise and you lose mindshare”.
The third strategy Instaclustr employs is being a good community citizen in the open-source community. “In order to have credibility as an open-source solution provider you need to be a contributor and get into events and meetups and really help to push or drive open-source adoption and open-source improvement initiatives. These are all very important parts of being a great community citizen”.