Instaclustr featured in the Australian Financial Review
Via afr.com
Instaclustr founders head for Young Rich List as revenue doubles
Two 30-year-old founders of Canberra-based technology start-up Instaclustr are knocking on the door of the Financial Review Young Rich List, after nearly doubling subscription revenue in 2018.
Benjamin Bromhead and Adam Zegelin conceived Instaclustr in 2013 to host and support open-source data technologies, initially as a way to manage their own data marketplace's use of Cassandra, the open-source distributed database created by Facebook.
A financial report lodged last week with the corporate regulator showed the company, which has raised $31 million since 2014, sold $12.6 million of subscriptions in 2018 (up from $6.8 million in 2017), and with a bit of pre-sales consulting thrown in, made total revenue of $14.1 million.
It narrowed its loss after tax to $1 million from $2.1 million the year before.
While the net worth of the pair cannot be specifically calculated, research based on the likely value of the company and their respective stakes puts their wealth at approaching $26 million apiece, and growing as Instaclustr continues to attract and retain customers.
The pair pocketed around $1.5 million each last year after each selling around 300,000 of their 824,198 shares into a $20.6 million Series B round, led by New York's Level Equity, documents lodged with the regulator show.
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That round saw 2.6 million new Instaclustr shares issues at $5.25 each, and also allowed early investors and the founders to sell some shares after a five year journey.
The Series B gave Level Equity majority ownership of Instaclustr, however Mr Bromhead and Mr Zegelin are understood to retain stakes of between 5 and 6 per cent.
Company value
Based on valuations of comparable companies like MongoDB, a Nasdaq-listed distributed database provider trading at an enterprise-value-to-revenue ratio of 28 times, Instaclustr could be worth over $350 million today.
That would put the entrepreneurs at the cusp of the Financial Review Young Rich List of self-made people aged 40 and under, which had a cut-off of $26 million in 2018.
Instaclustr has two other Canberran co-founders in Peter Lilley and Doug Stuart, who became angel investors after selling their cyber security business, Stratsec, to BAE Systems back in 2011.
Mr Stuart, now Instaclustr marketing chief, said the start-up was moving beyond its Cassandra-as-a-service origins to help customers manage the two other imperatives of big data besides search – streaming and analytics.
In the past year it has added managed platforms for high-volume streaming needs via the open source Apache Kafka software, batch analytics via the open source Apache Spark, and additional search capability via ElasticSearch.
"We've picked up five major customers in gaming, where they really understand the importance of maintaining complexity at speed," Mr Stuart said.
"We've also picked up a lot of fintechs who want to leapfrog the legacy spaghetti of their competitors. They want one service provider who can manage their entire data layer."
Instaclustr was "probably not quite" at a $350 million-plus valuation today, Mr Stuart said, but the company was investing in growth and did not plan to be profitable until calendar 2020.
Spending fast enough
"The biggest challenge is spending the money fast enough. We're not compromising on at least three interviews for new talent, to make sure we're bringing on the best," he said.
While Mr Stuart remains based in Instaclustr's Canberra head office, Mr Zegelin is in San Francisco while Mr Bromhead has just opened a new office in Boston, in part to follow increased US east coast leads, as well as provide follow-the-sun customer support.
A condition of Level Equity's Series B investment was that Instaclustr create a US parent company, however the majority of its 100-plus headcount are in Canberra.
Instasclustr's Series A round was led by Bailador Technology Investments, co-founded by former Fairfax Media chief executive David Kirk, alongside ANU Ventures (a partnership between the Australian National University and the MTAA Super fund) and Our Innovation Fund, set up by the founder of systems integration giant Dimension Data Australia, David Shein.
They all remain investors, and the latter two participated in the Series B, however a number of other angel investors sold out in the 2018 round. Mr Stuart and Mr Lilley remain investors, with stakes understood to be at similar levels to Mr Bromhead and Mr Zegelin.