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Building a Tech Startup Outside the Silicon Valley

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Preface • This talk is about our journey • Your experience will be different • Of course its heavily survivor biased

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Agenda for today • Chronology of Instana • How we evolved our engineering organisation
 to over 50 engineers • Ask me anything

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Chronology of
 Instana

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Inception & Validation 2014

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What problem did we want to solve? • Management of IT systems is messy and no fun • In many companies several monitoring silos exist in operations • End User Monitoring • Infrastructure Monitoring • Cloud Monitoring • Application Monitoring • …

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That is not a new problem! • For a startup its great if a problem is recognized already • Companies have already allocated budgets to solve this problem • Solving this problem is essential for companies that need IT to do business

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There must be competition!? • The monitoring market has many solutions • We needed to understand most of them to know their strengths and weaknesses • Lots of one-trick-pony type of solutions show complexity of the problem, but also need for end-to-end visibility • Technology advances, and solutions quickly become legacy • Many solutions do have quality issues on stability or usability • Lack of automation and assistance • High dissatisfaction about the inability to solve real problems

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Our window of opportunity • We focused on containers first • We also utilize modern technology to process data better • We deliver end to end visibility • We provide high quality and future proof technology • We automate root cause analysis • We solve actually day to day use cases of our customers

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Founding Team • A well rounded team • Pete
 built sales, marketing and channel at similar startup before • Pavlo
 renown big data and stream processing expert • Mirko
 serial entrepreneur, networker • Fabian
 domain expert and experienced engineer • Avoiding the typical anti-pattern of
 “I have a great idea, now I need a team to do it”

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Business Validation • What is the total addressable market (TAM) • What could be our market share • Who is our customer? • Mega tech corps like Google? • Local mom & pop shops? • Who is relevant competition? • How do we want to position ourselves? • A new product (AI Ops) • A better product (next gen APM)

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Slides from our 2015 VC Pitch Deck

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The Market * of companies Edge - Web Scale Companies Highly individual & complex architectures Head - Enterprise Customers „New architectures“ - System of innovation Head - Enterprise Customers „SOA architectures“ - System of Records Long Tail - Small Enterprises Packages Apps, Standardized less than 1.000* about 
 50.000* more than 
 1.000.000*

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The Market Vendors & Tools * of companies Perfect Market-Segments
 to place INSTANA signal fx

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$2.6B 
 market The Market Top 15 APM Vendors 0 100 200 300 Revenue 2014 Dynatrace CA Techno-
 logies IBM Dell Microsoft Riverbed Splunk HP New Relic Oracle App
 Dynamics BMC Software Fujitsu Hitachi Nec Data Source: Gartner, Inc., „Market Share Analysis: Application Performance Monitoring, 2014“ by Federico De Silva, May 27, 2015 16% Y-2-Y growth

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Time for APM 3.0! 1990 1995 2000 2005 2010 2015 Client/Server Linux Open Source Web 3-Tier Java EE SOA Web 2.0 OSS Middleware Cloud Big Data µService Containers Lambda Arch. Tivoli BMC CA Nagios CA/Wily Dell/Quest Precise HP/Mercury dynatrace AppDynamics New Relic APM 1.0 APM 2.0 APM 3.0

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Tech Validation • Prototypes for core ideas • Single agent, auto update, easy install, high resolution • Container Ready • Stream processing • Algorithms and learning for data stream • Graph for understanding • “NoSQL” Storage • 3D UI and innovative visualisations

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From Prototype to Product

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Early prototype

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Design prototype

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Visionary Version…

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Almost Working Version…

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Kind of Working Version…

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Actually Working Version

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Actually Working Version

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Current Version

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Lots of talking • We talked to hundreds of potential customers and partners • From previous life, network and cold calling • Practiced your pitching and marketing • Got feedback on ideas and prototypes • Narrowed down our target audience • Not trying to serve everybody • Narrowed down our solution • Ideally we would have done only 1 thing, but APM is a wide topic

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Seed 2015

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Let’s do this! • Market? Check! • Exists, big, underserved • Ideas? Check! • Validated by externals • Team? Check! • We had everyone to do it ourselves • Tech? Check! • It actually works

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Founding the company • We named our company Instana, because it is cool, but also has a meaning. And it was “free”, except on twitter :-( • Lots of legal stuff • We incorporated in the US, due to better VC market • For investments it is important to build a good CAP table for founders, VCs and employees • Filed for Patents, Trademarks • Secured initial financing, with a convertible note

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Stealth

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Product Market Fit • Selling the USPs and vision beyond • Building a foundation, that is • good enough • operable • expandable • Hiring slowly for missing tech skills • Most of our first hires came from our network

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Sell something • We started with a reasonable price for our product from day one • Find something people are willing to pay for • This is not about profit, or break even. It is about proof. • We build “infrastructure” only monitoring. Sold to “friendly” customers, but also cold called / cheap marketing • Deliver value (even when low initially), convince of future value and execute and deliver. Keep your promises. • Underpromise and overdeliver.

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Watching the feedback • Feedback is mostly positive • Feedback will help you to polish, but not generate radical solutions • Remember Henry Ford…

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A Round 2016

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Pitching • Lots of VCs • Lots of Variants of Pitches • Working Demos • Showing Proof: Customers • Showing Scale • Of tech • Of company • Spent weeks in silicon valley

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Weeks in valley • Talked to thought leaders • Lots of great networking potential in the bay • Everybody is open for discussions • Do not pitch your idea, but rather show results and ask for feedback based on their expertise and experience • Still tough to get into VC Money. Little trust that a team outside the valley can have success...

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Weeks in Europe • Looked for a tech VC • Still pitched the idea of getting an US VC down the line • And we found our investor

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Our Series A Lead Investor: Target Partners • Target Partners focuses mostly on
 Early Stage “Hard Tech” startups
 in Germany. • Our partner Berthold has been
 amazing throughout the process

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Building the 1.0 Version • It was clear to us that our vision is way too big. 
 The domain requires this and we knew it would be a long run • We build small features providing an outline of what the later product will look like • Many small little MVPs that form a big picture • Make components scale and redundant (and document trade-offs)

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Building the 1.0 Team • We decided to grow the team very slowly • Focused on experts working “alone” • Since experts could be anywhere, we went global • Started to hire Sales, Pre Sales, Marketing • Always keeping cost in mind

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B Round 2017

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How we found our B round investor • 2017 something interesting happened. • We were growing the product and customer base and making more noise marketing wise • We were starting to think about the B financing • Then suddenly VCs approached us… • … and flew in people… • …who refused to leave until we sign

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Our Series B Lead Investor: Accel • Accel focuses on SaaS solutions
 for customers and enterprise • Harry and Adrian flew in the next day • Laura and Andrei came as well, and
 refused to leave

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Accelerating Growth • Along our customer base we also started to grow the company faster • Grow all departments • Cost control and planning becomes a challenge • Turn external services into internal functions Accounting, HR • Overcoming organisational challenges

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C Round 2018

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Our Series C Lead Investor: Meritech • If you are watching my JavaZone
 vimeo, this is the thing I could not
 announce on stage :)
 vimeo.com/289698520 • Meritech is a late stage growth fund • Happy to have Alex on board now

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Evolution of the 
 Engineering Organisation

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Growth

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How we started

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2015

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2015

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2015

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2016

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2017

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2018

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Remote Work

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Local vs Remote • Instana is a remote by default company • However, in engineering we prefer to have teams co-located • We have 4 main engineering offices • Solingen, Germany • München, Germany • Novi Sad, Serbia • Austin, Texas, USA

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Hiring

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Local vs Remote • As you could see, diversity is an issue • Remote hiring tends to favour extroverts, meritocrats • We cannot take care of Juniors remotely • We build (currently) 4 local teams, where diversity is easier to achieve, and add a few remote people to the mix

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Support Engineer

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Engineers need to resolve Customer Issues • Customer Success team deals with questions 
 and comments • Engineering needs to understand and fix issues • We have currently 2 Support Engineer of the
 Week (SoW) • Responsibilities • Triage • Communicate (via Zendesk) • Help (Document or Implement)

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Release Engineer

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Major Releases vs Hotfixes • Releases contain new functionality
 and major changes • Hotfixes contain bug fixes, improvements,
 small additions • We need to communicate around releases • Marketing • Customer Success • Sales • SaaS is “hot-fixed” almost daily • On Premises Releases trail SaaS releases

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Autonomous Teams

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Teams organise themselves • Teams have a purpose / goal • Teams are staffed with cross-
 functional skills • Teams organise their
 working mode on their own

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Common Tools

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Github • Following the Gitflow model
 https://nvie.com/posts/a-successful-git-branching-model/ • Using PRs to discuss changes • Also covers our documentation • And customer sample apps • Like Robot Shop

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Slack • You want asynchronous communication that mimics office chatter • Slack does this for us • Use private channels for 
 “blameless” discussions • Star and mute channels!

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Slack • When its down, tweet :)

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Zoom • High Quality Video Conferencing
 and Screensharing • Zoom has great apps and
 even “Meeting Room” support

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Realtime Board • Teams do various meetings to discuss plans and designs • Visualisation of ideas and
 interaction are hard
 remote • Realtime Board fixes this

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Trello • A lot of planning does not 
 require a high level of detail • Trello is good for getting a
 high level overview of progress • We use it for roadmapping 
 and other organisational things

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Pivotal Tracker • Lower level issue and task tracking • Iteration planing aid • Progress tracking • Chaotic at times

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Wiki / Docs • Boards and Trackers are often
 insufficient for longer design
 and requirements work • We use Notion.so as internal
 documentation & knowledge
 base and for shorter lived
 working documents. • For drafting things, we also use 
 Google Docs / Sheets