Don’t Fear the Funder | Nitzan Shapira at Epsagon

In part one of my conversation with Nitzan Shapira, the co-founder and CEO of Epsagon, he talked about his automated analytics solution for companies using distributed, cloud-based systems.

In this second part of our conversation, Nitzan talks more about his personal story, including his experience working for Israeli intelligence and how that led him to start his own company. He also gives some insights on how to overcome the fear of acquiring funding.

More information:

Nitzan Shapira is the CEO and a co-founder of Epsagon. He is a software engineer with 15 years of experience in software development, management, and cybersecurity from the Israeli Intelligence unit. He also enjoys playing the piano and is a traveling enthusiast, an experienced chess player, and is addicted to sports.

Epsagon enables teams to instantly visualize, understand and optimize their microservice architectures. With our comprehensive lightweight auto-instrumentation, gaps in data and manual work associated with other APM solutions are eliminated, providing significant reductions in issue detection, root cause analysis, and resolution times. Increase development velocity and reduce application downtime with Epsagon.

DISCLAIMER: Below is an AI generated transcript. There could be a few typos but it should be at least 90% accurate. Watch video or listen to the podcast for the full experience!

Nitzan Shapira 0:00
And as soon as you feel you’re ready, I would hire someone to do more commercial work. If it’s a sales development person, business development, account, executive, whatever, I would start having someone to just do it with a larger capacity

Alexander Ferguson 0:16
Nitzan, it’s I’m excited to continue our conversation. I’d love to hear your story a bit more in depth, you share a little bit of where you where you started. But tell me, where did you begin? And how did you get to then where you are today? Without Zygon?

Nitzan Shapira 0:39
Where do they begin, like from birth, I mean, I guess my professional career as or like the going index started, when I was a kid, I had my first computer and I played a lot of PC games, actually, I didn’t do any programming as a kid. And then it really but it made me go in high school to learn programming. So that was the first introduction to the field. And then I went to do a computer engineering degree at the Technion in Israel. And that time, I also worked at Intel for about two years as a software developer as students. So that was really great experience. Like, as for a very young guy, I was like, 19, starts suddenly working in one of the most, you know, successful companies in the world. And it was a lot of fun and kind of made me realize the difference between academia and industry. You know, it’s very different. And, yeah, then I finished the school, I went to the intelligence unit, where I spent about seven years I was an officer Captain there, I did a master’s degree at the Technion in computer science at the same time with a thesis in computer graphics. So like completely different domain. And, as mentioned in the unit, I do work in cybersecurity and a lot of low level stuff. So I was there in different positions from research, development and management, and working on some super exciting, interesting projects with a lot of technology challenge, and also very important to the kind of the national security. And in the unit, actually, that’s where it all started, like thinking about starting a company, because many of the people around me finish the service and started their own companies, some of them, you know, exited in hundreds of millions, or even billions, some of them are active until today with hundreds of employees. So some of the best companies from Israel probably started from that unit. So I knew that I would like to do the same thing. At some point, I didn’t know exactly when and what but after his service, I went traveling for a year, I took a year off. I went to many countries back to Israel, and then I kind of had no money had no co founder yet, so I couldn’t just, you know, start something yet. I really wanted to find a partner to do this way. So I started working at a startup company called the misto. Later on, they got acquired by Palo Alto Networks. And I got the exposure towards startup actually, you know, it’s different, I can get intel the, the idea of the army. And, and at the same time, I reconnected with my co founder, Iran was the CTO, he was still in the unit, he was managing about 30 people back then. And after, you know, spending some time working together on different projects, we kind of felt that there was a very good fit. And we could actually see ourselves working together for years. And we decided to kind of quit forever we were doing to focus on the company. And that’s how it really started. And as mentioned, we went into cloud infrastructure, because we believe it’s it’s a very good opportunity. And yeah, that was about four years, three years ago. And then, you know, fundraising and all that stuff. And I moved to New York this year, actually, after spending about one year in Israel one year in between Israel in the US kind of half an F and this year, right, I made the move to come here. And I mean, regardless of whole COVID that made it a bit less relevant. But even just the time difference is a huge difference. Like being in Israel and having a US team is is something I I don’t wish to anyone. So I’m really happy. I mean, the US timezone right now and it allowed us to hire some really good people here as well.

Alexander Ferguson 4:29
It’s quite a journey. But it’s the stepping stones. I can see the natural progression that you wanted, eventually got the bug when you saw everyone else going off starting their companies, you knew you wanted to do this, on that journey of getting started getting that initial funding. That’s that’s a whole story, I’m sure right there. Any tactics or tips or things that you learned to get that initial funding that you could share that another entrepreneur could learn from?

Nitzan Shapira 4:58
Remote funding? Raising? And yeah, I mean, first of all, it’s not like such a scary thing if you think about it, and because the investors, they need to invest their, their LPs money, you actually if it’s a VC or if it’s an angel investor, you know, different incentives, but but still, you know, they want to invest, it’s not like you’re coming in, you know, in a position who needed more than they both of you needed in a similar way, everyone has different reasons, they have to show return on the money, they can just sit on it without doing anything, right. So you need to remember it and you need and then you need to understand what they care about, which is typically reducing the risk. So you need to put like, of course, you need an actual problem that you’re solving. That’s like the first thing with regardless of raising money, just like if you want to build a company or solve some problem, but assuming that there is a problem, and it addresses a big market, if it’s a smaller market, it’s also fine, maybe you don’t need to raise money, maybe you can raise a little less money from like an angel. But let’s say it’s a, you know, billions market like the monetary market. So we decided to do sizable seed round was about 4 million. And I mean, we raised almost 30 million today. But the seed was not small us minus its decent round, it can actually let you build an initial team and a product and sell even to the enterprise. So at that point, you know, you want to raise, you know, let’s say $4 million, you, you know, the VCs you want to go after, I mean, usually, if we went and looked at the Israeli ecosystem, eventually we had also Lightspeed which is an international VC, but with an Israeli office. So basically, you just need to have a plan, you know, you want to make sure you have a timeline for the fundraising, let’s say, a couple of weeks in which you do all the first meetings with investors, then you need to line them up, and you get introductions to whoever you need. I mean, it’s really easy to get introductions to receive, because they are not hiring, I mean, it’s their job to find you as well. So at least get the initial touch, it’s not difficult at all. And and then you need to build a story, as mentioned, that is that really shows that the company you’re building has as less risk as possible. So risk is typically in the form of the market, that’s the first thing you really need to emphasize that this is a big market, like if the VC doesn’t think it’s a big market, it’s just not no matter how good you are, you’re not able to, you know, to make a big outcome, then you know, the team, very important, you need to show them that you are very strong, like really top percentile team, like however you present it, whoever you are, you want to make sure this is the impression they’re getting. And third is like what you do product technology today, if you’re a software company, the risk there is pretty minimal, because you don’t need you know, data centers, you can do the keys, the cloud, you can have an MVP in a matter of few months, usually. But if you have a very strong tech side, which you may be doing something with biology, computation, or even hardware or chemistry, obviously, you need to explain why you can even do what you say you’ll do. In our case, you know, there is a very strong technology challenge with nobody questioned our ability to you know, to execute on it. So that wasn’t the risk, the risk was really about you know, there are there is competition, how are you going to be different? Are you going to be able to create a large company, but luckily, you know, right before our our series, there was some great example of you know, they going public signal affecting acquired for 1 billion mattress went public. So there are actually measurable results to start in this space, like dog was obviously a success to their investors. So yes, I’m happy to chat with anyone who has those concerns. I think I helped some, some entrepreneurs would like thinking about fundraising and making it much more structured rather than a scary thing.

Alexander Ferguson 9:20
I love your perspective on it, that it’s shouldn’t be scary that they’re in their in their position to give money, you shouldn’t feel bad that you’re asking for it at the very beginning. And then about the story, making sure you have a captivating story, stating the risks clearly that you understand the market. You have the team, a talented team, and you know that you can deliver on it. And you should then you don’t need to worry. I like it’s a nice framework is provided. Getting that initial customer, you’ve got the funding, and then you build your MVP. What did it take any learning lessons learned of getting that initial few customers on board? What does that take?

Nitzan Shapira 10:04
And why does it take patience? persistency I mean, obviously, nobody killed you and your son, nobody cares about your Wendigo either, but especially when you’re small, nobody’s gonna hear about you. Like, it’s just not doesn’t work this way, you have no no brand awareness, no one, just literally too few people heard you. So you can make anything to have even the most amazing blog, and even if problem you have is good, again, nobody knows you. So you are like three people in office. Right? So, I mean, obviously, you want to start doing something, but at the same time, you want to start speaking with customers, as much as possible, I really see on the on the the benefit of it. So I mean, we would go and do a lot of you know, reach out customers, emails, LinkedIn, whatever, we did it before the fundraising. But obviously after as well use your connections to get people to actually, you know, use your product, it’s not the same as an outbound that you can actually grab and sell into. But even if it’s through a friend, you know, eventually you’re you’re studying into businesses, they are not going to do you a favor and spend team’s time to implement your product, if it’s not going to bring them any value. So it is it does mean something when a company, usually more than one person uses your product, even if it was through a friend’s introduction, if and until today, we have customers coming through our personal connections every time there is an opportunity. I mean, why not? Eventually, you want it you want the foot in the door, you want to run people want people to know about you just the way to do that. And as soon as you feel you’re ready, I would hire someone to do more commercial work. If it’s an sales development person, business development, account, executive, whatever, I would start having someone to just do it with a larger capacity to start getting more and more meetings with customers, because this eventually is the engine to everything you get customers, you get revenue, feedback, like you need the engagement with the customers go to conferences, if it’s online, you know, even better, it’s even cheaper, you can pay like 1000 bucks, and get exposure to hundreds of companies. So it’s really worth it. So you know, it just takes a lot of work. And yeah,

Alexander Ferguson 12:31
I appreciate that first takes patience, and just a lot of conversations. But you make an excellent point that then building get getting a salesperson building the right team is a great way then to scale up from there. What what did your team look like at the beginning? And what does it look like today?

Nitzan Shapira 12:53
So in the beginning, it’s you know, Ryan and I started, we hired some, like, very good engineers, we knew from the unit that we either usually we work with them or we manage them. So actually, one of them is now our Director of Engineering, he’s managing the, like multiple teams. The other one is the director of like a cloud architecture. So people that really grew with the company and but we have the core engineering team, we really were in we had the luxury until today, we we feel very lucky because we had didn’t have to use a recruiter yet for the engineering goals. Because in Israel, we have really a very strong connection and people actually bring their friends and we have maybe 15 to 20 engineers today and very, very strong people. So we started with that, I think in the first you know, six to 12 months it was really mostly me and Ron trying to get into more customers basically, you know, we started with creating content as soon as we can so we started to get some traffic to the website and and then we decided strategically to open the product up after less than a year to say it’s GA and you can start a site and at that point we really start to see the more traffic and more people using it and we felt we are ready to bring the first salesperson so that was about a year after the seed funding we brought the first A in San Francisco and yeah then we before the series A we grew the team to I mean we have people in the US and probably in Israel and most of them were engineering in Israel and then after a series a we really could scale and we had a funding round after that. So we grew to about 40 today where route from one a to a team of five with sales and marketing like we have a bunch of them now Some of them from companies like data dog or New Relic. So anyway, yeah, it’s pretty much what evolution by goes together with the facing of the company,

Alexander Ferguson 15:11
it’s helpful to hear the timeline of that first six or eight months, and then a year later, and then to where you are today, there’s all the stepping stones, to be able to get to where you are now. What did it take to truly then start to scale going from the first, you know, 1020 customers on the platform to hundreds or more? And any stats that you can share about, like where you are now? And then it just tactics that I’ve gotten to that?

Nitzan Shapira 15:40
And, yeah, I mean, the world via is a bit overused, I mean, we will not Instagram yet or Tik Tok. But I mean, we are still mostly an enterprise company, we have hundreds of customers today, which is, you know, it’s not, it’s not little, but it’s not also not like a consumer product or like a fully self zero touch, self serve zero dot product. So yeah, it started, as I mentioned, with having the first users on board, or you some people call it design partners, but I don’t care about the term really, it’s about having people to use your product to provide feedback to see value, even before talking about them paying or not, it’s good if they can pay, but it’s not like the main thing at the moment. I mean, at the beginning, so we had like a few dozens, I don’t know, maybe 1020 companies using the product to some extent, before we open, open it up to the public. And at that point, we also started to get the first paying customers. Only after that we had the first let’s call it enterprise there, which is a bigger deal that is, you know, involving a longer sales cycle, usually, you know, more than a month, let’s say and, and start to actually get some ARR into the company. And yeah, and then it kind of went hand in hand, we had the self serve that started to work and we had the enterprise motion. And the goal is to get as many people from the self serve to the enterprise, that’s kind of the reason to have a server because the revenue coming from self service is usually not, in most companies in ours, our type is not going to be, let’s say more than more than half or even more than 30%. But selling to the customer that already use your product for a month or two or six, if it’s a large company, the sales cycle is extremely faster when you don’t have to explain to them, you know, it’s just a matter of, oh, we use this in one team, we want to deploy it across the board, we need a large contract. So you really go into a commercial discussion way faster. So that’s really the core reason to have self serve.

Alexander Ferguson 17:50
That’s a powerful tactic to know that that works of self serve to get into the larger companies. And then you can sell them, it’s much easier to expand the entire company.

Nitzan Shapira 18:02
Thank you. Yeah, I mean, it’s something that we are not the first the only company to use that tactic, obviously. But yeah, it’s definitely if you can make it work, it really reduces your customer acquisition cost and makes all the other parameters much, much better. Like all the SAS metrics, and so on.

Alexander Ferguson 18:20
In the last, in 2020, during COVID, what kind of challenges have you had both internally with your team and your culture as well as externally, with your clients and customers? As far as whether it’s communication or just marketing efforts? Or just speaking internally? And how are you addressing those challenges?

Nitzan Shapira 18:43
I think COVID affected everyone in some way. Some people actually benefited from COVID like zoom, I suppose. But overall, you know, in our space, we are in the infrastructure space, we are not targeting a specific vertical like travel or transportation or whatever. So some of our cast, some of our potential customers have been impacted. So you know, if we have a call with a company in the travel industry, or the I don’t know, exercise injury, maybe that’s not the best time for them, but at the same time, there are so many other companies that it’s maybe business as usual or even more business right now. You know, ecommerce really picked up. So naturally, we like we saw other types of companies going into the funnel, but I don’t think in general, it necessarily impacted our ability to grow his plan. I mean, the good thing is that the existing customers didn’t actually turn like any of them because I mean, if you think about it, and as the company really goes down completely, if they are still running monitoring is a must have they can just disconnect the monitoring source in theory business critical thing. So we was really great to see that some companies, some of our customers asked for maybe some support or flexibility in payments, but there was no discussion about, you know, cutting gifts or going out. And some of them asked for our business continuity plan to make sure we are not going to go down, which is actually pretty flattering. So yeah, it’s, it was really interesting to see the, let’s call it the stability of the market, which we’re in. So I’m pretty happy to to have chosen, you know, monitoring is what we do.

Alexander Ferguson 20:34
Last few questions I have for you. Are there any books, podcasts, audio books that you have found helpful in growing and learning yourself that you would would recommend?

Nitzan Shapira 20:47
And, yeah, there are some famous ones that I guess maybe one that I’m actually listening to right now, is really nice. It’s called from impossible to inevitable. It’s really nice. It’s by the founder of SAS Suster. Anyway, it’s an inaudible. Nice. I think some like the famous books from you know, Ben Horowitz is really good, the hard things about hard things, and I really like crossing the chasm. Shoe Dog is really good. I mean, really, if there are so many

Alexander Ferguson 21:29
last question I have for you, what kind of tech innovations do you predict we’ll see in the near term, the next year and long term the next 510 years.

Nitzan Shapira 21:39
I’m going to refer to my space like the DevOps and it because there are so many, obviously, but yeah, we see a lot of things happening in, you know, making things more automated, more, just, you know, automating as much as possible. The deployment, the testing, the monitoring the security. And there is generally a trend of shift left, which is making, you know, developers being in charge of more and more and more in your organization, rather than the traditional IT ops. So, every tool you you build today, if it’s for DevOps, for example, you have to think about the developers and you just you can just think about the CIO. This is the way things work you can like, everything has to be almost a democracy in that matter. And so many things are happening over there. I mean, we were seeing a lot of security products that they’re angry, suddenly a developer, which is something pretty, pretty unique. In general, I think cloud the cloud is like really in the beginning, and it’s gonna be a lot of stuff going on

Alexander Ferguson 22:44
there. That concludes the audio version of this episode. To see the original and more visit our UpTech Report YouTube channel. If you know a tech company, we should interview, you can nominate them at UpTech Or if you just prefer to listen, make sure you subscribe to this series on Apple podcasts, Spotify or your favorite podcasting app.



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