The somewhat dilapidated business suite next to a dentist’s office that was home to Confluent back in 2015 wasn’t that discouraging to me. We were pretty convinced from day one that we wanted to invest in the company. We had discovered the popularity of Apache Kafka through a CTO survey we regularly conduct at Index. It was clear that Kafka was being used everywhere, from companies in the tech sector to the Fortune 500 and governmental agencies. Anyone that was dealing with data-in-motion was deploying Kafka to do the job. Having seen the journey of Elastic from a popular open-source project to a commercial entity generating hundreds of millions of revenue, we knew we could replicate the success with Kafka.
Confluent is the creation of 3 founders, Jay Kreps, Neha Narkhede, and Jun Rao. The three had worked on Kafka together as it was being developed in the bowels of the infrastructure group at LinkedIn. They had, with the endorsement and a small investment from LinkedIn, launched the venture. The first meeting (set up with Neha) revealed them to be thoughtful, humble founders that dreamed big. After 15 minutes, I had the strong sense that Confluent was going to be an important company in the enterprise software ecosystem.
I spent much of my early career at Cisco. Joining the company from its early days and seeing it become a $250B titan, I had witnessed the power of moving data. Confluent and Cisco, of course, operated at very different levels. One focused on the networking of TCP/IP, while the latter was operating at a much higher level in the technology stack. But, the business implications of the roles of the companies had some clear analogies. Like Cisco, Confluent was building a network. Like Cisco, Confluent was becoming the central nervous system of a company’s data. The one big lesson that clearly applied is that a product that acts as the central nervous system is of huge value to its users, and it increases in value the more other systems connect to it.
"The first meeting revealed them to be thoughtful, humble founders that dreamed big. After 15 minutes, I had the strong sense that Confluent was going to be an important company in the enterprise software ecosystem."
— Mike Volpi, Index Ventures
What made Confluent even more exciting as a company was that it didn’t just move data, but it could also store it and allowed the users to process that data as it traveled through the system. They called it stream processing. The ability to move, store, and process data placed Confluent in a privileged position both in terms of its strategic value, but also, in its ability to build a business model around its product.
Confluent’s early days were as successful as we could have hoped for. From the humble dentist’s office sublease, Confluent moved to a bigger office in Palo Alto. They attracted extraordinary talent across the whole company - from executives to individual contributors. The business grew at a torrid pace. Confluent became one of the fastest-growing companies in enterprise software surpassing $100M in bookings in 4 years since first revenue. It became the undisputed leader in its category.
Of course, what seemed like a charmed existence from the outside was much more hectic and chaotic on the inside. Managing growth at that pace is not easy. Transforming an open-source project into an enterprise-grade software solution takes a lot of work and patience. Converting the adopters of Kafka into loyal and happy customers of Confluent took a lot of acumen. These were just some of the interesting challenges that Jay and his team overcame during those years.
"From day one, Jay was a technical genius, there was no question about that. He has always had his own style -- Jay is cerebral, analytical, patient and thoughtful. Over the last 6 years, he’s developed his own style of leadership which wonderfully blends humility with a restless pursuit to improve the company each day and in every way."
— Mike Volpi, Index Ventures
One of the transformations that has made us board members most proud is the progression of Confluent from a download / self-hosted software company into a cloud / SaaS company. Writing software and running software (for customers) is a very different task. Different skills are required, A different understanding of a companies’ responsibilities is necessary. For all open-source companies, this is a tricky and necessary transition. Confluent was no exception to that. What we all thought would be a 6-month effort, turned into 2 years where virtually every function in the company had to reinvent itself to fight the battle of the next decade. Confluent Cloud is now a meaningful part of the company's quarterly revenues from a cold start two years ago.
But, perhaps the most impressive transformation is the evolution of Jay Kreps, the co-founder CEO from technologist to leader. From day one, Jay was a technical genius, there was no question about that. He has always had his own style -- Jay is cerebral, analytical, patient, and thoughtful. Over the last 6 years, he’s developed his own style of leadership which wonderfully blends humility with a restless pursuit to improve the company each day and in every way.
Today is a very special day for Confluent. The IPO marks one of the most important milestones in a company’s history. In keeping with the time of the year, it’s like a graduation of sorts. From this point on, Confluent will live life in the public eye with responsibilities to stakeholders far and wide. But, like fresh graduates, its best days are most definitely ahead. In some ways, the last 6 years have gone by in a flash. It still feels like yesterday when I first walked into their office in Mountain View. I am so incredibly proud of what Jay, Neha, Jun, Steffan, Erica, Ganesh, Cheryl, Stephanie and so many others from the Confluent family have accomplished. Yet at the same time, Confluent is at the beginning of its journey. Confluent will be one of the great names in enterprise infrastructure. I have no doubt.
Published — June 24, 2021