Investment - September 2024
The Joule General Partners are pleased to announce the execution of Limited Partnership V's first investment in an Israeli founded emerging technology company. Below you will find information about the business and corresponding investment. We welcome your questions and feedback.
DEAL SUMMARY
Company Name / ControlMonkey
Website / https://controlmonkey.io/
Offices / Tel Aviv, Israel
Sectors / Development Operations (DevOps)
Founders / 2
Year Founded / 2022
Number of Board Positions Held by Joule / One
Total Joule LP V Investment / $1,800,000
Total Size of Round / $5,000,000 (Seed)
Notable Co-Investors / Lool Ventures (TLV), Gaia Ventures (NYC)
LP V Ownership / 10.0%
DEAL DYNAMICS
Joule's Tel Aviv-based Partner, Dafna Winocur Biran, had known ControlMonkey CEO Aharon Twizer for many years through both the technology ecosystem but also concentric social circles. Within Israel's tech sector, Aharon was a respected technologist having previously co-founded and served as the Chief Technology Officer of startup Spot.io, which Netapp acquired for $450 million back in 2020. Through that experience in which Spot raised more than $50 million in the six years leading up to its acquisition, Aharon learned to become more nuanced about venture capital - understanding that not all money is created equal and that having capital from a U.S. fund would be highly advantageous to his business especially at the early stages. As such, Joule was one of the very first funds he spoke to regarding his seed round. In addition to his existing relationship with Dafna, Aharon had heard good things about Joule from the CEO of our portfolio company Coralogix who was a pre-existing angel investor in ControlMonkey. Once we got to conviction on the team, we began quickly validating the technology by putting Aharon on calls with numerous industry leaders including, but not exclusive to the Head of DevOps at Walmart (NYSE: WMT) and HealthEquity (NASDAQ: HQY), as well as the former Head of Engineering at Sailpoint (acquired by Thoma Bravo). The feedback was unanimously positive. With both our conviction and the interest of an Israel-based VC secured, Aharon chose to have Joule co-lead his seed round with participation from a number of strategic angel investors. Dafna will represent Joule on ControlMonkey's Board of Directors.
TECHNOLOGY DESCRIPTION
In 2022 the global software market was valued at nearly $600 billion and growing at a CAGR of 11.5%, which would take it over the $1 trillion mark by 2030. Not only is software the operational backbone of most organizations, but it makes up a huge piece of our global economy. Just looking at the FAANG companies with an aggregate $7 trillion market cap - most of what they sell is software. The point is that developing quality software at high velocity is mission critical for the modern enterprise, yet there is an increasingly complex array of infrastructure - Hardware, Cloud, and IT - that impedes agility and drives up cost while slowing production. To combat this complexity, Development Operations (DevOps) practitioners, those at the crossroads of software development and IT operations, are trying to introduce more automation so that infrastructure can be spun up quickly and managed easily to ensure the continuous delivery of software while strictly adhering to organizational security and compliance requirements. To try and meet the infrastructure needs of DevOps teams, nearly a decade ago San Francisco-based Hashicorp (NASDAQ: HCP), which IBM acquired in April for $6.4 billion, introduced Terraform, an open source Infrastructure-as-Code (IaC) platform, which 80% of enterprise teams use today according to the 2024 State of IaC Report. While Terraform is the gold standard in this $2.3b a year infrastructure automation market (growing at a CAGR of 24.0%!), it still comes with significant limitations -- there is an extremely steep learning curve when it comes to Terraform proficiency, partner plugins require manual installation and upkeep, and finally, and perhaps most challenging, is keeping Terraform in a constant and stable state. With so many people within an organization interacting with a piece of software in production, even minor changes can cause misconfigurations and 'misbehavior' of the infrastructure leading to significant underperformance.
ControlMonkey has entered the market with the aim to fully automate Terraform by providing DevOps teams with a single control plane where they can visualize, spin-up, automate, and govern all of their cloud infrastructure at scale. By using CloudMonkey, software developers can focus on their primary and most valuable objective, which is creating and/or enhancing software, not spinning up and managing infrastructure.
One of the most powerful components of their offering, and a major differentiator for them in the market, is the Artificial Intelligence-based remediation functionality that they've built. This allows for their platform to detect misconfigurations or abnormalities within the infrastructure and automatically fix them so that developers don't have to allocate time and resources to do so themselves. According to the aforementioned State of IaC Report, 44% of DevOps professionals interviewed says it takes days to weeks to fix infrastructure 'drift' (misbehavior), while 43% can attend to it in a few hours. Said another way, ControlMonkey has the ability to save customers hundreds of thousands of dollars, if not millions annually just with their unique infrastructure maintenance capabilities.
MARKET ADOPTION
In late 2022 the ControlMonkey started developing their platform, which they spent most of 2023 testing with an initial set of design partners. Towards the end of last year they began to convert those design partners to customers and officially started to commercialize their technology. Today, the company has over a dozen customers including blue chip enterprise logos such as Comcast, Intel, Square and NetApp, which are generating more than $500,000 in annually recurring revenue (ARR) with plans to exceed $750,000 in ARR by EOY 2024. While this may not seem like a meaningful amount of traction, for a company just now closing its seed round, this would be a true feat.
EXECUTIVE TEAM
CEO Aharon Twizer, as mentioned previously, sold his prior company Spot.io to NetApp in 2020 - an experience from which he gained the understanding that infrastructure delivery needed to change, thus inspiring the creation of ControlMonkey. Prior to his professional career, Aharon served in the Israeli military in an elite computing division that provides data processing services for the army and its staff. CTO Ori Yemini was a senior member of Aharon's R&D team at Spot.io and has both a Bachelor's and Master's degree in Computer Science from two of Israel's top universities.
JOULE VALUE-ADD
In the due diligence process, Joule was able to facilitate numerous connections to prospective customers. One such prospect, HealthEquity (NASDAQ: HQY), was so impressed with the offering that they committed to a pilot engagement almost immediately and are currently in that test phase prior to becoming a customer. Also prior to the investment, Joule introduced the ControlMonkey team to Crowdstrike (NASDAQ: CRWD) and Freshworks (NASDAQ: FRSH) to begin cultivating those respective relationships. And finally, Joule was responsible for syndicating the final ~10% of the round to a U.S. fund led by the former Chief Strategy Officer of SAP thus allowing the founders to accelerate and complete their capital raise and return to their business momentum.
