Show Notes

The growth of the Internet has been nothing but amazing. Since I sent my first email from a unix terminal in 1992 (using ‘vi’!), we’ve seen the Internet over 50 billion (!) new “things” connect.

With people using so many IoT devices and facing cyber-security threats, it’s more important than ever for networks to be properly managed. That’s where Milan-based tech startup Tanaza comes in. They provide a smarter and cheaper alternative for network solutions, empowering both internal and external IT departments with their software.

Tanaza CEO and founder Sebastiano Bertani joined Roland Siebelink on the Silicon Valley Momentum Podcast this week. The two discussed Tanaza’s journey, the company’s multiple pivots, and many of the challenges it has faced, as well as those that are still ahead:

• Why Tanaza considers itself the Android of networking while the bigger companies are Apple.
• How distinguishing between short-term and long-term goals can impact how you approach customers.
• Why avoiding distractions from the core of the company is Tanaza’s biggest challenge.
• Why it’s okay not to play it safe and not be afraid of being the idiot in the room.
• The importance of building a team that has chemistry and not just the best individual for a role.

Transcript

Roland Siebelink:Hello and welcome to the Silicon Valley Momentum Podcast. My name is Roland Siebelink and I'm a scaleup ally for tech founders. And do we have an amazing tech founder in the studio with us today? It's Sebastiano Bertani, founder and CEO of Tanaza joining us from Milan. Hello, Sebastiano.

Sebastiano Bertani:Hi everyone. I'm happy to be here.

Roland Siebelink:Sebastiano, let's talk business. Tanaza, what do you do? And what difference do you make for whom in the world?

Sebastiano Bertani:We basically built a cloud-based operating system or a cloud-based platform to manage and operate networks. If you think of how complex networks are becoming today, not only in businesses but also in residential homes, we have more and more IoT devices. We have security threats. We have the need to do Zoom calls without disruptions. In that sense, the networks have to work properly, and to make that happen, you need to manage them. What we build is a software to make this possible, to make networks manageable, and to operate them in a way that everything works just fine. We have been doing this for some time in the SMB market mainly. Imagine any place where you have a complex network to manage, you have many devices to manage, you have to be sure that everything is fine. Ideally, there is some IT guy there, or there could be an IT guy from an external company providing a service. We empower those guys with our software.

Roland Siebelink:Okay. Does that mean your core customer is really that IT guy, maybe sometimes an outsourced IT guy that helps other companies manage their networks?

Sebastiano Bertani:Yes, that is correct. We call them Managed Solution Providers, if they are outsourced. And we call them the IT guy, if they are internal.

Roland Siebelink:No fancy title for the internal IT guy! Very good. How do you actually reach those people? How do you make them aware of Tanaza solutions? And if you do reach them, what is the key benefit that you try to sell to them?

Sebastiano Bertani:Right now we’re focusing on early adopters and visionary customers because our approach is pretty unique in the market. And I think I will explain that with an analogy. If you remember when the iPhone was launched, it was the only product in the market like that. Apple innovated so much, right? Both on the hardware side, on the software side, it was like magic. No one else had anything like that. And I think it took three years for Android to get to a similar level, I would say, or to be comparable in some way. If you think about the main differences, Apple is a vertically-integrated solution. It's hardware and software coming together from the same company. That's how they are very fast to bring innovation to the market. But Android has something that is pretty unique. My father is using a $50 phone and it works as well as my phone, which is a bit more expensive. I want something more. That's the beauty of a disaggregated solution of a software solution that can run on multi-vendor hardware. That's exactly what we do. If you go to the networking industry, you can think of Cisco as the Apple of the networking industry. They do something very strong, software-hardware integrated, and we want to be the Android there. We just bring to market software as a service, literally an operating system that you can install on devices provided by third parties. And so you see, our typical IT guy has to be open to innovation in some way. What we do is we promote what we do organically and people that are interested, just discover us. They get to our website, they download the software, install that on the gear they have, and they start using them. Sometimes the reaction is fantastic. But this is still, I would say, in an early phase because not everybody's ready to disaggregate what is not yet disaggregated.

Roland Siebelink:Okay. That's very good. Let's talk a little bit about the ecosystem that you're in. Does that mean you're actually up against Cisco as possible competitors? Other companies that have this more vertically-integrated solution, or are you more fighting against the hacks that people have basically pulled together to try and manage it for themselves? What's your biggest competition?

Sebastiano Bertani:Well, that's quite interesting also because it has changed over time. In the early days, our software was limited. Let's say an early adopter was like, "Yeah, I can build it myself and I can use some SSH and hack together something." And that's always true. If you have a lot of time, you don't need anything. You can do all yourself manually. But then if the network functions become more complex, you need something that is more structured. In the early days, we had these kinds of conversations. Now we haven't been hearing anything like that also because the product is way more mature. And I have to say, right now the main competition really comes from the establishment. The traditional incumbent guys in the networking space that lock their customers with these vertically-integrated solutions and maybe expensive contracts. I would say that, especially when you go from SMB to enterprise, no one is going to be fired if they buy Cisco ever. We can represent the cheaper alternative, the smarter alternative that frees companies from the lock-in. But we may be perceived as a little bit risky because we're new. I would say the culture shift is quite a challenge for us. But when we talk to the right type of companies, they really get in love with what we do. It's either they hate what we do or they love what we do. And we try to talk to the ones that love us more.

Roland Siebelink:Of course you do. That's very smart. Sebastiano, a lot of the listeners here are also in that phase where they have a product that works and they are trying to polish their go-to market. Once you start understanding that certain customers will love you and other customers will not love you, how do you hone in on them more? How do you start predicting who to reach out to who to talk the most with? And who to spend your energy on?

Sebastiano Bertani:I have to say that's the most complex thing to do in the business because you see many interesting things. "Oh, there's an opportunity. There is an opportunity there." And you really want to try to go for all of them. I think it really has to be realistic about what you want to do and what can be done. Also, what your goal is in terms of, are you trying to maximize revenues in the short term? Are you trying to pursue a long-term goal which maybe doesn't go through having massive revenues in the short term? I think having a very clear goal is the most important thing to do. And I have to say, disruption and disaggregation is a very theoretical concept in some way. We are one of those companies that have that as a mission in life and vision. And we try to ignore anything else. But the reality is it's very hard to stick to that line to get there because you're going to get distracted. Not being distracted is the most, I would say, difficult thing. And we try to say, "What do we need to be successful?" In the long term, not in the short term. And is it really possible to do that with the vision we have in mind? What we realized is that yes, we're a software product. But as Android, we can't just go to market alone. Android goes to market with Samsung, with LG, with many other hardware companies. We realized this, and then we started to understand that it makes sense for us to focus on hardware companies, to empower them. Literally using them as our channel as Android is doing. In essence, when we could see this opportunity among all the opportunities, and that this makes sense compared to where we want to go as a company, we started negotiating deals where we could retain the full intellectual property. That's what you do if you have an Android-like vision. And then we started trying to make our partners successful. All of the opportunities learning how not to get distracted by other things and just doing the right thing was the most complex thing, to be honest. And I think that's what really needs to be done by anyone who wants to bring the company to success.

Roland Siebelink:I love this theme. It hasn't come up in many podcasts yet. I'd love to delve into this a little bit more. You're about 25 people right now, as I understand it. That's a sizable team already, right? How do you manage your team to be focused on that vision and not to be distracted by all the other interesting stuff that goes on around them?

Sebastiano Bertani:I think we have an amazing team and some of the people that really like to explore, we end up spending nights discussing what we could do. We tend to see that as more fun than building stuff that is valuable. If we do more of that kind of stuff, then we feel guilty. "Hey, no, we need to go back to the core." Let's work eight hours on the core and then spend one hour on other things. I try not to enter into that mode with everybody because that will be distracting. But I know that with some people we can say, "Let's enter brainstorming mode." Now we can do whatever we want but limited time-boxing, I would say.

Roland Siebelink:Yeah. Time-boxing really is a technique to separate the explorative phase from the exploiting phase, right. That's a very, very good way of operating. Can you talk a little bit about the history of Tanaza? How long have you been in business? How did you found the company? Talk about the relationship with your co-founders over the years? How has everything evolved?

Sebastiano Bertani:Yeah, absolutely. We started sometime ago, I would say. We started in 2011, 2012, let's say, operating as a company. Those days it was like, I don't want to spend any more time with my mother over the phone asking me why wifi doesn't work. Any male between 20-30 usually is the IT guy of the family, and we wanted to solve that. That's what we wanted to solve. And so we started that way. And then we were literally pulled from the market to the SMB. And then to the verticals, very vertical solutions in the retail space. We started building what other companies did, like social wifi and marketing automation and monetization of wifi; this and that. But we were very nerdy inside. We did not want to build an application over the top. We built a full stack from the application layer, to API, to third party systems, to the drivers, to the operating system. But our core was in the operating system. We really want to do networking. At one point we said, "This space is quite crowded." We got to a good revenue, I would say, at one point, close to $1 million. And then at that point we said, "Well, we need to change." We thought that would not be going to scale. We were concerned about privacy problems. And if you think about it, nowadays, everything is about privacy, protecting customers. I think we were lucky in understanding that sooner than later, not sticking to that market. And then we went back to the platform and re-conceived the whole system as an operating system where applications can run there and you can have applications for SMBs, applications that are more for the enterprise space. Now there is a nice trend where we see this complexity coming also to the residential market. We're very happy because with this new approach, the Android approach, we can go to hardware companies - and we have a few of them already - and they like to use our software to power their hardware infrastructure. And so we are the software partner that builds play stores of applications, leveraging third party companies to unleash value on top of those networks. Those guys are the guys that create distribution. It's beautiful because if you work with a company like that, you don't have to care too much about distribution. And you can focus on what has value. The core of the system, adding application at the top for multiple segments. This is pretty much the story. Now we are in the phase where we are establishing more and more relationships with hardware companies.

Roland Siebelink:Twice already, I think, Sebastiano, you mentioned we were pulled by the market. This is a very interesting concept to talk to founders about. What does it take to get these opportunities where you're pulled by the market and what mindset do you need to cultivate for yourself to be ready for those pulls?

Sebastiano Bertani:I would say, first of all, you have to not fear to look ridiculous at all. You have to stop judging because if you think about the typical middle manager that works with established brands, you know what's the right thing to say. You know what things you cannot say. You're not going to go very far. When you start exploring, you look like the idiot in the room many, many times, especially if you're saying something out of context. And this is happening to me all the time. But then you find someone that thinks like you. And then you can start building together something that no one else did before. This happened many times. The last time this happened with a conversation with Facebook, for example. It was like, "We say this and that, we may look like the strange guys." And then they said, "Oh no, this is super cool. We can do something together." And bump! Then you're a special person. You have a special proposition. You are different. If you just play safe, this is never going to happen. I have to say it's like a roller coaster. So many times you're like, "Oh no, my life sucks. We never get anything done." And the day after it's amazing. You have to survive this up and down, up and down. And stay positive because if you stay prepared, the opportunity will come at one point. Or at least, when it comes, you're going to be ready. If you let the dark forces let you down and then play it safe, maybe you're going to feel better on average, but you're not going to achieve these things.

Roland Siebelink:How do you get yourself into a mindset, Sebastiano, of playing actually to win rather than playing not to lose. That's what I feel about this. How do you do that psychologically? Tell me.

Sebastiano Bertani:I don't know if I do that. You're right. I was thinking about this a few days ago. What's the difference between a day that you face with energy, that positive attitude, and the day where you just take care of stuff that comes? I should use a different word. I think it's really about the mindset. I was trying to understand. Is it something that comes from an outside thing that drives me? I don't think so. I think maybe I will have a great day with friends and family and I feel successful as a whole. And then I see everything in a positive way. Or the opposite. Maybe it's a difficult day for stupid things. You don't find a car parking lot or whatever. And then you start seeing everything in a bad way. I don't know. I don't know how to do that. I'd like to know how to do that always, sometimes I'd succeed. I have to say pressure and the fear to not make it is a big part of being an entrepreneur. I think that's just what it is. I don't have a secret way to solve it.

Roland Siebelink:What about the team that you've built, Sebastiano? Can you talk a little bit about how have you built it up? What are those 25 people focused on? And especially some questions that founders often want to know is how are you balancing the core product and engineering capacity versus more of the partnerships and go-to market capacity?

Sebastiano Bertani:Well, that's a tough one. I would say the majority of our team is basically engineers. They build the product or support engineers. We have a part of the team in embedded development. Part of that is the cloud infrastructure. There we have some system administrators and full stack guys. In terms of the type of people we recruit, I have realized we are very tough. We are very picky. Meaning it's very difficult to add someone to this team because the bar is so high. Sometimes I have to say, "Guys, hire someone." You have four, you have to pick one. You can't tell me that all of them have at least an issue not to hire them. This was a part of the answer. This is how proud I am about the team and the passion that everybody has. Then there is a problem of the core versus the special projects. And I think that is very difficult. Every time there is a big opportunity, there is always some R&D to be done. And that becomes a distraction. One of the most complex things that I try to do - and I think I'm partially successful - is try to align the expectation between different partners, so that at least we have one roadmap and not three competing roadmaps. And that goes back to what do you want to do and how can you focus your effort. It's remained tough. You really want to take all the opportunities and have one team for each one of them, but it's not possible. This remains a difficult thing to do. We try to be agile in that and to allocate, let's say 20, 30% of the energy, ideally, in special projects and 70% to the core. And ideally, try to sell the vision of the core to any partner we have, so that they stick to that as much as possible.

Roland Siebelink:Can we switch the topic a little bit toward your financing strategy? So many founders here, of course, are just raising their seed round or are looking to get into the venture capital game. How have you been thinking about that through the history of the Tanaza? And how have you balanced finding external funding versus just living off the money you earn?

Sebastiano Bertani:Also another interesting topic. I would say, we are from Italy. Culturally speaking, we are not like the typical California-based companies that think a different way. We like the idea of bootstrapping in some way. We did not use a lot of capital, to be honest with you, for a company of this size and with this history. We started this company with family and friends. Got this seed round from this family office. We got a good seed funding from the European commission. They gave us 1.6 million Euros, almost $2 million free equity. That was good. But I have to say, despite all this story, 2020 has been very tough. On one side, there was this impulse to this digitalization. But our core market, which was more in the SMB space and in places where you need to manage a network, do you see many places with people there with crowded places? No! The world was frozen for one year. And then that gave us time to develop more of the product and to establish stronger partnerships because our partners we're facing some issues. We're working to be even stronger during 2021 and 2022. But I think we got to the point where we see exactly where I want to go. We have these core products to continue to develop. We have to develop these applications, the top and partnerships. We think at this stage, the next steps for us in terms of funding is to close a Series A round, ideally with an institutional investor that understands about the networking and connectivity space, which is not your typical investor. If you are interested in other markets, you may not even understand what that is. We don't want just the money. We want an investor that understands what we do and the vision of disaggregating. I think the next nine to 12 months, we want to close a 5-million round in terms of what our strategy is for fundraising. This will allow us to scale the operations. Maybe in European terms, this is what I call an ambitious plan. Maybe the typical US company would say, "Well, that's the medium speed plan." But I would be very happy to be able to execute on this plan. And I think there are very good chances that we can make it.

Roland Siebelink:I do think that if you have been able to show successful bootstrapping in the past, that also means you still own a lot more of your equity and you can keep your own faith under control. And there's a lot to be said for that as well. I do think there is no one right way or one wrong way. It is just different perspectives and see what you need in order to make the best out of your company. I really love it. With having been in this business since about 2011, 2012, you said, Sebastiano, what advice would you impart on other founders that may not have been in business for that long yet, that are looking to build a startup as successful as Tanaza? What are some of the key learnings you would like to share with them?

Sebastiano Bertani:I just wanted to share something that I realized recently during COVID. I can't stand working from home. And the reason is I love so much to sit around with people and discuss new things and new features at the coffee machine. I think informal communication is where a company really can do great things. What I realize is that even if it has been one year since we seriously met together, the last time as a company, I feel that the key people in the team are here with me in the room working. I didn't think I could rely on them so much, not only from the professional standpoint but also from the emotional standpoint. I really see as if they are here with me. Still, is it frustrating to do remote work from home? But this means, "Hey, I can count on them way more than what I thought." Way more. And I think the core is really to assemble a team of people more than finding the best person in the industry for that specific role. I think once you have the right chemistry, the right passion, and you can act as a whole - even in complex times, you're going to face problems and solve them. Maybe it's not the best way that an AI robot would do to optimize every KPI. But it's how I like to do it. It has to be fun because otherwise at one point, you're not going to survive. You're going to lose the meaning. And the meaning is the most important thing. People have to be connected to that.

Roland Siebelink:I love how you're pointing in between the lines often to how the real driving force is keeping up the energy, keeping up the motivation over time. Because it is such a hard game sometimes, that motivation, that energy you also get from other people on the team, how that is really a life force that keeps you in business over time. I love it. It’s very good. Sebastiano, as the final question, if people want to learn more about Tanaza where can they go? What should they download? And is there any way in which they can help you reach those next milestones?

Sebastiano Bertani:Well, I would say, if they go to our website, they can have a look at our product with a nice video. If they are nerdy enough, if they are innovative enough, they can download the software and start managing their device for free. And play with it. And I'd really love to know what they think about it. Ideally, for anyone that is managing the infrastructure or the homes and the wifi of the family - and I mean the distributed family - this product should be free. Now we don't have anything that is clearly free for that kind of use. But this is what we're going to because we think that disaggregation is so disruptive and we think it should be free for individual users. Why not? Play with it. Talk about it. Use it with your family. And then just spread the word. This is how anyone could help us.

Roland Siebelink:That's excellent. Okay. Very good. And if there's any investors listening that have a particular experience in the network management industry, of course, I'd be happy to provide an introduction to Sebastiano as well. Thanks once again. This was an amazing interview. Really appreciate it, Sebastiano Bertani, the founder and CEO of Tanaza. Appreciate you joining.

Sebastiano Bertani:Thank you very much. It was a great pleasure.

Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.