Solo.io reaches $1B valuation with $135M Series C investment

When you think about service meshes, a somewhat esoteric cloud native tool designed to stitch different microservices together, you might not think it’s the most lucrative side of the Kubernetes led cloud native market, but you would be wrong. Today, Solo.io, a Cambridge, Massachusetts service mesh startup, announced a $135 million Series C at a fat $1 billion valuation.

Altimeter Capital led today’s round with participation from existing investors Redpoint Ventures and True Ventures. By the way, that valuation is a 10x increase over their previous valuation at the time of their $23 million Series B round in October 2020 and brings the total raised to $171.5 million.

While founder and CEO Idit Levine says the company she started in 2017 anticipated the rise of the service mesh market in general, she doesn’t see her company strictly focusing on that particular technology.

“We predicted everything that will happen in the market and honestly service mesh is catching on like crazy. But I will say that saying Solo is [strictly] a service mesh company, to me it’s like saying that Amazon only sells books. That’s where we started, and we’ll do whatever we need to do and go with the market,” she said.

The company made some early bets on the open source Envoy proxy and Istio service mesh, Both projects have grown to be leaders in this space, and the company has been a major contributor to both from the very beginning, which puts it in a good position to build commercial products on top of these projects.

Just recently, Solo released an updated version of Gloo Mesh technology. The startup was able to combine an API gateway and service mesh into a single control plane, vastly simplifying the management of these technologies.

As they grow, as you would expect, the team is growing too with around 70 employees. She said her strategy has been to hire young people and teach them the business and it’s been working well.

In terms of diversity, she says that as a woman with a highly technical background, she has sometimes been frustrated by tokenism. “I never asked for anybody to give me this discount because I’m a woman. Actually, sometimes it has been irritating. Oh, we want to give you a talk because you’re a woman. It pissed me off. You need me to give a talk because I am damn good,” she said.

As she builds her company, she is making the effort to find more diverse candidates. Her current group of engineers is 30% women, which is high by tech company standards, and she continually looks for historically underrepresented groups as she hires.

“We have a lot of diversity in the company. […] I think that it’s contributing to [our success]. We are reaching out to women in tech and people of color in tech, so we are definitely trying. We are going to meetups [and other places] and looking out for [diverse] people. And so we are trying and it’s definitely what we want to achieve,” she said.

While Levine didn’t want to share specific revenue numbers, she said that the company’s goal for FY2021, which runs February to February, was to triple their ARR from the previous year, and they were able to do that by the end of Q2 of the fiscal year, putting them on track for some explosive growth. And she says, part of the reason for that is that companies are signing up for Solo’s products for multiple years. In fact, 35% of their contracts are for 2-3 years, accounting for over 100 contracts so far.

That could explain why investors were willing to pour so much money into this company and value it so highly. Levine says that she wasn’t looking for funding, but customer demand has been growing so quickly, and the funds will enable them to accelerate and keep the growth they’ve been experiencing going.

“Basically there wasn’t any reason to take the money. I think that the reason I took this on is because we want to take over [the entire] market, and we need to grow. There’s so many demands and we need to scale dramatically, and that’s the main reason that we took this round,” she said.