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Oro Series A funding. E-Commerce and Open Source. An interview with Yoav Kutner, CEO and Co-Founder of Oro and MageCore

March 10, 2016
Alain VeuveAlain VeuveManaging Director, AOE Switzerland

Last week Oro announced a first venture capital round. In the past three years, the business application platform Oro brought up several Open Source products such as OroCRM, OroCommerce and indirectly many more such as Akeneo, Marello, Diamante Desk and TimeLap. An interview with CEO Yoav Kutner, who previously built Magento together with Roy Rubin.

Yoav, last week your company Oro announced a 12M finance round. How does that feel?

It feels great! We have been bootstrapping the company for the last 3+ years investing in building our new products, and it is a great validation of what we have achieved so far and a great stamp of approval for our Open Source strategy as a business model.

For the ones that haven’t read the details yet, can you give us some background information?

We have just closed our first round of investment of 12 Million dollars lead by Highland Europe.

What do you plan to do with the money?

Before, we were probably not moving as fast as we wanted to, but now with this new funding we are able to take more risks and really double down on our product development and accelerate creating products that help businesses have tools to succeed. We will also use this infusion of capital to drive rapid expansion of our sales, marketing and partner development all over the world.

B2B E-Commerce is a hard-knock life, especially for SME. When I first explored OroCommerce, I got a feeling like “gosh, they are about to do it again”. Mainly because a lot of features that are a pain to build are included in OroCommere already. How much ambition do you have to show the world that you guys can revolutionize the world of E-Commerce one more time?

We are really excited about creating a true B2B E-Commerce application and platform. We know from years of experience working with thousands of merchants that there are no real options for them when it comes to solving their B2B E-Commerce needs. The existing platforms were really neglecting B2B features and focusing on B2C needs as the E-Commerce world got more exciting in the past decade. But the reality is that the B2B experience needs to match the B2C experience people are getting used to when shopping online. The world is becoming more efficient and using phone calls, Fax machines and face-to-face meetings is not always an option in our modern, global world. Building tools that help SMEs stay relevant and compete is part of our DNA. So I would say we are very ambitious about creating the right product with the right feature set to bring the B2B world to the modern Web era.

Your team carried out an extensive performance test comparison between Magento 1 and Magento 2 and the result was, simplified, that Magento 2 is generally slower than Magento 1. This created a lot of buzz and discussions. On the one hand, regarding the technical topic itself but also regarding the question whether Oro has a hidden agenda when it comes to Magento. It somehow peaked when you had to kind of remind Paul Boisvert (current Head Product Management Magento) on LinkedIn who you are. So, how is your relationship with Magento?

As I mentioned before, we were bootstrapping our company since we started it. As such, some of our revenues come from providing services on Magento under the brand MageCore (comes from the original code space name of Magento and Core – the fact that we have a lot of the original core Magento developers working with us). As marketing for Magento 2 started getting more intense, more and more of our MageCore customers were asking us about Magento 2. As upgrading to Magento 2 is a re-platforming effort and huge investment on their side, they asked us as their SI if it is worth it and what the benefits in doing so are.

Yoav Kutner

Yoav Kutner

CEO / Oro
I think that it is a good practice for SIs not to follow the trends without actually providing real fact-based information to their customers.

So, we were hired by a few of our customers to evaluate the risks and benefits of upgrading to the new platform Magento 2 and what impact will it have on their business. A lot of our MageCore customers are high traffic/order sites, so the one thing we were worried about is performance and cost of hosting, and that is where we started. Our findings were not positive and it seems that to get the same performance out of Magento 2 one will have to spend about 7-8 times more on hosting Magento 2 vs. Magento 1. I am happy this started a conversation in the ecosystem (you know the story about The Emperor’s New Clothes by Hans Christian Andersen). We truly welcome any feedback that improves our tests or even refutes them as this will help everyone in the community succeed. I really feel we are an integral part of the Magento ecosystem and contributed a valuable test to the community. We will continue investing in this and are working on our next part of the tests that should be made public soon.

Coming back to the expansion of Oro. I think one of the bigger mistakes with Magento was that you guys realized rather late how important Europe was. Are you doing better this time?

I agree. Reacting too slowly to the European needs with Magento was one of our biggest mistakes. Part of the investment in Oro will be spent on establishing a local presence in the EU. We already have a few developers and PMs in Europe that work with our European customers and we will expand the team there. So this time we will not only have drones but rather have boots on the ground in Europe.

In my article “The stagnation of E-Commerce” I pointed out that we did not see a lot of innovation in the E-Commerce sector since you guys launched Magento. Do you see OroCommerce as a product that could transform into a B2C solution over time as well – and fill this gap?

I agree with your observations in your article. It has been a while since we saw many innovations in the B2C space. We feel that the B2B space was neglected even more than B2C. The B2C space is also very fragmented and it is becoming a very crowded space with many new players offering B2C platform options.

Yoav Kutner

Yoav Kutner

With OroCommerce we are going to focus on the B2B E-Commerce needs first.

That said, many of the B2B merchants have the need to have B2C online presence as well. It might be only a frontend catalog or a fully transacting B2C E-Commerce site. As we are developing the multi-website feature in OroCommerce, we support catalog-only and simple B2C websites in a single instance of OroCommerce. However, we will probably not match the full feature set that Magento offers as most of the requirements our customers have do not need the bloated feature set Magento provides.

What SMEs typically fail at is good product data management (which is key for E-Commerce). I very much like what Akeneo is doing and talked to prospects that are seeing that constellation of a more or less integrated product chain – OroCRM/Akeneo/OroCommere – as a big advantage once they can use it in production. Is that part of your strategy and how do you plan to extend it?

Absolutely! This was and is the driving vision of the Oro Platform (or BAP). We decided to invest in the development of the platform to allow other software companies to create business applications without the need to re-create from scratch features that all applications of this kind need (e.g. ACL, User Management, Workflow Engine, Report Engine, etc.). We have seen a few of these applications introduced in the market using Oro Platform, including Akeneo, Marello, Diamante Desk and TimeLap. Furthermore, this also allows companies using our products to develop applications that are proprietary to their business needs. We are continuing to invest in the Platform and applications that run the same Oro Platform version can run together in the same environment, hence reducing the costs of integrations between applications. Of course we are investing a lot into OroCRM and OroCommerce integration and we should have a seamless integration between them in case a B2B company needs a CRM to work with their B2B site. I am very proud of what the Akeneo team is building and we have as a high priority item to have a very deep integration between OroCommerce and Akeneo PIM.

Are you searching for staff in Europe?

Yes. We are looking for Symfony 2 developers, sales and marketing people for the European market. More information can be found on our website

What will be the product and pricing strategy for OroCommerce?

Of course our Community Version is free. OroCRM Enterprise pricing is $59/user with 5 users minimum. We maintain this price regardless of whether you choose our SaaS offering or host it on your own. With OroCommerce we are still working out the price but looking for a simple fixed price model and we should have the full pricing details in the near future and most likely release that at our first Oro event Momentum.

I have the feeling that Open Source as we knew it for years is becoming less important. Mainly because traditional proprietary vendors are opening their codebases more often and because Open Source companies struggle to sell enterprise editions. How do you see this and do you see other Open Source business models that could do better?

I think it is still a very good model to have an Open Source version. Oro started with very little investment in marketing, yet we have gained customers and users all over the world in a very short time. This would be much more expensive if we had to do the same with a proprietary software and traditional marketing strategy. Also, the benefits of having thousands of users using your product and giving feedback is invaluable. We learn what our community needs and uses from our products and what issues they have. I think that the reason that some Open Source companies are struggling to sell the enterprise versions is because the value and who should use it is not clear. With Oro we are taking a bit of a different approach to differentiate our Community and Enterprise editions. Aside from features and integrations that are expensive to support, the feature set is identical. The main difference is quality and scale of features (e.g. Job queue if you have many users, Enterprise Report Engine, etc.). We believe that when a business grows and needs more, they will do the cost analysis and spend some money on their software to get better performance and scale. We will also start offering some services in the near future so that companies that, for example, need a data store, as they collect a lot of data, could extend that service from us rather than on their own.

In Germany, Spryker is getting more and more attention. Mainly because their concept is very modular and their code base is used by some of the biggest E-Commerce players in Europe. What do think about this modularized approach that leads to more flexibility and agility for large enterprises?

I am not extremely familiar with the Spryker solution, but it seems to me that they are building a modular system – which is nothing new. They shared some of their ideas with me, and to be honest, it resembled some of the big project deployment we worked on with Magento. They claim that it is better than existing solutions on the market, but I have no facts supporting this claim. They are great guys so I wish them all the luck. I do, however, like modularity when it comes to creating applications, as it allows companies to extend and add features as they need to be successful. But of course, this comes with some costs such as performance and time to market.

Yoav, thanks for your time.