assionate about collaboration tools, Gabriel Engel founded Rocket.Chat, a leading open‑source team communication platform in 2015. The platform allows users to chat securely on the web, desktop or mobile. However, that wasn’t his first venture as an entrepreneur: he also cofounded Konecty. Living abroad, he worked as product manager for business innovation and mobile applications at Vodafone Global Enterprise.
Rocket.Chat was not your first company. Tell us more about your entrepreneurial journey and what motivated you to start your own business.
My father is a businessman, my grandfather is a businessman, and my uncles are entrepreneurs. I have many examples in the family. My father said, “If you want to learn how to run a business, work with your mother.” She had a women’s clothing store. When I said, “I don’t understand anything about women’s clothing,” he replied, “That’s right. If you understand how it works, if you know your customers, what sells, inventory, talking to the accountant…”
So, I worked at my mother’s store for a year or two. When she sold her store, I went on to work in an IT company my father had. Then RBS, the local media conglomerate, bought it. I could have gone with the team to work at RBS. Instead, I got together with my university friends and said, “Let’s open our own business.” I knew about managing and IT, and my friends also wanted to be entrepreneurs. Together, we started making websites for small companies. By the time I graduated, the company had grown, and since I wanted to live abroad, I went to London.
I went there as an English student and had a visa that allowed me to work part-time. I planned to get a job at a company that developed websites for other small and medium-sized companies, exactly like we did in Brazil, to see how a company in England works. And when I was half-ready to run a company in the UK, I fell out with my cofounders in Brazil.
They bought my share of the company, and I decided to stay in England. I was supposed to stay for one year but stayed for ten years. I got to know a lot of Brazilian companies, and I helped them to go international, as a consultant or representative there.
You also worked at Vodafone while you were in the UK.
Yes. I worked for two and a half years there and saw how a wealthy multinational works. What was interesting was also frustrating, because you saw the amount of money wasted in a large company. All costs grow along with the budget. Everything gets so expensive. No one wants the risk of making a mistake, so they only hire the most expensive suppliers and the most expensive companies, and the projects become Babylonian.
If I wanted to do something small at Vodafone, it would cost fifty or one hundred thousand dollars. Wait, what? I do that with five thousand reais in Brazil. I understood how big companies can become slow, making room for small companies to take over. And that’s why I came back. I got so frustrated with Vodafone’s process: I spent most of my time presenting ideas about what I was doing or was going to do, and why… I didn’t do anything but convince or hire people.
What did you do when you came back to Brazil?
I kind of created the embryo of Rocket.Chat. The first product I created was a CRM. My brother had opened a real estate agency, and he needed a CRM for it. Then another company came along asking for the same thing. I started hiring people in Brazil to develop it. That was Konecty. Soon, people wanted a communication tool that went along with the CRM. More people were selling online, and they wanted a way to communicate with both a distributed team and with the customers. And then, as part of the CRM, I created Rocket.Chat. And Rocket.Chat ended up having a life of its own.
We decided it would be open source, which would attract more developers to help us improve the product. It got so big that investors came and said, “Look, we’re interested in investing, and we want the chat to be a standalone thing.” Rocket.Chat became one company, and the CRM, Konecty, another.
What were the difficulties of Rocket.Chat’s business model?
RocketChat’s business model is what we call OpenCore. It’s an open-source model, where most of the product is open source, free, and everyone can use it. And we have an enterprise version. This model has a positive side: an extremely high rate of market penetration because you distribute it organically. When you have a good product, many people want to use it at home. It’s free, it spreads very quickly. But the biggest challenge is finding the balance between creating a good enough product that spreads quickly and at the same time maintaining enough differentiation in an enterprise version that some companies see a reason to pay for it. Otherwise, everyone uses the free version and you never make money.
It’s the first question: “If you give away products, how do you make money?” There is a version made for the corporate world, with other levels of security, compliance, and reporting that the free version does not have. The free version has eighty percent of the functionality. The other twenty percent is in the paid version.
How did you reach successful monetization?
It took a long time. We created a community around the product very quickly and caught the attention of investors. Even without looking for investment, we received offers. We tried to survive for a while with our own funds. I borrowed money and put it into the company, but we received an offer of five million dollars. At the time, five million dollars seemed like all the money in the world, and we thought the money would never end. We hired people and grew. The focus was always to increase our user base and think about monetization later. We knew that companies like Facebook or Amazon took years to monetize.
At the beginning, it seemed super easy, because the first people came and wanted to throw money at us. We had people who wanted to pay, who wanted to support open source, and who paid for a license. Communities got together and sent us money; it generated the false impression that monetization would be easy. But when we started it, we realized that generating revenue was complex.
We assumed that, when the time came, it would be obvious how to monetize it. It wouldn’t be difficult. And that was a disillusion. There was a whole side and a science to it that we didn’t know about. The sales cycle took longer than expected, and people needed reasons to pay.
We created it in 2015, the commercial product was released in 2018. Only in 2019 did we start having significant revenue.
The people who brought you here are not necessarily the people taking you to your next phase. Identify the people who can continue growing. Invest in them, give them space to grow.
When you started hiring, it was already a distributed team, right?
Yes, the company started as distributed. We have an office, because I had two small children, and my wife couldn’t stand me at home anymore. I needed an office to organize myself, but most of the team was distributed.
And how did you manage to build the team culture?
One of the things about our team culture was that we came from the open-source world and ended up hiring people who already shared the open-source culture and values. They got involved on their own initiative, they would pick a problem in the public bug list on GitHub, work on it and send it. Sometimes people weren’t even getting paid for it. Engagement with the company’s purpose has been strong since the beginning, and that became our DNA.
Today, we added Dream Big and Ownership as part of our values. Everyone has an owner’s mind, everyone has shares in the company, and everyone solves problems without making excuses and depending on others. The other is Trust, because we make everything transparent: everyone knows what is happening, we publicly share our company handbook, and when I have board presentations, everyone knows what is being discussed.
And the last value is Share. The bonus program is for everyone: everything we do is shared with us and the community, in the spirit of open source and building together.
In terms of hiring, what lessons have you learned over the years?
When we rushed to hire and grow fast, we hired people for their technical skills and not for their values. We used to do the technical test first, and sometimes there was a culture interview later, but other times we overlooked that because “he’s such a good programmer! We need a developer like that!”
Invariably, it went wrong. They could be amazing technically but wouldn’t work well with the team or discuss things with others or be open to feedback. Every time we interviewed technically first and accepted the risk of the person not being a cultural fit, we regretted it. And in the first moment of pressure, those people are the first to jump ship. These things go together…
Now, we see if they are a cultural fit and then we’ll see if they have the technical ability or the potential to learn. It’s easier to teach someone a technical skill if they share our values than to take someone who has technical skills but doesn’t share our values.
What are your top work essentials?
Phone, laptop and a second monitor.
At what age did you found your company?
What are your most-used apps?
What’s the most valuable piece of advice you’ve been given?
Believe you can do it or believe you can’t. Either way, you’ll be right.
What do you do every morning to prepare for the day ahead?
I get my kids ready for school and make them breakfast.
What book has most influenced your career?
Delivering Happiness by Tony Hsieh.
What positive habits have you cultivated?
Not panicking and not being so reactive.