SaaS Interviews with CEOs, Startups, Founders
748: How to Use Open Source Project As Lead Gen from $3m+ ARR Founder
11 Aug 2017
Chapter 1: What is the main topic discussed in this episode?
launched back in 2014 really got their first revenue in 2015 couple hundred grand 2016 obviously they've grown significantly to date we know they're at least they're serving at least uh in the low hundreds of customers call it 300 paying at a minimum call it a thousand bucks per month or about a ten thousand dollar acv for doing at a minimum again 300 grand per month or well over three million dollar annual run rate potentially significantly higher tomer's being very modest i feel like but
Chapter 2: What is Logz.io and how does it operate?
A lot of success, 80% gross margin. Again, helping these really CTOs and technical teams understand and get a better grasp of how to manage their different logs and the processes they run around all those log files. This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base.
You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have. I'm now at $20,000 per talk. Five and six million. He is hellbent on global domination. We just broke our 100,000 unit soul mark. And I'm your host, Nathan Latka.
Chapter 3: What is the revenue model for Logz.io?
This is episode 748. Coming up tomorrow morning, Gavin joins us. He's making $9.6 million off those horrible airport Wi-Fi connections. You guys know what I'm talking about, right? Well, you won't believe how he's making money. Hello, everybody. My guest today is Tomer Levy. He's the CEO and co-founder of a company called Logs.io.
Before founding this company, he co-founded and was the CTO of another company called Antigua, a company that developed innovative Docker-like containers designed for large enterprises. Prior to Antigua, Tomer spent six years at Checkpoint, where he led its intrusion prevention system, or IPS product, from concept to market, generating $100 million in revenue in the second year alone.
Chapter 4: How does Logz.io leverage open source for lead generation?
Tomer was an MBA from Tel Aviv University and has a BA in computer science. and is an enthusiastic kite surfer. Tomer, are you ready to take us to the top? Yes, I am. All right, very good. So let's just jump right in here to Logs.io, your current company. What does it do, and what's your revenue model?
Sure, we're a log analytics company. We help customers like Dyn, Turner Media, British Airways, analyze data generated from machines. If you think about it, every machine in your room, from your computer to your mobile phone to even your house, has software that generates logs.
Chapter 5: What challenges does Logz.io face in the competitive landscape?
We help companies analyze this log data and basically reduce the time it takes to solve problems in their web servers, in their databases, This is kind of the main product that we offer. Our business, as you asked, is basically selling software as a service to analyze this data.
Are you selling to IT folks or CTOs at companies?
Yes, usually it would be SRE, DevOps, IT operations. This is, I would say, most of our customers. About a quarter of our customers are actually security teams that also need to monitor log files, monitor log events, and kind of correlate to understand threats and attacks.
And what would you say on average, just so we can get a sense of kind of deal size here, what's the average customer paying you, either per month or per year, whatever's easiest for you?
As you get this answer, often it's complicated. It starts with, I would say, the self-service tier, which usually people buy online, paying a few hundred bucks a month.
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Chapter 6: How does Logz.io maintain customer retention and manage churn?
That would be a few thousand dollars a year. On top of it, we have two main cohorts. One of them is the SMB, usually would pay about 10K, 10 to 15K a year for the product. And on top of it, we have what we call SME, small, medium enterprise, would usually pay 50K per year minimum, and then would go to a few hundred Ks for the high-end enterprises.
When you look at your sweet spot, though, I mean, so is it fair to put a range on it? Is it fair to say between 10 and 40K in annual contract value? I mean, think about the last few deals you've closed. They've kind of been in that range.
Yes. I would say as we evolve, we're a very young company.
Chapter 7: What strategies does Logz.io use for customer acquisition?
How old are you? When did you launch the company?
We launched it on 2014. We launched the company. We launched the product end of 2015. We're about a year and a half in the market today. If you look at the last 10 days, it's probably around 40K.
Is your process on those folks, do you have an inside sales team there or no?
Yes. So what we do very differently for most companies, at least in our space, is we focus on open source.
Chapter 8: How does the team structure at Logz.io support growth?
So we're actually, a large part of what we offer is actually an open source platform called ELK, ELK often used. So just to say, ELK has about half a million downloads a month.
What is it? Like for a non-technical person, describe that to me.
So think about it like a set of libraries, you install them on a server and they basically take all the data, any data you have, it can be web application, it can be data about credit card swiping, your e-commerce, it doesn't matter, you put it into this one bucket and what ELK allows you to do is basically visualize the data and understand what's important in it.
What we do is we offer that in the cloud with more capabilities. So I'm going back to your question about kind of the way our business works is really based on the open source community. So we see today many companies, thousands of new companies sign up to our platform every quarter and start the process, start to use the platform. And this is kind of the main driver to the business.
And this is how we actually get our initial value.
Did you intentionally launch this open source project with the know-how that one day you would use it as lead generation for a paid product?
So, unfortunately, we're not the one who actually developed the open source from the beginning. It was actually developed by different folks, and they spent most of the time kind of investing in the core search engine. The Elk is, I would say, a very strong search engine. What we've built on top of the core open source, we've built...
I would say an application, a solution specifically for log management. So customers, instead of them trying to install, maintain, it's really hard. It takes a lot of time and effort. They kind of get that as a SaaS from us in the cloud. And unfortunately, we didn't invent that.
So is a good way to think of Elk for a non-technical person, it's basically like Google search for all your log data?
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