748: How to Use Open Source Project As Lead Gen from $3m+ ARR Founder

Tomer Levy. He’s the CEO and co-founder of Logz.io. Before co-founding Logz, he co-founded and was the CTO of Intigua, a company that innovated locker-like containers designed for large enterprises. Prior to Intigua, Tomer spent 6 years at Check Point, where he led its intrusion prevention system product from concept to market. He has an MBA for Tel Avi University, a BA in Computer Science, and is an enthusiastic kite surfer.

Famous Five:

• Favorite Book? – The Hard Thing About Hard Things
• What CEO do you follow? – Jeff Bezos
• Favorite online tool? — Grammarly
• How many hours of sleep do you get?— 6-7
• If you could let your 20-year old self, know one thing, what would it be? – “Take it easy, you’ll figure it out”

Time Stamped Show Notes:

• 01:20 – Nathan introduces Tomer to the show
• 02:06 – Logz is a logins company
  • 02:12 – Some of their customers are Kantar Media and British Airways
  • 02:30 – Logz solves systematic problems in web servers and databases
• 02:41 – Logz is a SaaS business
• 02:52 – Logz caters to IT operations and security team of a company
• 03:24 – You can subscribe to Logz’ website directly and pay monthly
• 03:29 – Logz has 2 main cohorts
  • 03:32 – SMBs would pay around $10-15K a year
  • 03:41 – SMEs would usually pay annually that can grow to hundreds of thousands
• 03:58 – Average pay is $10K-40K in annual contract value
• 04:10 – Logz was launched in 2014 and the product end of 2015
• 04:30 – Logz has an inside sales team
• 04:38 – Logz offers an open source platform like ELK which is around $500K a month
  • 04:58 – Instead of libraries, ELK will be installed in the servers and take all the data
  • 05:12 – ELK visualizes the data and Logz offer ELK with more capabilities
• 05:27 – Logz is based on the open-source community
• 05:55 – Logz isn’t the developer of the open source
  • 06:05 – Logz built a solution on top of the open source for log management
  • 06:30 – ELK is like google search for all of your log data
• 07:02 – There are also other companies who are doing open SaaS
  • 07:10 – Pantheon for WordPress and similar with Cloudera are doing open SaaS too
  • 07:38 – Github just recently offered Git open source as a service
• 08:03 – Tomer has been writing content even before the launch of the company
• 08:14 – Logz is number for ELK search and they contribute the most in the open source community
• 08:43 – Open source has to be good and easy enough to get started so it will have mass distribution
  • 08:51 – But it has to get to a point that it is difficult to scale and make it production grade
• 09:04 – Logz currently has a thousand companies on board
  • 09:17 – Some are paid customers and some are on free
• 09:35 – Logz has raised money but they could have built a lifestyle business
  • 09:52 – Logz raised $24M and the last round was $15.6M in October 2016
• 10:07 – Team size is 70
• 10:54 – Logz started in October 2014 and ran their first product by February 2015
• 11:05 – Logz started with 5 non-paying customers after shifting to paid model
• 11:38 – As your company grow, people will realizes your company’s value and be willing to pay for it
• 11:49 – Logz has 0 revenue in 2014 and 2015 revenue was around 6 figures
• 12:44 – Logz has already broken a million dollar runway
• 13:02 – Logz competes mostly with engineers setting up their own open source
• 13:10 – The commercial side, Logz competes with AWS or Amazon Web Services
• 13:45 – Gross margin
• 14:12 – Logz pays $1-5M to Amazon for hosting
• 15:20 – Minimum MRR
• 15:46 – Team is based in Telavi, Israel
  • 15:59 – Logz also has a team in Boston where Tomer currently is
• 16:11 – Gross monthly customer churn
• 17:07 – “We’re very much a land and expand business”
• 17:43 – Marketing team has 8 or 9 people and 7 sales people
• 18:10 – Fully weighted CAC
• 18:40 – Payback period
• 19:22 – Logz also invest in paid marketing with around $5k a month
  • 19:50 – Logz invests massively in events this year
  • 20:23 – Logz spends a few hundreds of dollars in sponsorships
• 22:17 – The Famous Five

3 Key Points:

1. When thinking about a business model, try and create on that is “land and expand”.
2. Starting as a free service is fine, but you need to make sure you’re built to offer your customers more value behind the paywall.
3. Great content coupled with great keywords builds great companies.

Resources Mentioned:

• The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences
• GetLatka - Database of all B2B SaaS companies who have been on my show including their revenue, CAC, churn, ARPU and more
• Klipfolio – Track your business performance across all departments for FREE
• Hotjar – Nathan uses Hotjar to track what you’re doing on this site. He gets a video of each user visit like where they clicked and scrolled to make the site a better experience
• Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments
• Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible
• Audible– Nathan uses Audible when he’s driving from Austin to San Antonio (1.5-hour drive) to listen to audio books

Show Notes provided by Mallard Creatives