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

Tomer Levy

In Episode #748, Nathan interviews Tomer Levy. He’s the CEO and co-founder of Before co-founding Logz, he co-founded and was the CTO of Intigua, a company that innovated docker-like containers designed for large enterprises. Prior to Intigua, Tomer spent 6 years at Check Point, where he led its intrusion prevention system and where the IPS product—from concept to market—generated $100M in revenue in the second year alone. He has an MBA from Tel Aviv University, a BA in Computer Science and he 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 – A description of Logz
    • 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 teams 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 pay around $10-15K a year
    • 03:41 – SMEs usually pay annually and it can grow to hundreds of thousands
  • 03:58 – Average pay is $10K-40K in annual contract value
  • 04:10 – Logz was launched in 2014
  • 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 will take all the data
    • 05:12 – ELK visualizes the data and Logz offers 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 Cloudera are also doing open SaaS
    • 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
  • 08:43 – Open source has to be good and easy enough to get started with so it will have mass distribution
    • 08:51 – 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 a paid model
  • 11:38 – As your company grows, people will realize 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 – On 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 Tel Aviv, 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 salespeople
  • 18:10 – Fully weighted CAC
  • 18:40 – Payback period
  • 19:22 – Logz also invested in paid marketing at around $5k a month
    • 19:50 – Logz has invested massively in events this year
    • 20:23 – Logz spends a few hundred dollars in sponsorships
  • 22:17 – The Famous Five

3 Key Points:

  1. Trust that in difficult times and in trials, you WILL figure it out.
  2. Start as a free service—build your paywall as you grow and become more valuable to your customers.
  3. Build your product and brand by creating great content that hits all the right keywords.

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
  • Simplero – The easiest way to start and sell your course
  • 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