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Aug 11, 2017 · 24m · top-founders

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

Tomer Levy · 11m spoken Nathan Latka · 9m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this episode of The Top, host Nathan Latka interviews Tomer Levy, co-founder and CEO of Logz.io, exploring how the company scaled past $3 million in annual recurring revenue by commercializing the open-source ELK stack into an enterprise-grade cloud analytics platform.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 46.6% of the talking time here. How this is scored →

Nathan as informed peer 4.0 Guest teaching 1.9 Guest disagreement 0.6 Nathan pushing back 2.5
05100:0010:0020:000:00–2:05 · Nathan as informed peer 0/10 Episode Preview and Business Highlights Solo host intro setting up the episode highlights, revenue estimates, and preview of Logz.io.2:06–4:23 · Nathan as informed peer 5/10 Logz.io Product Overview and Customer Pricing Tiers Nathan inquires about the target buyer and pushes to pin down an average contract value range across self-serve and enterprise tiers.4:24–9:01 · Nathan as informed peer 6/10 The Open SaaS Model and Community Inbound Strategy Tomer explains the mechanics of the Open SaaS model on top of ELK, while Nathan summarizes the strategy and probes how they monetize without owning the open source code.9:01–13:34 · Nathan as informed peer 6/10 User Traction, Capital Raised, and Early Product Launches Nathan digs into customer definitions and funding history, then attempts to extract revenue figures which Tomer politely declines for competitive reasons.13:34–15:42 · Nathan as informed peer 7/10 Infrastructure Costs, Gross Margins, and Estimated Run Rate Nathan drills down on cloud infrastructure expenses and calculates an absolute lower bound for revenue at 300k per month, which Tomer confirms they exceed.15:42–20:27 · Nathan as informed peer 6/10 Organizational Distribution, Sales Efficiency, and Marketing Channels Nathan probes headcount breakdown, churn dynamics, fully weighted CAC, and marketing spend across PPC and industry sponsorships.20:27–23:26 · Nathan as informed peer 2/10 Host Promotion: GetLatka Database and Hotjar Analytics Includes host sponsor reads for GetLatka and Hotjar, followed by standard rapid-fire Famous Five questions.23:26–24:20 · Nathan as informed peer 0/10 Episode Recap and Next Episode Preview Host monologue concluding the episode with a summary of Logz.io metrics and a teaser for the following guest.0:00–2:05 · Guest teaching 0/10 Episode Preview and Business Highlights Solo host intro setting up the episode highlights, revenue estimates, and preview of Logz.io.2:06–4:23 · Guest teaching 3/10 Logz.io Product Overview and Customer Pricing Tiers Nathan inquires about the target buyer and pushes to pin down an average contract value range across self-serve and enterprise tiers.4:24–9:01 · Guest teaching 4/10 The Open SaaS Model and Community Inbound Strategy Tomer explains the mechanics of the Open SaaS model on top of ELK, while Nathan summarizes the strategy and probes how they monetize without owning the open source code.9:01–13:34 · Guest teaching 3/10 User Traction, Capital Raised, and Early Product Launches Nathan digs into customer definitions and funding history, then attempts to extract revenue figures which Tomer politely declines for competitive reasons.13:34–15:42 · Guest teaching 2/10 Infrastructure Costs, Gross Margins, and Estimated Run Rate Nathan drills down on cloud infrastructure expenses and calculates an absolute lower bound for revenue at 300k per month, which Tomer confirms they exceed.15:42–20:27 · Guest teaching 3/10 Organizational Distribution, Sales Efficiency, and Marketing Channels Nathan probes headcount breakdown, churn dynamics, fully weighted CAC, and marketing spend across PPC and industry sponsorships.20:27–23:26 · Guest teaching 0/10 Host Promotion: GetLatka Database and Hotjar Analytics Includes host sponsor reads for GetLatka and Hotjar, followed by standard rapid-fire Famous Five questions.23:26–24:20 · Guest teaching 0/10 Episode Recap and Next Episode Preview Host monologue concluding the episode with a summary of Logz.io metrics and a teaser for the following guest.0:00–2:05 · Guest disagreement 0/10 Episode Preview and Business Highlights Solo host intro setting up the episode highlights, revenue estimates, and preview of Logz.io.2:06–4:23 · Guest disagreement 0/10 Logz.io Product Overview and Customer Pricing Tiers Nathan inquires about the target buyer and pushes to pin down an average contract value range across self-serve and enterprise tiers.4:24–9:01 · Guest disagreement 1/10 The Open SaaS Model and Community Inbound Strategy Tomer explains the mechanics of the Open SaaS model on top of ELK, while Nathan summarizes the strategy and probes how they monetize without owning the open source code.9:01–13:34 · Guest disagreement 2/10 User Traction, Capital Raised, and Early Product Launches Nathan digs into customer definitions and funding history, then attempts to extract revenue figures which Tomer politely declines for competitive reasons.13:34–15:42 · Guest disagreement 1/10 Infrastructure Costs, Gross Margins, and Estimated Run Rate Nathan drills down on cloud infrastructure expenses and calculates an absolute lower bound for revenue at 300k per month, which Tomer confirms they exceed.15:42–20:27 · Guest disagreement 1/10 Organizational Distribution, Sales Efficiency, and Marketing Channels Nathan probes headcount breakdown, churn dynamics, fully weighted CAC, and marketing spend across PPC and industry sponsorships.20:27–23:26 · Guest disagreement 0/10 Host Promotion: GetLatka Database and Hotjar Analytics Includes host sponsor reads for GetLatka and Hotjar, followed by standard rapid-fire Famous Five questions.23:26–24:20 · Guest disagreement 0/10 Episode Recap and Next Episode Preview Host monologue concluding the episode with a summary of Logz.io metrics and a teaser for the following guest.0:00–2:05 · Nathan pushing back 0/10 Episode Preview and Business Highlights Solo host intro setting up the episode highlights, revenue estimates, and preview of Logz.io.2:06–4:23 · Nathan pushing back 2/10 Logz.io Product Overview and Customer Pricing Tiers Nathan inquires about the target buyer and pushes to pin down an average contract value range across self-serve and enterprise tiers.4:24–9:01 · Nathan pushing back 3/10 The Open SaaS Model and Community Inbound Strategy Tomer explains the mechanics of the Open SaaS model on top of ELK, while Nathan summarizes the strategy and probes how they monetize without owning the open source code.9:01–13:34 · Nathan pushing back 5/10 User Traction, Capital Raised, and Early Product Launches Nathan digs into customer definitions and funding history, then attempts to extract revenue figures which Tomer politely declines for competitive reasons.13:34–15:42 · Nathan pushing back 6/10 Infrastructure Costs, Gross Margins, and Estimated Run Rate Nathan drills down on cloud infrastructure expenses and calculates an absolute lower bound for revenue at 300k per month, which Tomer confirms they exceed.15:42–20:27 · Nathan pushing back 4/10 Organizational Distribution, Sales Efficiency, and Marketing Channels Nathan probes headcount breakdown, churn dynamics, fully weighted CAC, and marketing spend across PPC and industry sponsorships.20:27–23:26 · Nathan pushing back 0/10 Host Promotion: GetLatka Database and Hotjar Analytics Includes host sponsor reads for GetLatka and Hotjar, followed by standard rapid-fire Famous Five questions.23:26–24:20 · Nathan pushing back 0/10 Episode Recap and Next Episode Preview Host monologue concluding the episode with a summary of Logz.io metrics and a teaser for the following guest.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 69.5% · guest 30.5%0:00 · Nathan 69.5% · guest 30.5%3:00 · Nathan 20.7% · guest 79.3%3:00 · Nathan 20.7% · guest 79.3%6:00 · Nathan 25.9% · guest 74.1%6:00 · Nathan 25.9% · guest 74.1%9:00 · Nathan 38.7% · guest 61.3%9:00 · Nathan 38.7% · guest 61.3%12:00 · Nathan 35.3% · guest 64.7%12:00 · Nathan 35.3% · guest 64.7%15:00 · Nathan 48.5% · guest 51.5%15:00 · Nathan 48.5% · guest 51.5%18:00 · Nathan 48.5% · guest 51.5%18:00 · Nathan 48.5% · guest 51.5%21:00 · Nathan 80.2% · guest 19.8%21:00 · Nathan 80.2% · guest 19.8%24:00 · Nathan 100% · guest 0%24:00 · Nathan 100% · guest 0%
Sharpest disagreement ▶ 12:45 Guest firmly draws boundary on sharing exact revenue

Tomer resists Nathan's repeated probing for exact ARR milestones, citing corporate policy against disclosing private financials to competitors.

 Hardest push from Nathan ▶ 14:58 Host forces mathematical floor on guest's revenue

Refusing to accept vague disclosures, Nathan combines customer counts and ACV figures to establish an undeniable baseline revenue run rate.

 Biggest teaching moment ▶ 8:26 Guest articulates the Open SaaS monetization dynamic

Tomer breaks down how Open SaaS companies leverage open source adoption up to the point of production scaling challenges where enterprise commercialization occurs.

 Nathan holds their own ▶ 17:54 Host reframes CAC around fully loaded sales and marketing payroll

Nathan intervenes to clarify that CAC must account for loaded sales and marketing salaries rather than simply pure programmatic advertising spend.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Episode Preview and Business Highlights 0000 Solo host intro setting up the episode highlights, revenue estimates, and preview of Logz.io.
Logz.io Product Overview and Customer Pricing Tiers 5302 Nathan inquires about the target buyer and pushes to pin down an average contract value range across self-serve and enterprise tiers.
The Open SaaS Model and Community Inbound Strategy 6413 Tomer explains the mechanics of the Open SaaS model on top of ELK, while Nathan summarizes the strategy and probes how they monetize without owning the open source code.
User Traction, Capital Raised, and Early Product Launches 6325 Nathan digs into customer definitions and funding history, then attempts to extract revenue figures which Tomer politely declines for competitive reasons.
Infrastructure Costs, Gross Margins, and Estimated Run Rate 7216 Nathan drills down on cloud infrastructure expenses and calculates an absolute lower bound for revenue at 300k per month, which Tomer confirms they exceed.
Organizational Distribution, Sales Efficiency, and Marketing Channels 6314 Nathan probes headcount breakdown, churn dynamics, fully weighted CAC, and marketing spend across PPC and industry sponsorships.
Host Promotion: GetLatka Database and Hotjar Analytics 2000 Includes host sponsor reads for GetLatka and Hotjar, followed by standard rapid-fire Famous Five questions.
Episode Recap and Next Episode Preview 0000 Host monologue concluding the episode with a summary of Logz.io metrics and a teaser for the following guest.

Statements from this episode (12)

Assertion Not checkable as stated
Levy: Security teams represent about 25% of Logz.io's customer base
“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.”
Tomer Levy Aug 11, 2017 ▶ 2:55
Disclosure
Logz.io enterprise pricing starts at $50K, scaling to hundreds of thousands.
“One of them is the SMB. Usually would pay about 10 K, 10 to 15 K a year for the product. And on top of it, we have what we call SME, small, medium enterprise would usually pay 50 K per year minimum, and then would go to a few hundred K's for the high end enter…”
Tomer Levy Aug 11, 2017 ▶ 3:31
Assertion Not checkable as stated
Logz.io's last 10 closed deals averaged approximately $40,000 in ACV.
“If you look at the last 10 deals, probably around 40 K.”
Tomer Levy Aug 11, 2017 ▶ 4:19
Assertion Supported
Levy: The open-source ELK stack gets about 500,000 downloads per month
“So just to say ELK has about half a million downloads a month.”
Tomer Levy Aug 11, 2017 ▶ 4:45
Assertion Not checkable as stated
Levy: Logz.io ranks number one on Google for ELK production searches
“Today, we would we're the number one contributor of content to the ELK community. So if you search Google for ELK or AWS, ELK in production, we're number one in Google in all of these searches.”
Tomer Levy Aug 11, 2017 ▶ 8:08
Insight
Commercial open-source succeeds when the free software is painful to scale.
“The open source has to be good enough to get started, good enough, easy to get started and use it, so it will have mass distribution, but it has to get to a point where it's hard to scale it, it's hard to make it production grade, and this is where commercial …”
Tomer Levy Aug 11, 2017 ▶ 8:42
Assertion Not checkable as stated
Levy: Logz.io serves 1,000 companies globally, with a few hundred paying
“We have about a thousand companies from 80 different countries which use Logs.io. A few hundred of them are paying customers. A few hundred of them are free users.”
Tomer Levy Aug 11, 2017 ▶ 9:09
Assertion Not checkable as stated
Levy: Logz.io competes mostly with engineers managing open-source tools
“We actually compete mostly with engineers setting up their own open source, and that's an interesting competition.”
Tomer Levy Aug 11, 2017 ▶ 13:01
Assertion Not checkable as stated
Logz.io generates significantly more than $3.6 million in annual recurring revenue.
“We're doing higher, we're doing significantly higher than that.”
Tomer Levy Aug 11, 2017 ▶ 15:28
Assertion Not checkable as stated
Levy: Logz.io self-service churn is under 10% annually
“It's still single digits yearly, like still less than 10% yearly.”
Tomer Levy Aug 11, 2017 ▶ 16:29
Assertion Not checkable as stated
Customer churn for Logz.io accounts paying over $10,000 annually is near zero.
“And on the, once you pay, I would say, 10 K a year, I would say very close to zero.”
Tomer Levy Aug 11, 2017 ▶ 16:35
Disclosure
Levy: Logz.io spends $5K to $15K monthly on PPC ads
“Yeah, something, maybe five to 15, depending on the month, depending on what you're trying to achieve, but relatively small numbers, small money, and it's, and it works well for us.”
Tomer Levy Aug 11, 2017 ▶ 19:32
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