How Bird Eats Bug Reached $4,800/Month in MRR with 60 Paying Companies After Raising $1.5M Seed (Interview with CEO Dan Makarov)

Introduction and Background

Nathan Latka

00:00Hey, folks. My guest today is Dan Makarov. He spent most of his career in product management roles in companies like Google, BCG Ventures, and Rocket Internet. Now together with two ex colleagues, he co founded a B2B SaaS startup building a new kind of dev tool that helps software development teams report and fix technical issues 30% faster. It's called birdeatsbug.com. Dan, you ready to take us to top?

Dan Makarov

00:19>> Yes. Absolutely.

Nathan Latka

00:20So when did you guys start writing the first line of code for this tool?

Founding Story and First Line of Code

Dan Makarov

00:24>> About two years ago, like in summer, we had the idea and, the first line of code was written. And I think two months later, we already launched the MVP, so, like, the minimum viable product on Product Hunt, and we got to number five product of the day, and that basically kick started the the company.

Nathan Latka

00:41And this was in 2019?

Dan Makarov

00:43>> Correct.

Product Hunt Launch in 2019

Nathan Latka

00:44Okay. And and tell me more about the Product Hunt launch. Why do you think it did so well? Were you guys intentional with that launch, or do you do you just sort of get lucky?

Dan Makarov

00:52>> I think it it's a combination of both. I think there's, like, a big element of luck when it comes to product hunt launches, but we tested the waters, like we did some preliminary, let's say, launches for like smaller products, like useful for the community just to get a feel for product hunt in general. But I think the main advantage for us is that, like usually, for example, we heard that the audience on Product Hunt doesn't have

01:16>> very good retention. And I think that the reason for this is that you have a lot of repetitive products, like a lot of website builders, for example. And in our case, like we were very unique. And I think also the name helped and the whole branding. And we see a lot of the people who tried Bird on the first day, like on the launch day, with us today. So that's very interesting to see.

Nathan Latka

01:37You got 361 upvotes on that day. This was back 09/23/2019. Do you remember what your web traffic looked like? Like, how many leads did you get from product? Do you remember?

Dan Makarov

01:49>> Like, we we didn't have sign ups at the at that stage. I can share the how many

01:58>> Chrome install Chrome extension installs we had, and that was about five, six hundred installs. And I think about, like, seven hundred to a thousand bugs reported on that day. And, like, it was, like, a massive peak, then it, of course, went down, and it took us probably, like, a year to get, like, consistently to that level of of usage.

Current Usage: Bugs Reported and Growth Rate

Nathan Latka

02:17Where are you now in September? How many bugs reported on your platform? I assume that's your critical usage metric. Right?

Dan Makarov

02:23>> Correct. Like, we have about, 1,600 bugs a week. So, that would be, like, what, 6,000, a month roughly. Okay. And we're growing, like, in the last, quarter, we were growing 20, percent month over month. And and how

Pricing Model and Free Tier

Nathan Latka

02:39do number of bugs reported correlate back to revenue? Is that how you price?

Dan Makarov

02:44>> Sort of. So, like, we have a generous free tier, but then once, you run out of free tiers, like, on a free tier, you can store up to 30 bugs. So you you can access up to 30 bugs, and then you need to upgrade. But then once you upgrade, we don't have, like, specific tiering. So, like, we just have one plan for simplicity. And correlation is pretty direct, although there's, like, a time lag because it takes

03:07>> you a while to, like, go through your freemium plan and then upgrade.

Nathan Latka

03:12How long does it take your you know, obviously, you track onboarding. So if I sign up today, how long will it usually take for someone to hit that 30 bug limit?

Dan Makarov

03:20>> Like, it really depends. On average, it's, two to three months, that we see a company, but that was before our pricing change. That was, like, $50 per person we were given, and now we're given, like, $30 per company partly to reduce that amount. And, I think that's gonna be, like, within a month, like, most companies will hit that.

Paying Customers and Conversion Rate

Nathan Latka

03:38I see. Okay. So how many paying customers do you have today?

Dan Makarov

03:42>> We have about, 6%, and that's, like, target like, it's kinda an interesting story. So we took Dropbox as an example, and because they have like a free tier as well, and they have a lot of word-of-mouth. In our case, we have 40% of signups coming through word-of-mouth, which is like crazy. And we decided not to make the free plan too restrictive to keep the word-of-mouth going on, but also like we want to know that we're, you

04:10>> know, spending time on something worthwhile that companies are willing to pay for. And I think Dropbox is about 4%, and then we're, like, targeting roughly that amount to to stay happy. And

Nathan Latka

04:21so, Dan, when you say six percent, 6% of what?

Dan Makarov

04:24>> 6% of all of the sign ups are now in paid tiers.

Nathan Latka

04:28I see. So how many total sign ups do you have you had then?

Total Signups and Customer Count Clarification

Dan Makarov

04:31>> We had about 10,000 signups to to place.

Nathan Latka

04:34So you've got about 600 paying customers right now? Yeah. I see. Okay. Cool. So tell me more about that. Obviously, product hunt was just an initial strategy to get a bunch of these signups. What else did you do in the early days to get your first sort of 10,000 signups?

Growth Channels: Google Ads, Newsletters, and Listing Platforms

Dan Makarov

04:48>> Like, once we launched on Product Hunt, most of it was, like, SEO and and direct traffic, and, like, we listed on a few platforms like Capterra, for example, or GetApp. And at the moment, we're like essentially trying like every single channel that we can get our hands on. In terms of the most successful, like in terms of signups, I would say it was Google Ads and we're like advertising, you know, for general screen recording, I guess,

05:12>> categories. And other than that, interesting, like, because you have Capterra and GetApp and software advice, and that's like one umbrella, but like we get more leads via GetApp, although we were originally kind of like better known Capterra. And what also worked for us is newsletters. I can recommend that. I was not expecting this. And also we have an onboarding video and we just tried to like put it on YouTube and see how it would perform. And

05:41>> like that performed surprisingly well. So, like, even for an ad, like, 5%, watch time we're getting, like, average watch time is 75%.

Nathan Latka

05:49So looking just at your paid spend, I mean, what are you paying to get a new a paid customer these days?

Dan Makarov

05:55>> I believe it's gonna be, like, under €10. Oh, per paid customer, that's, I don't know from the top of my head. From the sign ups, I think we're paying, like, less than €10 per, sort of sign up, And then I guess you can convert that. So, like, what about

06:12>> 15 sign ups. Yeah.

Nathan Latka

06:13So it takes you 15 times $12.

Dan Makarov

06:14>> Right? €10 to $12.

Nathan Latka

06:15So 15 sign ups for one paid times $12. It's about a $180 per paid sign up, something like that.

Dan Makarov

06:21>> Yeah. Yeah. Interesting.

Nathan Latka

06:22And, let's talk about GetApp. Know, everyone always asks me, Nathan, should I go on g two first or Capterra? GetApp, I would say, is like an underdog in this category, but it's performing well for you. You ranked number five under

06:35the category bug tracking. So you rank fairly high with 29 reviews, 4.7. Do you pay for placement here, or is this all all organic?

Dan Makarov

06:42>> So I think on GetApp, like, you have to pay, like, if you want to track clicks. So, like, we're paying in some regions. I think mostly like The US and like Europe and and North America. I don't

06:58>> know how much, like, the the cost per click, I'm not that sure about. Like, the the thing with GetApp is that, like, you have high purchase intent, so that's great. And like, if you have a good retention customer lifetime value, I think that's also great. I think the challenge that we find with GetApp is that we are essentially creating our own category. So like, we're not something that's been that's existed before and, like, we're not technically

07:24>> bug tracking.

Nathan Latka

07:25Yep. Yep.

Dan Makarov

07:26>> So, like, people are, like, looking for adjacent things, and then they find Bird. So it's not always easy to kinda, like, tell the person that it's not, exactly bug tracking, for example. But GetApp, I think works for us more because GetApp seems to have like more technical audience versus Capterra or like more like developers looking for tools there.

Nathan Latka

07:49How many leads do you get from GetApp per month right now?

Dan Makarov

07:53>> That's a good question. That's

Nathan Latka

07:55Or a range. I

Dan Makarov

07:58>> can tell you it's like in the tens, but we're not, you know, spending too much money. So like, because the cost per sign up is quite high, like, for us at least, we pay for the present. I think, like, we in general, on GetApp, Capterra, like, we're spending under, like, $800 a month.

Nathan Latka

08:18To list on all of them.

Dan Makarov

08:20>> Say again?

Nathan Latka

08:21To list on Capterra, like, all of them. Yeah. Yeah. Yeah. Yeah. Yeah. Okay. Interesting. So let's let's go back to, like, again, how you're currently building. So bug tracking tool, over 10,000 free sign ups, which is great. You're converting 6%, which is high for premium tools. So congratulations on that. What are they paying on average per month?

Dan Makarov

08:38>> It really depends on the size.

Revenue: $4,800 MRR and Seat Pricing

Dan Makarov

08:43>> So sometimes, like, we have, like, a single bug reporter, for example, and they're paying, like, $8. Like sometimes it goes over like 200 a month, like for slightly bigger companies. And the interesting thing that we found is that like a few bigger companies reached out to us, like with thousands of people, and we couldn't cater to them because all of them wanted things like single sign on, for example, self hosted solution, and also SOC two and

09:09>> ISO 27,001 certifications. And we will get those for sure, but, like, they take months to get. And like their purchasing departments are like really ruthless about these certifications.

Nathan Latka

09:21So how many seats on average are these 600 customers paying for? It sounds like like a five person team might be average, something like that.

Dan Makarov

09:29>> Yeah. I would say, like, five to 10 to 10 people. And, but it goes, like, from one to, like, a 100, easily. So there's, like, a fluctuation.

Nathan Latka

09:37Yeah. Yeah. But so if I ask you how many paid seats are on your platform across the 600 customers, it'd be something like 3,000, 4,000.

Dan Makarov

09:42>> Yeah. Yeah.

Nathan Latka

09:43Got it. Right?

Dan Makarov

09:47>> From 600 paying no. Like, 600, like, paying customer would be, like, 600 seats, essentially.

Nathan Latka

09:53How many logos? Yeah. Okay. Got it. So how many just companies?

Dan Makarov

09:56>> Yeah. That that would be about 60.

Nathan Latka

09:59Okay. Got it. 60. Okay. Got oh, well, are huge teams.

Dan Makarov

10:01>> Like, yes. I did, like, six six zero.

10:05>> So Yeah. So those are average 10 person teams? Exactly. I see.

Nathan Latka

10:08Okay. So 600 pay seats times, like, a minimum of $8 per seat. You guys are doing about $4,800 a month right now in revenue?

Dan Makarov

10:15>> Yeah.

Nathan Latka

10:15Okay. And where were you if that's what you're doing today, what were doing about a year ago? Do you remember?

Dan Makarov

10:20>> We were pretty much zero. We we we just launched payments and, like, if I remember correctly, that would be, I don't know, like, maybe $200.

Nathan Latka

10:29Yep. Yep. Yep. Okay. Interesting. So so how do you oh, and and have you guys bootstrapped this, or did you raise?

Fundraising: $1.5M Seed Round

Dan Makarov

10:36>> We bootstrapped our first year, and then we raised, 1,500,000 seed.

Nathan Latka

10:41That was last year you raised 1.5?

Dan Makarov

10:43>> That was end of last year.

Nathan Latka

10:44Yes. Okay. Interesting. Why raise capital? Why do you need capital to build this?

Dan Makarov

10:50>> It's technically difficult to build. So something like, what we're building today was not possible, like, even, let's say, five or six years ago, because of the state of the browsers and, like, like, the technical limitations. So that's one thing. It just requires, like, more manpower and also, like, more, you know, good developers, which is not cheap to get. And secondly, I believe it's gonna be like the right strategy would be a combination of bottoms up, like

11:20>> what we have right now, and also top down approaches. So like we would need to have like sales to in order to cater to bigger organizations, which is, I guess, the more interesting market for, you know, a company like ours.

Team Size and Co-Founder Equity Split

Nathan Latka

11:32Mhmm. Okay. That makes sense. And tell me more about the team today. How many people?

Dan Makarov

11:35>> We have 11 full time employees and it's like a couple of freelancers.

Nathan Latka

11:39How many of those folks are exclusively engineering?

Dan Makarov

11:43>> Five.

Nathan Latka

11:44Okay.

11:45Okay. And are you sole founder? Are you the technical engineer?

Dan Makarov

11:48>> Technical company? I'm not I'm not technical. We have three co founders, and, I'm one of the co founders. I'm coming from, like, yeah, product management space, but, I'm I'm not, I maybe more technical than let's say an average person, but definitely not the engineer level technical. Three people,

Nathan Latka

12:02obviously, the tough conversation when you get going to decide how to split equity. How'd you guys have that tough conversation or you just put a third, a third, a third?

Dan Makarov

12:09>> Exactly. Like, well, we have exactly the same stake and like we have the regular kind of like cliff and so on. So I think that conversation was like pretty easy, like also because

Nathan Latka

12:20Regular cliff, you mean one year cliff for your vesting?

Dan Makarov

12:23>> One year cliff for the vesting and like four year vesting period. Yep. Yeah, like, I think, and not just me that it gets really tough, like, if the split is not equal because then it's kind of like who's putting in like more, you know, hours or like more nerves and so on. And that's, like, not a very stable, I believe, combination like long term.

Nathan Latka

12:44So you could not if see where Like,

Dan Makarov

12:48>> you're starting at the same time and not like somebody's joining later and so on.

Nathan Latka

12:52Yeah. Yeah. All kinds of reasons, though. Someone could have put in money. Someone could have been giving up a bigger job to join. All kinds of reasons. But, anyway, so you guys are split at a third. Obviously, you let in investors. Now I assume you raised that 1.5 on a safe. Right?

Dan Makarov

13:04>> No. That was, like, a regular

Nathan Latka

13:05It was priced. What what valuation did you raise at?

Dan Makarov

13:09>> Like, we gave about, like, 25% equity, so, like, about 6,000,000.

Nathan Latka

13:14Okay. 6,000,000 post money? Yes. Was that fair? Do do you think it was high or low looking back?

Dan Makarov

13:23>> Maybe. I think the interesting part was that we were raising in the middle of the first wave of COVID, where, it was really unclear what's gonna happen and and how the the investments are gonna go. So, like, we see that like, for example, if we were raising right now, like, we could have maybe gotten better terms, but we're happy in general. And I think that's

13:53>> I think at at that stage, it's more important to get the capital to get going in the first place than to, you know, like, squeeze every penny out of it. And we kinda, like, let's say, reap the benefits today because now we can show like a lot more progress and like the next fundraise looks a lot easier than the first one.

Cash in Bank, Burn Rate, and Runway

Nathan Latka

14:13Dan, how much of the 1,500,000 do you guys still have in the bank?

Dan Makarov

14:16>> More than a half. More than half? Okay. Yeah. Like, we still have, like, a comfortable, you know, eleven months of runway.

Nathan Latka

14:23Yep. Yep. Yep. Okay. So so can I mean can I transit that to saying if I can take $750,000 divided by 11, you guys are net burn about $70,000 per month?

Dan Makarov

14:33>> Yes. Somewhere around that.

Nathan Latka

14:35Does that make you nervous at all?

Dan Makarov

14:37>> No. I think we're gonna fundraise, like, if if things go as, as they're going right now, we should be able to fundraise early like, way earlier than, we've run out of money.

Nathan Latka

14:47How much revenue do you wanna hit before you go out and do your next fundraise?

Dan Makarov

14:52>> That's a good question. I think we're not this round, like, for the revenue game, like, we're mostly, like, looking at the the usage numbers and, like, at the growth and, like, if we can hit consistent growth. And I think we're on the path to do this and that's gonna mostly depend on A, like if we find good advertising channels and B, if we're able to build a solid product and there are a couple of like big

15:17>> things that we're working on. Like for example, at the moment we're working on something called instant replay. So for example, right now you need to record like you need to reproduce your steps to report a bug and you will be able to go back in time instead of reproducing and then just export last, let's say, minute of your actions with technical logs so that the engineer can know, like, 100% of the time, like, what actually happened.

15:41>> And that's like basically a game changer that can I don't wanna say the word revolutionize, but that can really change the way that software development teams operate? And I think that's our biggest, like, one of our biggest bets and, like, we still

15:55>> have people are on?

Churn and Expansion Revenue

Nathan Latka

15:56Are they hooked? What's your churn look like over the past twelve months?

Dan Makarov

16:00>> We have about 30% of people staying in week ten, and that really depends on the on the role. Like, because

Nathan Latka

16:16we see So, Dan, just to be clear, when everyone signs up, if you go fast forward to week ten, thirty percent of them are still there or thirty percent of churn?

Dan Makarov

16:23>> Are still thirty percent are still there, are still reporting at least one bug a week. So, like, we we Are they all paying though,

Nathan Latka

16:30or is that just free user churn?

Dan Makarov

16:32>> That that's free user churn. Like, for

Nathan Latka

16:33What about paid?

Dan Makarov

16:34>> Customers,

16:36>> that's I cannot give you the specific numbers, but that's like, we have, like, 1%, 2% churn, like, month over month max. Okay.

Nathan Latka

16:45Got it. Do you have any expansion revenue yet or is it just 24% churn?

Dan Makarov

16:48>> Yes. We changed the pricing plans recently. So like before we were charging packages and there you barely get

16:57>> expansion because like if you have, you know, a seven person company, like if add you another person, we will not see this because we have a package, let's say of 10 people. So we only have like one month of data for the expansion. But even before, like what we were seeing like expansion of like, if I remember correctly, about like 5%, but now it's more because we can measure it more granular.

Nathan Latka

17:17So what's 5% per year expansion?

Dan Makarov

17:21>> Yes.

Nathan Latka

17:22Okay. Got it. So net revenue retention is still below a 100%, but you're working on getting that above?

Dan Makarov

17:29>> Yes. As in the like, we we don't have really full year worth of data, like, to to say

Nathan Latka

17:37Yeah. Yeah. Fair enough. Fair enough. I mean, you can you mean, the product launch was back in 2019, though. You had a big swell there. Mean, what I would worry about is, like, you had a 100,000 bugs reported that what?

Dan Makarov

17:47>> On '2 in 2019, we didn't have any, paid plans.

Nathan Latka

17:50No. I understand that. What what I was gonna say though is on if you're only looking at usage numbers, product hunt on that day, you had a 100,000 bugs reported. Today, weekly, you're only reporting 6,400.

Dan Makarov

17:58>> Oh, no. No. No. Not a 100,000. Like, a thousand bugs on Okay. That

Nathan Latka

18:03Got it.

Dan Makarov

18:03>> That would have been the best launch in history.

Nathan Latka

18:07Well, that's why I was a little confused. Got it. So you had you said 700 to a thousand bugs reported that day.

Dan Makarov

18:12>> Yeah. Yeah. Yeah.

Nathan Latka

18:13I see. Okay. Cool. And now it's 6,400 per week.

Dan Makarov

18:15>> Very cool.

Famous Five Rapid-Fire Questions

Nathan Latka

18:16Alright. Alright. Let's wrap up here with the famous five. Number one, what's your favorite business book?

Dan Makarov

18:23>> I I forgot the name. It was about the

18:30>> communication.

Nathan Latka

18:32We'll skip it for now, Dan.

Dan Makarov

18:34>> No.

Nathan Latka

18:34The second

Dan Makarov

18:35>> I I can give you the the second famous. It's good to great.

18:38>> Okay. Good.

Nathan Latka

18:39Number two, is there a CEO you're following or studying?

Dan Makarov

18:43>> No.

Nathan Latka

18:45Number three, what's your favorite online tool for building Bird Eats Bug?

Dan Makarov

18:51>> Linear.

Nathan Latka

18:53Linear?

Dan Makarov

18:54>> Yes. It's a it's like a Jira competitor.

Nathan Latka

18:56Oh, okay. Number four, how many hours of sleep do get every night?

Dan Makarov

19:00>> Eight.

Nathan Latka

19:01And what's your situation, Dan? Married, single, kids?

Dan Makarov

19:04>> Married, no kids.

Nathan Latka

19:05Okay. And how old are you?

Dan Makarov

19:07>> 32.

Nathan Latka

19:08Last question. What's something you wish you knew back when you were 20?

Dan Makarov

19:14>> It's hard, but it's fun.

Closing Summary and Outro

Nathan Latka

19:17Guys, there you have it. They got going in 2019 with the project launch, Bird Eats Bug, making it easy for your dev team to squash bugs faster. They've got 600 paid seats on the platform at an average of $8 seat for $4,800 a month in MRR. That's up from 200 just a year ago, $200. A lot of growth still early. They raised 1,500,000 seed to invest in MVP and growth at a 6,000,000 post money valuation. They

Dan Makarov

19:36>> still own as founders about 75% of the business, Investors own 25%.

Nathan Latka

19:40Looking to scale here quickly on a per seat basis with eleven months of runway left in the bank. We'll see what happens next. Dan, thanks for taking us to the top. Sure.

19:51One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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