How Bonsai Reached 1,600 Paid Customers Bootstrapped on $550K MRR (Interview with Dru Sellers)

Introduction and What Bonsai Does

Nathan Latka

00:00Hello, everyone. My guest today is Dru Sellers. He is building a company called bonsai.io, a managed search engine for SaaS. Dru, you ready to take us to the top?

Dru Sellers

00:09>> Absolutely. Let's go.

Managed Search Explained

Nathan Latka

00:10So what exactly does this mean? Mean, this like Algolia competitor?

Dru Sellers

00:14>> In a sense, but so the bigger way to think about this is we've all worked with developers. Inevitably there's a piece of technology that they're new or that's novel to them. They get stuck on it and they spend days spinning the wheels trying to solve this problem. Our company comes in and just eradicates that as a problem from, for search engines specifically. And that's where the managed piece comes in.

Nathan Latka

00:37What does that mean for, I don't understand for search engine specifically, people building search engines?

Dru Sellers

00:42>> So people are building an application. So let's say that you're building some new hot application that's gonna show me all the best barbecue in Austin, Texas or in the world. And I'm gonna type in Rudy's barbecue. Well, if I do a lowercase r and uppercase R, a database can't naturally figure out that those are the same thing. And so you need a separate piece of technology and toolset to find that search engines are idealized for this

01:09>> particular model.

Nathan Latka

01:11Oh, I see. So so you're selling to companies that use search for discovery, could be a restaurant or anybody else and help them make sure that their metadata is formatted in a way to increase discoverability in the search engine?

Dru Sellers

01:24>> Yeah. So real quick, a lot of developers have spent a lot of time working with databases. When you get to a search engine, it's a very different paradigm. And so you don't have a ton of experience. So we come in, we don't all... We... I've heard this term like SaaS plus where we're not just hosting the tools, like giving you that SaaS, like, you know, pay a couple of dollars, get a thing. We also then go

01:48>> above and beyond providing a level of service. And this is where we kinda hang our hat on that managed aspect because we're giving you consulting in a sense. We're helping you understand how the tool works. We're basically like your go to resource for understanding how this tool works.

Nathan Latka

02:03What was that split last year? Total revenue last year, what percent was services versus SaaS?

Dru Sellers

02:08>> So it's all bundled together into one. So we don't have a breakout.

Nathan Latka

02:13And Okay. That's When did you launch the business? What year?

Dru Sellers

02:16>> We launched in 2011.

Early Customers and the Heroku Partnership

Nathan Latka

02:202011. Okay. I mean, me through those first couple of customers. How'd you get them?

Dru Sellers

02:26>> I mean, it's what everybody wants. It's the dream story. So we had an early partnership with the channel that in this case, we're talking about Heroku. So if you're a developer, you've probably heard of this. It's a platform for developers to run apps. And we were in the first cohort of add ons. So if you're building an app and you wanted a database, there was an add on for database. If you wanted a full text search

02:45>> engine, we had... We... Our add on was there on day one. And so we had customers coming in the door just from the get go.

Nathan Latka

02:52Do you... Are you still listed in like the Heroku app exchange?

Dru Sellers

02:56>> Very much so.

Nathan Latka

02:57How many new leads or traffic do you get per month from that?

Dru Sellers

03:02>> From a leads perspective, it's gotta be... I... It's not something I look at anymore. It's gonna be... It's probably in like in the hundreds, but you gotta remember, it's it's a little bit opaque to us at times because of PR apps and CI builds. So there's... This is one of reasons we don't actively look at it. Yeah. It's it's just gotten really noisy.

Current Customer Count and Free Users

Nathan Latka

03:23Well, so how many customers are you serving now today?

Dru Sellers

03:25>> We're serving... So we have about 1,600 paid and 4,000 free.

Nathan Latka

03:30Okay. Interesting.

MRR and Revenue

Nathan Latka

03:32So I wanna go back to how you've built that this sort of freemium model, but let's talk about the 1,600 paid right now for a second. What MRR are you now doing?

Dru Sellers

03:39>> Our MRR is around $550K.

Nathan Latka

03:42Oh, wow. This is super impressive Dru. Congratulations.

Dru Sellers

03:45>> Well, thank you. It's... I'm just the guy kinda running the show. My CEO, Nick Zadrosny is the guy that really like took it from zero to a 100 and I'm trying to take it from a 100 to a thousand.

Nathan Latka

03:54I love that. I love... Did you do... I was gonna say, I don't know if you listen to the show or not, but you know that I love founders that do this sort of thing, especially in a capital efficient way.

04:02Yeah. So are you capital efficient? Did you bootstrap?

Bootstrapped Origins and Founding Story

Dru Sellers

04:05>> Totally bootstrapped. I think we are... Total initial investment was in the area of like $5,000. It was two guys. They had just gotten done implementing. It's one of those like kinda romantic stories where they had just done like a search project and they happened to be in San Diego. I wanna say the story is they were in San Diego. They were at like a Ruby user group and

04:30>> they got into the cab with like a Heroku person and like hit it off. And it was totally one of those serendipitous moments where they were like, hey, you know, we need an add on. Will you come and join in this thing? And they were like, well, this sounds awesome. Yeah. Like this is the cool thing to be in.

Nathan Latka

04:47That's too funny. Okay. And what does growth look like? I mean, you're $550K a month today. Where were you like in December 2019?

Dru Sellers

04:55>> December 2019, I wanna say we were

04:59>> About a year ago. Our annual would have been like $4.09.

Growth Channels and Enterprise Tier

Nathan Latka

05:04Got it. 4,900,000. Healthy growth. Where are most of these new customers today coming from?

05:08Are they Heroku Exchange or somewhere else?

Dru Sellers

05:10>> They're actually referrals is our current big winner from lead generation perspective and it's at our enterprise tier offering is really what's taking off for us. And so one of the things that's very unique about us is the level of support that we provide. So we've been around for eleven years. We've run Solr, we've run Elasticsearch. We know Lucene back and forth, which is the underlying thing providing the horsepower. Because

05:39>> we've been doing that for so long when people show up, we're here to help you understand your problems. We oftentimes hear, I got more benefit out of this sales call that I just did with you than I did in this paid engagement with this other company.

Team Size and Structure

Nathan Latka

05:54We love that. I love hearing that. And so you guys have bootstrapped this. Walk me through the team dynamic. How many people total?

Dru Sellers

06:03>> We have 14.

06:04>> A...... Team. Yeah. It's 11 developers. One, two, three, four. Thirteen thirteen right now. We just hired our second salesperson and they'll be starting this month. But we are otherwise 13 people and 10 of them are engineers and we have three non engineering talent. That's great.

Nathan Latka

06:21Now the two sales folks that you have, do they both carry a quota?

Dru Sellers

06:25>> Neither of them carry a quota today. We are very much this like

06:33>> we're a little new agey. We're a little woo woo. And we like thinking about like what keeps people happy? What keeps people engaged? We have a four day work week. We have mental benefits. We have health benefits. We really invest back into our employees. And so my CEO is really good about always asking the question like what's the intent or the goal of this practice in the larger business? And is there a way that we can

06:58>> achieve it at a scale of 13 versus trying to cargo cult in an idea that's meant to be for a company of thousands?

Nathan Latka

07:06Yep. I mean, 13 people and 6,000,000 in revenue. Mean, what that? 450,000 revenue per employee. The average is $190K. I mean, guys you're doing something right. I mean, how do you get so much productivity out of these folks who are only working four hours a week?

Dru Sellers

07:19>> Yeah. So we are focused on our customers. So we have our help channel where people come in and we don't just solve problems at the surface level. We get in, we engage with you. We wanna... And because we're running your search engine, we can actually go and see everything. And we can go in and say like, oh, this is a problem where the user had a configuration issue. And so we might need to work on our

07:42>> documentation but we'll sit down and square them away. Oftentimes it's a technology thing. And we're all engineers and nobody... There's no engineer in the world that likes repetitive tasks. There's a whole XKCD comic on should automate or should I just do this manually? And over the eleven years, we've just been putting these little like paper cuts in. Okay. Cover this one. Okay. This is an Elasticsearch two problem. This is an Elasticsearch six problem. Okay. Band Aid.

08:10>> Band Aid. And then do that for eleven years and we get to stay focused on product.

Churn and Retention

Nathan Latka

08:16And is it is it sticky?

08:18I mean, what's your churn rate today?

Dru Sellers

08:20>> Churn rate is pretty much if you start with us, you're not gonna leave. We... I think that we've had two... We've had one decent sized account churn and we've had one small account churn in my four years here.

Nathan Latka

08:32Do you measure that at all in terms of like annual revenue churn or anything?

Dru Sellers

08:36>> Since it's been up and to the right. We don't, it's not something that we... Been successful. We've been really lucky in that our growth numbers have been, that our numbers have been up and to the right so substantially that we haven't necessarily had to focus on that. And we... Let me

New Customer Growth and Upsell Mix

Nathan Latka

08:51ask a different let me ask a different question. Expansion revenue. So a customer that you're upselling year over year. What percent are you upselling customers year over year currently?

Dru Sellers

09:00>> I don't know that.

Nathan Latka

09:01That's a great Okay. I don't Let me ask it a different way. You went from 4,400,000 run rate to, a $6,000,000 run rate. How much of that growth over the last twelve months came from upselling existing customers versus new customers altogether? Do you know?

Dru Sellers

09:13>> It would be predominantly new customers.

Nathan Latka

09:15Interesting.

09:16And how many new customers did you add over the past twelve months?

Dru Sellers

09:19>> Would be maybe a 100.

Nathan Latka

09:20Interesting.

Referrals as Top Growth Channel

Nathan Latka

09:22And so as we wrap up here, referral program, do you incentivize referrals at all? Is there an affiliate program?

Dru Sellers

09:28>> Not today. It's something that we're actively looking into.

Nathan Latka

09:30So what do you mean when you say referrals are your number one growth channel?

Dru Sellers

09:33>> Word-of-mouth. Yeah. Word-of-mouth, when people leave a company and go to their next job, they bring us with them.

Nathan Latka

09:41Okay, makes sense. And you obviously had the benefit of eleven years of history. So there's a lot of job changes happening in there.

Dru Sellers

09:47>> Yeah. And that's one of like our big things is we have one customer that we've been with for the last six years. We've been through three search teams and as each search team comes on board, we can effectively pass on that knowledge to that next team.

Customer Acquisition Cost and Sales Approach

Nathan Latka

09:59And what are you spending to get a new customer that pays you, you know, 300, $400 a month?

Dru Sellers

10:06>> We we we don't.

Nathan Latka

10:08No sales people. That's one

Dru Sellers

10:09>> of our problems to be fair. Like besides the sales, and he's mostly handling inbound sales right now. We're about to turn on outbound sales for the first time. But we... This is one of our problems is that we aren't spending enough in marketing and in sales and that's one of the goals for this year.

Plans to Raise Capital

Nathan Latka

10:24Interesting. Any plans to raise or you like the Bootstrap Life?

Dru Sellers

10:28>> We love the Bootstrap Life. It lets us stay a 100% focused on the customer.

Famous Five Rapid Fire

Nathan Latka

10:32Yeah. We love that. Okay. Let's wrap up here, Dru, with the famous five. Number one, favorite business book.

Dru Sellers

10:36>> Creating the Corporate Future by Russell Ackoff.

Nathan Latka

10:39Number two, is there a CEO you're following or studying?

Dru Sellers

10:42>> No. I try to just learn from everybody, but I will say that I quote from what is strategy by not Paul Krugman.

10:52>> Anyways, I love Southwest's model. A bunch of stories that I quote from Southwest.

10:57>> Yep.

Nathan Latka

10:58Number three, what's your favorite online tool for building?

Dru Sellers

11:01>> You're talking about Herb Teller, think, right?

Nathan Latka

11:04Southwest? No.

Dru Sellers

11:05>> No. Okay. I I do like the Southwest story. So it'd be the early stuff. So it's probably Herb, but I study the business versus the person.

Nathan Latka

11:11I see. Okay. Number three, what's your favorite online tool for building Bonsai?

Dru Sellers

11:15>> Roam Research right now.

Nathan Latka

11:17Interesting. Not a Notion guy.

Dru Sellers

11:19>> All right.

Nathan Latka

11:20Any Roam Research tattoos anywhere on you yet?

Dru Sellers

11:23>> No, not at all. It's crazy in the culture. I love it though. Love it.

Nathan Latka

11:27And you're in... Are you in Austin?

Dru Sellers

11:29>> I am, sir.

Nathan Latka

11:30Yes. And Nat Eliason obviously is down there and talks a lot. There's a lot of Roam tutorials. He's creating a course. We're actually having a meetup on Thursday at my house. So you should come if you're free. I'll send you an invite.

Dru Sellers

11:39>> Oh, I'd love that. I just

11:40>> got them going through his course.

Nathan Latka

11:41Oh, very cool. Perfect.

Dru Sellers

11:42>> Small world.

Nathan Latka

11:43How many hours of sleep are you getting every night?

Dru Sellers

11:46>> Eight to nine.

Nathan Latka

11:47And what's your situation? Married, single, kids?

Dru Sellers

11:49>> Single. That's how I get eight to nine.

11:52>> No kids.

Nathan Latka

11:53And how old are you?

Dru Sellers

11:54>> 42.

11:55>> 42.

Nathan Latka

11:56Last question, Dru. What's something you wish you knew when you were 20?

Dru Sellers

11:59>> Man, learning how to take more risks.

Nathan Latka

12:02That's a good one. Guys, founded eleven years ago the company is now doing $6,000,000 in terms of run rate, bootstrapped up from 4,000,000 about twelve, thirteen months ago. They're a tool that helps businesses understand how they show up in search, optimize how they show up so they can get more leads, more traffic, and ultimately more sales. Over 4,000 free users and about 1,600 customers, mostly developers using the platform as they look to scale and continue

12:24to scale in app exchanges, referral programs, and otherwise. Dru, thanks for taking us to the top.

Dru Sellers

12:29>> Thank you.

Nathan Latka

12:29Have a great day. One 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

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