Logz Revenue, Valuation & Funding (2024)

hello everybody my guest today is Tomer levy he's the CEO and co-founder of a company called logs dot IO before founding this company he co-founded whatwhat and was the CTO of another company called antigua a company that developed innovative docker like containers designed for large enterprises prior to antigua tomar spent six years at checkpoint where he let its an intrusion prevention system or IPS product from concept to market generating 100 million dollars in revenue and in the second year alone toma was an MBA from tel aviv university and it had an has a BA in computer science and is an enthusiastic kite surfer toma are you ready to take it to the top yes I am all right very good so let's just jump right into your two logs dot IO your current company what does it do and what's your revenue model sure we're a log analytics company we help customers like dine turn media British Airways analyzed data generated from machines if you think about it every machine in your room from your computer to your mobile phone to even your house generates a software that generates logs we had companies analyze this log data and basically reduce the time we take to solve problems in their web servers in the databases this is kind of the main the main product that we offer our business as you ask is is basically selling software service to analyze its data yep and are you so we are you selling like two IT folks or CTO at companies yes usually it would be s sorry DevOps IT operation this is I would say most of our customers about a quarter of our customers are actually security teams that also need to monitor log files might or log events and kind of correlate to understand threats and attacks and what would you say on average just so we can get a sense of kind of deal size here what's the average customer paying you either per month or per year whatever is easiest for you as you get this answer often it's complicated it starts with B this with the I would say the self-service tier which usually people buy online paying a few hundred bucks a month let that be a few thousand dollars a year on top of it we have two main courts one them is the SMB usually would pay about 10k 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 50k per year minimum and then would go to a few hundred KS for the for the high-end enterprises what do you look at your sweet spot though I mean are so is it fair to put a range on it's fair to say you know between 10 and and and 40k and annual contract value I mean is that think about the last few deals you've closed I've kind of been in that range yes yeah I would say as we've all we're very young companies so all right when do you launch company we launch it on on 2014 we we launch the company we launch the product into end of 2015 so we're about a year and a half in the market today so what if you look at the last 10 dealers probably around 40k yeah and are you is your process on those folks you if you have an inside sales team there or no yes so what we do very differently for most companies at least in our space is we focused on open source so we're actually a large part of what we offer is actually an open source platform called ALK elk often-used so just you just said elk has about about half a million downloads a month what is this so I like for a non-technical person described that to me so think about it like a set of libraries you install them on a server and they basically take all the data any data you have it can be what application it could be daily about a credit card swiping your e-commerce it doesn't matter you put it into this one bucket and what elk it allows you to do is it's basically visualize the data and understand what's important in it what we do is we offer that in the cloud with more capabilities so I'm going back to your question about kind of the way our business works is is really based on the open source community so we seek today many companies you know thousands of new companies sign up to a platform every quarter and start the process start to use a platform and this is kind of the main driver to the business this is how they we actually get our initial knowledge did you intentionally launch this open source project with the neither know-how that one day you would use it as lead generation for a paid product so unfortunately we're not the one who actually developed the open-source from the beginning it was actually developed by different folks and they I spend most at the time kind of investing in the core search engine this the elk is I would say very strong search engine what we've built on top of the core open source we've built I would say an application a solution for specifically for log management so customers instead of them trying to install maintain it's really hard it takes a lot of time and effort they kind of get that SSS from us in the cloud and and unfortunately we didn't invent that so is a good way to think of elk for a non-technical person it's basically like Google search for all your log data perfect yes got it and then what you're doing is making management of those logs easier way more robust than just a search with your new platform exactly how do you make so this is an issue in question because this is a growth the channel that other people could use kind of the open source two paid model but since you didn't create the open source software like how do you make sure you're the one getting leads right when people go use that for free yeah that's that's actually increasing discussion and and and we're not the only one doing something called open says it's open source as assess who are some others just name one or two you can think about you can think about Pantheon they do a wordpress as a service you can think about you know they're probably a cloud their eyes is kind of in this market but they'd s'more on-prem Hortonworks and others so what's the label you gave them what was it called open says open source as a service yes interesting but it's free usually I mean it has to be free if you sell it as a service it's hard to do it for free so meteor think about github right github just offered the get open source as a service obviously github offers more capabilities if you're developers it's a great platform in the same sense we offer first the open source and then start to pile on more capabilities machine learning and some more advanced stuff so so yeah that that's kind of in a nutshell and the way we get leads and how do I make sure that we are dominant in that space is a lot of content so we've been writing content before just as we launched the company we started writing content today we would with a number one contributor of content to the ELCA community so if you search Google for LK or AWS Alka in production we're number one in Google and all of these searches and we're contributing a lot to the community and also getting obviously traction and leads from these articles so someone else wanted to do this what you would do is go find a relevant to open source community right for whatever your product is and make sure you're the one contributing the most free value to that community so that when someone wants to a more advanced version they find you naturally exactly and I would add one more thing and this is very delicate for open source 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 hard to make it production grain and this is where commercial companies has a lot have a lot of leverage because otherwise people just keep making open source stuff ever copy yeah say so we're you - how many customers are you serving today so we have today about one in you know just again one half years in the market we have about a thousand companies from 80 different country to choose logs a few hundred of them are paying customers a few hundred of them are free users of our power coming all like like 300 page something like that I'll keep that one private but a few hundreds okay good and then walk me through kind of this story from a financial perspective did you decide to bootstrap this or be raised capital so we actually had we had to make a decision very early on we raised money but we could have built a lifestyle business out of this company very easily because we had traction de0 we made a decision we want to build something big giving our experience in the past we already build companies so we raised twenty four million dollars in these two and a half years the last round was in October we raised the 15.6 million dollars of 2016 yes got it got it and what's the team size today or 77070 and you said I always love this because got a huge debate on a show a few days ago of this guy that said Nathan we have 10,000 customers and later on the episode I did the math and it didn't check out and I said what happened he goes oh well these aren't paying customers I'm like well what the hell is a customer if they're not paying like call them a free trial right he's like no we like to call them a customer because it's a it's a mode of thinking and it's how we should think I said you're less and you're full of [��__��] basically these are free people you haven't monetized this thing and it's not working you and he's like you can't you can't sell software up front and I said baloney I know people do it all the time it sounds like you were profitable or you had traction on day one tell me about that traction how did it happen what was day one revenue so you know when we when we started the company was October 2014 I think probably February we were already had something up and running and we had five you know brave companies who said I'm they're gonna work with us and for three years they pay no we didn't okay yes just kiss their hands for longest to to test the product and then if you might like it monthly then we open it up and said okay now you know maybe someone will sign up it's not good enough we were afraid and then someone sign up and then another person sign up and you know we started to be five signups a day ten signups the day you know we get today many signups today so I've seen my advice even though your product is you know sorry for the language [��__��] and it was [��__��] in the beginning you know open up people will understand you literate fast and and we just we just jumped into it that's so smart what was first I guess 2014 was your first year right what was the do to have any revenue in 2014 or no 0-0 what was first year revenue than in 2015 how low how embarrassing was it so we launched a product on October 2015 I think we're six figures at that point okay so you broke up ARR okay so you hear like what like you know nine ten thousand bucks a month by December 25th 16 yeah I don't have that I don't have them and like right now but probably yeah we had our first few customer probably a few hundred K yeah definitely yeah we like to count error because it sounds higher yeah yeah for everyone listening like you guys know that's good I talked to hundreds of SAS CEOs but ARR is just monthly recurring revenue multiplied by 12 right it's a writ so it's a run rate you take your current month's revenue multiplied times 12 and that's how you get 200 grand or whatever you guys were at Tomer and then have you guys broke the million dollar run right oh okay how what can you share how they can be grown it so I unfortunately I would love to share but we made a decision the company not to share numbers for competitive reasons who do you be with what we brought we brought that a long time ago who do you compete with so we actually compete mostly with engineers setting up their own open source and that's that's an interesting competition on the commercial side we compete with elastic it's it's and an AWS so AWS Amazon Web Services obviously a strong base in the market and they offer I would say simplified version of the open source so they resolve some of the pain and we see ourself as more of a premium product which much more expensive working with larger companies to help them get a kind of a more strategic solution and what are the is it company like this I imagine it's hosting heavy I mean do you sit is your gross margins similar to other SAS companies like in the mid 80 range or is it way lower or way higher what what's your gross margin I it's it's not way lower it's it's about that maybe a bit low we will be at around that number hope next year but it is a challenge right when you host and think about it we're very young company we have so much data we have Amazon build that go to the millions so just think about how much the the constant effort of technology to make sure you're not just moving the money to Amazon is always a challenge for every second yeah so just be clear you're you're paying you know between one and five million in just a year just to Amazon for hosting absolutely god that's such a good business why don't we think of it you're like you just said you're like maybe call it 80% gross margin now but as you scale that's improving slowly and you expect to be mid mid 80s later this year well we're going that do you focus on that or you're not really cadets not something you really care about it's always a challenge right or in a manager meeting or board meeting and you say hey I have two engineers extra where should I put them on a new feature to bring a new customer to grow the business or should I bring them to reduce the cost and it usually goes to not reduce the cost but focus on growth and focus on expansion and this is where we are 100% of that to your question were investing very little resources are reducing the cost yeah now I mean I want to put a floor on this cuz honestly look a lot of times people like shiny objects they like clickbait headlines they like to hear about numbers and success so the floor you gave me was a couple hundred customers I'll call it 300 and the minimum you said I mean basically he said on the low end you're gonna do 10 grand an ACV on one customer so that's a thousand bucks per month I'm just multiplying 300 times that to come out to 300 grand per month in revenue at about a minimum is that fair to say that's a that's a minimum I expected probably doing significantly higher than that we're doing how we doing well there you guys have it so right a lot of success there he's built a minimum but look he my gut tells me it's probably he won't confirm or deny this but probably 2 3 4 or 5 times that but he doesn't obviously want competitive folks understanding how that works tell me more tell me more about the team how did you so you were 70 people where you guys based so we're based in Tel Aviv Israel big part of the team what we found in the company were Israelis to Israeli founders so R&D in Israel and now I'm actually talking to you from Boston from our Boston office so have a growing team in Boston here and it's where the most of the go-to market activity is here in Boston and what about a space like this what's your what's your gross not net but what's your gross monthly customer churn look like I mean is it high low just people switch easy so so we we the way we look at it is if you look at the self-service people who sign up on the road and they do something it this this will have a higher churn rate like it was high it's still single digits yearly like still less than 10% yearly okay and on the once you pay I would say 10k year I would say very close to zero okay got it and then what so maybe the right question asked here I'm trying to get a sense of how you're using your team how many of them are salespeople and how you use how you use them to our new customer so what do you forecast you're still young but hypothetically what do you forecast lifetime value is on these customers so that you can back into you know how many salespeople can I put on them and what can I put on paid marketing sure so so we're very much a land and expand business we see you know year and a half but we see the growth of existing accounts and the low churn and it gives us the confident that we should bring customers to where they feel comfortable coming if you feel comfortable coming in with a small project for five or ten or twenty K that's that's perfect for us and if you're happy and usually you are happy you will grow so when we look at the you know how much do you want to invest in bringing a customer currently it's extremely low it's you know well way beyond the standard of the industry because we bring customer through content well yeah I mean how many how many of the seventy people are sales and marketing marketing is a pretty big team like relatively I would say probably eight or nine tim is about ten okay most of the companies still are indeed driven or the focused product so if you look though at a fully weighted CAC meaning include these salaries of marketing and sales people don't just look at paid marketing spend I mean are you are you spending five grand to get one of these new customer I'm talking by the way about not your self serve cohort I'm talking about your 10k a CVS and higher kind of cohort yeah I think we're well way beyond in this is standard for the type of customers will bring usually you would see kind of the return period would be I would say 12 to 24 months for for this kind of business we were well beyond below these numbers so we feel we have currently a very very efficient customer acquisition cost just to rephrase that so your payback period you're doing way better than getting it back in the first year yeah you depend on the customer and the cohort you know it can be first year or so definitely by the second yeah absolutely way yeah Danny got and that's just to be clear guys he's got two cohorts a self serve which is its own animal but everything above the self serve cohort your payback period super healthy you've got you said eight salespeople and seven marketing people yes yes yep very cool what about what about I'm always curious are you doing anything on pain marketing at all right now or is it all just content yes we do and and actually it's it's it's a pretty it's easy to predict with with with PPC and and we see that you know we don't spend a lot of money you know a few thousand dollars a month it's like really small for me like five thousand yeah something maybe five to fifteen depends on the month depending what you're trying to achieve but relatively small numbers it's more money and it's and it's works well for us yeah and where are you doing it I mean are you just doing typical PPC kind of ads are you're doing anything creative like sponsorship at events or things like that all right I didn't good event events were especially these you're massively investing in events we have a team of community evangelists and what they do is they go to invents they talk about the industry they talk about something people care about and they and they basically get to get the get the name out get the word out that logo is here and this is kind of it's very hard to measure but this is one investment I think on the on the obviously paid campaigns we do through Google you spend on marketing stuff in 27 on sorry bikini on sponsorships at events in 2017 hundreds of thousands less than a million yeah that's okay got it very good Tomer let's wrap up here with the famous five number one what's your favorite business book I would go for been always the hog things about how things number two is there CEO you're following or studying right now you've got a look at Jeff besos right yep number four are sorry number three is their favorite online tool you have like acuity scheduling yeah I'm using grab early being you know not not native English speaker it's great your English is great number number four how many are just leap to get every night I would say six to seven okay and what's your current situation married single you have kids I'm divorced with one girl okay so this is all one little on how young is she she's all ten okay and how old are you Tomer I am 39 okay last question take us back 19 what he was your 20 year old self knew yeah I think that you know when I was 28 silly today I you think that other people figured it out but you know now I see more that no one actually like very few people actually figured it out and it's okay ever and struggling take it easy you'll figure it out and yeah there you guys have from the logs CEO and Founder Tomer take it easy you will figure it out they launched back in 2014 really got their first revenue in 2015 couple hundred grand 2016 obviously they've grown significantly to date we know they're at least they're serving at least and the low hundreds of customers call it three hundred paying at a minimum call it a thousand bucks per month or about a ten thousand dollar a cv for doing at a minimum again three hundred grand per month or well over three million dollar annual run rate potentially significantly higher Tomer is being very modest I feel like but a lot of success 80 percent gross margin again helping these really CTOs and and technical teams understand and and get a better grasp of how to manage their different logs and what and the processes they run around all those log files tumbler thank you for taking us to the top thank you