Every software engineer knows how much time they waste eliminating bugs from the software code. Bird Eats Bug is a well-designed tool for bug identification and elimination that is easy to use by customers and saves programmers a lot of valuable time.
- Bird Eats Bug achieved a substantial user base as a startup founded in 2019 because the bug-fixing tool works well.
- The two-year-old company raised $1.5 million at the end of 2020 as its first capital raised from investors, which valued the company at $6 million.
- The Bird Eats Bug value proposition is that using the tool saves a software developer up to 30% of the time that they are wasting on software bug fixes.
Ranked in Top Five on Product Hunt
The naming of the software bug-checker as Bird Eats Bug was an excellent choice for brand awareness.
The first version of a viable product announcement came from Bird Eats Bug on Product Hunt, after only two months following the company’s inception. Product Hunt 2019 ranked the Bird Eats Bug tool as the number five best product of the day on September 23, 2019. This event kickstarted the company to success.
The tool’s critical usage metric is the number of bugs reported.
This bug checker software got 361 upvotes that day on Product Hunt. This attention attracted 500 to 600 new users who made Chrome extension installs of the free version. About 700 to 1,000 bugs reports happened that day, demonstrating the viability of the software tool for use by the development community.
Two years later, in September 2021, all the Bird Eats Bug tool users find, on average, 1,600 total bugs each week or 6,400 bugs each month using the software. There is a free version that leads customers to convert to a paid SaaS service.
Onboarding with 30 Free Bugs Per Company as a Generous Free Tier
Users can start immediately saving time in bug fixes for free. It takes, on average, two to three months to reach 30 bugs reported by each company. By that time, software developers who report 30 bugs understand the usefulness of this bug elimination tool. Some of them upgrade to the paid unlimited bugs version.
Current 2021 Growth of Users at 20% Month-Over-Month
By September 2021, the company was experiencing a user growth rate of 20% month-over-month.
40% of New User Signups Come from Word-of-Mouth
A large portion of the satisfied user base for Bird Eats Bug tells other software programmers about the tool’s usefulness. This word-of-mouth advertising is responsible for about 40% of the new user sign-ups.
6% of 10,000 Sign-Ups Converted to the Paid Subscription Level
The company uses SEO efforts to generate direct traffic to its website. An emailed newsletter also brings new sign-ups. A YouTube video about the bug-fixing tool did surprisingly well, with an average of 75% watch-time for the video.
So far, the company has captured about 600 paying customers who use the paid service level generating $8 average revenue per user (ARPU) per month. This success generates $4,800 in monthly recurring revenues (MRR) with annual recurring revenues (ARR) of $57,600.
The 6% conversion rate from the “freemium” (non-paid) users to paid subscription users compares favorably with other SaaS services such as Dropbox that has a lower 4% paid-user conversion rate.
Is Paying $800 per Month for Software Review Listings Worth It?
The company maintains paid listings to track clicks on the software review websites such as GetApp and Capterra. GetApp works better than Capterra. GetApp has a more technical audience than Capterra, and more software developers look for tools on GetApp.
Both systems attract users with a high level of buyers’ intent to purchase. The company pays around $800 per month in total to be listed on all the appropriate software review sites. The sign-ups generated using this method are reasonable numbers for what the company pays.
Average Cost of $12 Per Sign-up
The company pays ten Euros (about US$12) per sign-up when the users download the free version of Bird Eats Bug in response to an ad or a listing on a review site. With this method, the company pays for sign-ups coming from valuable regions, such as the USA, Canada, and Europe to acquire 10 to 100 new users per month.
Google Ads are used to target general screen recording tools as a related category. The Bird Eats Bug tool has a screen recording feature to show programmers what was happening before encountering a programming bug. Google Ads are the most cost-effective way for the company to get new sign-ups.
Customer Acquisition Cost $180
Since the company pays, on average, $12 for each sign-up to use the free version, and eventually 6% of those sign-ups convert to a paid subscription, a calculation determines the paid customer acquisition cost (CAC) to be about $180. The CAC is a significant investment at $180 per customer compared to the annual customer value (ACV) of $96.
The CAC means a customer must use the service for more than two years to generate profits. This delayed longer-term focus of the company is the main reason why the company is not yet profitable. The company is in a growth phase where acquiring new customers for the long-term value is strategically more important than short-term profits.
Annual Revenue Growth is 5%
The company revenues are growing. Additional growth may come from other applications of the software for screen recording as a security tool. The company wants to invent a new category and distinguish its products from the competition. Some of them are much larger companies.
Bird Eats Bug is not a typical bug tracker but more of a screen recorder, such as the analogy of a dashcam monitoring the work of a software developer to show what happens before, which triggers a bug.
A feature of instant replay is coming soon to record the steps that produced a bug. This feature will allow software developers to go back in time and export the last minute of any actions with technical logs so that the software engineer can know 100% of the time what happened. This instant replay is an innovative game-changer in the software development process
Up to 24% Gross Annual Churn and 81% Net Revenue Retention
About 30% of the free users stay at the level of reporting one bug per week in week ten of use. There is a maximum of one to two % monthly churn for paid users, which means up to 24% annual churn. There is an estimated 81% net revenue retention (NRR) which the company is working on getting above 100% by adding new product features.
11 Full-Time Team Members – Five Team Members are Software Engineers
The balance between software engineers and administration staff is about fifty-fifty. This balance is a common worker mix for a startup SaaS company. The company also employs two freelancers.
25% Equity Portions
The seed capital raise of $1.5 million at a $6 million valuation gave the investors 25% equity and left each of the three founders with 25% equity apiece.
$70k Burn Rate Per Month
The net monthly burn rate is $70k. The capital raised from investors gave them a current position of having $750k cash still left in the bank (October 2021). The runway now for the company is 11 months to raise more money. This burn rate is comfortable for the company, according to CEO Dan Makarov.
Fundraising for the next round will focus on the usage numbers and growth, not profitability. Fundraising will happen early before the company runs out of money.
Working Up to 30% Faster
Makarov spent most of his career in product management roles in companies like Google, BCG Digital Ventures, and Rocket Internet. Together with two ex-colleagues, Makarov co-founded this B2B SaaS startup of Bird Eats Bug building a new development tool that helps software development teams report and fix technical issues up to 30% faster.
The business model of the founders was to make a development tool that they wanted and needed. Then, make it work well, get others doing software development work to try the tool, and ultimately convert free users to a paid SaaS subscription model.