Viruses are life, but they depend on the machinery of other, more complex life to reproduce. Life doesn't start with viruses, for if it did, how would they reproduce?
You asked about examples of life simpler than bacteria. You didn't stipulate that they had to be ancestors. How would that even work, anyway? An organism would have to be extremely long-lived to be living concurrently with its direct, more complicated descendent.
Think in terms of lines, not individuals. Mutations are acquired on individual level, so out of a whole family of bacteria, one individual may reproduce into something slightly different, while the rest of the family continue unchanged.
(Modulo fast mutation rate in bacteria, and modulo the wide use of horizontal gene transfer. The more I learn about bacteria and archaea, the more I feel there's little point in trying to find the tree of life.)
