Creating a Successful Product-Led Growth Business

Play Video about Blake Bartlett OpenView Part II Video Transcript: [Music] welcome back to another episode of founders fridays as i shared with you in the past this is a tell-all for anyone focused on driving revenue uh our theme continues to be on product led growth uh blake's back for week two of uh our discussion uh last week we covered several topics around blake's investing style openview partners what we mean by product led Growth uh we're going to shift gears a little bit today blake so let's talk a little bit about uh you know how um or why should companies care about plg you publish some really awesome research last year that i have shamelessly quoted on your behalf that talked about how enterprise value can be 2x with plg companies related to the sas index it talked about how Companies that achieve a certain scale as a plg business then tend to accelerate past that inflection point right around 10 million in arr and you also talked about the overall value that's been created with with plg in in market value share a little bit more about those metrics and if there's any uh any new research or updates that the audience should be aware of let's let's start There yeah yeah so um this this is something that's uh borne out in the actual numbers itself so if you look at public companies this is where we came up with this stat and just look at you know general non-plg sas businesses and then you look at plg businesses specifically again all public companies and you look At their general sort of valuation multiples the valuation multiple for plg tends to be on average 2x the valuation multiple for non-plg sas businesses so so that's where the data is coming from now what's behind that um it's not just that investors because public market investors um oftentimes will weigh the numbers more than just you know kind of the hype of a trend sometimes there's hype in public markets as well but it's Not just that people think that you know plg is great it's that they're looking at the numbers and the numbers themselves look different than non-plg businesses and so why is that you can grow faster on the top line and how do you grow faster on the top line with self-service well on the one hand when you have a sales team which you know especially in the early days might be a relatively few people that are on your sales team You have to use those resources very very carefully so they can't talk to everybody um you know they can't talk to people that are too small because those are the on economical deals they really have to talk to your icp and what is the sales process it's all about discovery and qualification in the early phases qualification is really a term to describe kicking as many people out of the funnel that are going to waste my time as i possibly can so that i can Focus on the couple that are that i'm going to close so when that's the going in premise it just means that you're saying no to lots of potential opportunities um that are that aren't the best fit opportunities for you but now if you just change your go to market model and make it self-service where it's anybody can come and sign up for this product just the way that anybody can sign up for instagram or amazon or whatever the thing is you're Not turning anybody away um and so you can be attracting all segments of the market that see value in your product or in your solution and then also you can be sell you don't have to say no to certain geographies you can say yes to all geographies because there's no time zone issues self-service is what's you know onboarding them not your your humans um and then also like you know you can be Selling at you know 11 p.m on saturday night you can be selling at 3am on sunday morning and you can be selling at you know in the middle of the day on a weekday as well and so um the way i describe it is that when you have self-service you can say yes to everybody but then also um the the door you're open 24 7 365 days out of the year not just the selling hours for your sales team and so that is what allows you to just accept more customers on Board more people and drive more revenue you know canva is a really good example in this regard where canva is you know they've projected that this year they're going to be a billion dollars of arr if they only focused on one icp and rigorously uh qualified everybody that came through their funnel they would not be a billion dollar error business in the less than 10 years that they've been around um it really is plg that allows them to be mass market which allows them To get more revenue and to grow as quickly as they have so so that's the first factor and then i'll go quick on the second factor which is because you have um you know a way to describe plg is all of this automation and all of this self-service is it's a way to de-labor the growth engine behind your business and so if you're removing the human dependencies that also means that all of that human effort that usually it took to sell Somebody and to onboard them and to get them you know successful if that's all now being automated then that spend previously is now dropping to the bottom line and that's where you get the capital efficiency piece is that you can get more revenue it costs less to sell it and to service it and so that's where you get the sort of faster growth with better capital efficiency which is the fundamental math behind why these businesses have higher Valuations i love it i think the context that you shared behind the numbers is so valuable so relevant and i think that you kind of really absolutely got my attention we talked about you know the qualifying process is you're saying no to a lot of things which as a founder is incredibly hard to do i think my co-founder who actually builds the product is much better at That uh very kind of the habit that you just described uh and then you know it kind of switches to where you now have to attract anybody and everybody that can sell service sign up your product so uh it's an interesting journey to be to be on as a founder kind of listening to you so to speak to it from the lens of having been through this a few times uh with other companies so let's let's talk you know last week when we talked about this you talked about product design That's sort of leading with that let's talk about that for a moment some of the companies that you brought up uh you know slack gallantly uh expensify etc and sort of this viral nature of uh the element of you know some of these these workflows is that something that you can design for uh for virality specifically yeah or is it something that you kind of select Into it like what what how do you think about that yeah you can definitely design for virality now i will say that there are certain you know problems and and product areas and opportunities where there is natural virality um and and there are others where there is weaker virality but there tends to be viral opportunities in most most markets in most problem areas so for example we're On zoom right now um zoom is inherently viral you can't have a zoom by yourself there's always at least one person on the other and if not many people and so you know that creates a viral opportunity if those people you've invited to your zoom meeting haven't heard about it before you know we've obviously all heard about zoom now but in the early days that was ways that zoom got discovered um calendly is very Similar you know just the way same way you can't host a meeting with some without somebody else on the other line you can't schedule a meeting unless you're scheduling with somebody else you can't schedule it yourself and so by sending the calendly link you're both using it but you're also promoting it and so there's inherent virality there now there are other things that are you know less obviously and inherently viral but still very viral so for example um a Survey from like surveymonkey that's also viral because it's one person that's sending it out to perhaps 100 respondents and so those 100 people have both used surveymonkey but they've also discovered surveymonkey so when they have their own need to run a survey they can use that tool that they they enjoyed using um but to pick a less obvious example from expensify so expensify you know again they go after individual end users who Are submitting their expense reports but expenses are in some way interior to your company inherently viral as well because you can't reimburse yourself you can't approve your own expense report you have to send it to your manager you have to send it to finance everything has to be approved and then you close the loop through getting that ach reimbursement so even though that's a less strong viral loop than the calendly or the zoom viral loop It still is viral and you can find a way to latch on to that virality and go from submitter to manager to sort of finance team and then also go from submitter to peers of people who are in the same position say a sales rep who has a lot of expenses to another sales rep that has expenses as well so there's way to drive sort of both pure level word of mouth and virality and then also the natural variety from the particular Workflow that your product serves got it and and so taking this kind of to the other extreme is there a box that you kind of draw around you know where plg fits and then there's maybe certain things that will never make it into that box because it's just so different from from the way the plg principles operate like what what would that look like what are some of the places where like it's not even worth going after that Yeah i think that um my my view and my general thesis is that i think product led growth is going to transform the vast majority of software categories you know call it 80 plus um and that's really just because um all software has end users and all of those end users have mobile devices where they can go onto the app store they're using chrome they can go onto the chrome web store they're using other applications That have marketplaces attached to them just everywhere they look there's one click options to install software so because of that the the cat's out of the bag you can't put it back in that is why um every end user in the world for every problem is constantly looking for new solutions and they're going to solve their own problems just the way they brought their own device now they're bringing their own app um and so you can't you can't undo that now what's That perhaps 20 or you know 10 to 20 that will be harder to access that really is um i mean certainly you could point to like regulated industries or or things where there is a lockdown of like it not allowing end users to take any actions that are unsanctioned so you know uh finance uh financial services and things like that could be those categories government but i think that even then you still see plg adoption in some of those accounts so it really is Like the core systems of record uh for large industries uh that for large enterprises that you know virtually never turn over anyway probably aren't going to turn over through plg so like take the core system at a bank um you know the ledger that sort of that keeps track of everybody's balances and all the transactions those are still very antiquated legacy solutions and i don't see them getting Refreshed you know anytime soon at all let alone through a self-service you know developer um oriented solution or something like that so yeah there are some of those core systems of record that are just so mission critical to large enterprises that they might not ever be um you know plg-ified got it so i think i think uh what you just called out there makes a ton of sense i think let's maybe shift gears From product to go to market right so on the go to market side you know you've kind of touched on this already in terms of what the sales funnel looks like but but maybe go into some of the myths that we've heard around the go to market site you know that plg is just free trials or it doesn't necessarily need a sales team or that the product team is in charge so kind of help bust some of those myths because you and i know that's not always Accurate true uh but you know when does what what is it beyond free trials or when do you actually need a sales team to be introduced into a plg motion and how do you know that you're ready for it or you know what role does the product team play in uh driving the the go to market side of the business not just building the product so let's kind of hit those three areas and let's take those maybe one at a time Yeah yeah so the the starting point is that it you know it has to be self-service um capable um and that theoretically any user can come and go from sign up to activation to aha moment and getting value to then swiping the credit card to then inviting team members and then even driving expansion revenue that all of that can happen with zero human involvement from your team So that's that's where you start now when you have that foundation it allows you to do whatever you want if you want to strategically for certain individuals or certain accounts that you know are in your icp of you know strongest fit account and you want to proactively reach out with human support to help them get through the journey faster or get to that a-hole moment faster and sort of reduce time then you can do that but that's optional that's Like a choice that you can make to accelerate things as opposed to if humans aren't on the phone software's not getting sold right so that's kind of the you know you know is it mandatory or is it optional and so once you have that foundation and you're in the world of the optional then you can start to look at you know when do you layer in sales and i think that's a common misconception as well is that plg is somehow anti-sales that you need to Build this magical product that sells it that sells itself and you don't have anybody that works on the go to market team and then you're just going to one day wake up and be a billion dollar company that's not plg again it's the starting point of self-service and sales is still very much has a role in plg and if you look at the large plg companies at scale there's just as many sales people as with any software business um but what is different is the order of Operations instead of having a higher sales first in order to get your your first customer because again without sales people you can't sell um now it's a little bit more okay we've gotten our initial customers we've gotten this self-service base we're generating revenue but we're starting to see a dynamic where customers get to like you know 20 20k of arr or 30k of aor and there's an opportunity to get more but they're not Getting there on a self-service basis how do we get to that next step you know we're not being able to go from you know one team to the next team or from multiple teams to sort of wall-to-wall enterprise-wide adoption why is that a lot of times when you start to see those natural limits um you know in how far you can get on a self-service basis or through a customer success aided adoption that's can be the indication to you that now is The time to add sales and so the role of sales is really much more expansionary to sort of help folks get to the next level of usage and get to the next level of value as a because they're already using the software um it's an expansion motion as opposed to i'm trying to convince you to start an rfp and then i'm you know trying to win the rfp and then i'm trying to negotiate a seven-figure contract and convince you to choose me over my competitor that's The old way of selling and the new way of selling is you've already adopted my product through self-service you're already paying for my product you're using it on two teams you want to use it on 20 teams that's where you want to go that's where i want to go as well we're on the same side hand in hand let's get to that shared destination and so it's um it still sails but it takes on a different flavor makes sense and blake how do you see the Role of customer success evolving in this context because a lot of what you just described in the traditional b2b sas play is what the customer success teams have been doing which is driving adoption and then helping uh create expansion in that account so now obviously the front end of it which is a sales process is happening self-service or you know in a much smaller limited way a user source signing up at an Individual level and then after a point in time where certain teams have been have adopted now you're going enterprise-wide or what are traditionally called you know elas enterprise like you know agreements so what how do you see the role of customer success changing in this context yeah well it is an interesting call out because sales and success are starting to blend a lot more in the product led world than they they had ever before um And so i will often describe the sales role as it's really a customer success like sales role that you're doing and so there are a lot of similarities there and in some plg businesses this tends to be a little bit more in the earlier plg businesses versus the ad scale ones but you will see that there actually aren't different terms or titles for these individuals they're just they're all customer champions or they're all sort of support uh specialists or onboarding Specialists or things that are sort of more generic as opposed to account executives and in terms that are clearly sales oriented so the the roles are switching or emerging and kind of there's more overlap but what i do see sometimes is that you know the customer success person can still act as that almost like a concierge for the customer journey um how do i help you get to the next stage of the customer journey how do i help you get to the next okay You're now at a stage of the customer journey where it's about going from one team to multiple teams or going from multiple teams to an ela okay this it seems like maybe i need to pull in a different team member from my side which happens to be a sales rep and they're going to help you with that next phase of the conversation i as the csm identified that that's where you are on the customer journey i'm trying to help you By bringing in my teammate who can help you with that phase of the journey so it ends up being a lot more of a you know kind of two sides of the same coin sales and success for this expansionary process and one identifies and one closes um but yeah there still is a lot of overlap that's for sure got it uh got it okay so uh let's talk about data and metrics so Uh you know what sort of data should founders be looking for at the various stages and what kind of metrics that we should be thinking about as as we're building out a plg business what does that look like what is what's different from a traditional sort of sas metrics that we're all very comfortable and used to at this point yeah yeah so all the sas metrics you know arr and cac payback and gross net retention all Of those are the same those all matter and those are all still important and hopefully plg makes them look better but in terms of operational metrics what matters in the early days honestly it's going to look like a consumer app the metrics that matter most are how many installs or signups am i getting how many of those people are actually activating and not just you know ghosting me after they uh create a username and password how many of them Get to this sort of aha moment of being activated uh what is our 30-day retention or 60-day retention or 90-day retention look like of individual users um and and there's also an angle you can say what does my product exist to do how many times is that thing happening zoom exists to host meetings how many meetings were hosted how many meetings were hosted by sort of a particular account or cohort or domain are we seeing that the usage is increasing in Scaling so again very product oriented metrics um and very in some ways consumer-like metrics in the early days now you'll always track those because again product is the sort of starting point of the journey but then later on you start to say okay how do these product metrics turn into you know perhaps metrics that you know matter for those those csms or those the sales reps that i mentioned and that's where you start getting into things like pqls um You know product qualified leads which is you know perhaps a replacement for the old marketing qualified lead and things like that because your product is doing the work um and so there are additional metrics but but really i think that's probably the biggest thing is that the sas metrics stay the same there are some interim metrics kind of around pqls and other things that sort of tell you this lead is ready for some human activity and then really it does Start with and the foundation always ends up being those product metrics got it and obviously product data and usage becomes a very critical criteria for how you measure success and and whether you're headed in the right direction as a company as well as for your customers whether they're uh adopting your product in the way that you'd expect them to how do you so you know what are some of the challenges that you see with bringing Those product usage metrics to sales teams or customer success teams so they can actually help drive the adoption that you'd expect to get out of your out of your accounts yeah well it's it's the classic needle in a haystack challenge uh and signal versus noise you know there is a lot of product metrics and individual data points and all these things but you know which ones matter and what are they telling me um you know It's more important than just like high level stuff of you know mao and dao like those are important but you know really you need to be on on what are the metrics that matter for our product specifically again like zoom hosting meetings and how many meetings over a certain time period how many attendees were in the meetings like those types of things that sort of communicate you know utility and value as opposed to just high-level product Metrics um so so signal versus noise is a challenge and then when you have so much noise or so much potential signal then how are you surfacing that to an individual rep in a way that they can actually act on it um you know it's not like piping real-time streaming data into salesforce is particularly easy and so you have this challenge of identifying the signals that matter surfacing them at the right times that You can take the next best action a lot easier said than done yeah and we live and greet that every day on behalf of our customers because we're talking to a lot of plg companies helping bring their product data into the sales and service organization and you know separating that signal from the noise is obviously one of the biggest issues that we see the other issue that we see is the way That product data is structured it's not designed for account or user level information that crm teams consume so transforming those data models from event streams to accounts or contacts is a pretty tricky problem and that's one that you know we feel like we can add a ton of value to but really enjoyed this discussion uh thank you so much for your time uh where does plg go from here any final thoughts Well i think we talked about it earlier which is i think plg everybody's talking about it now and it's this awesome community and this awesome movement but we're still relatively early in terms of seeing the trends of plg you know disrupting and taking over you know that 80 percent of software applications so what does the future look like more penetration into that you know more automation and then also for all of us as end users more awesome tools out There that you don't have to talk to sales to try and use and you know there's there's something new every single day on on product hunt that all of us can get value out of and i think that's only going to increase in a dramatic fashion yeah blake uh what's the best way for our audience to reach you besides linkedin of course yeah the best way um honestly that probably is the best way i i the only social media i have is linkedin so find Me on linkedin add me reach out and that is also where i publish um you know a weekly video series about product like growth um so great place to connect and follow for more content there awesome blake thank you again so much for your time not just today but the past week as well it's always a pleasure to talk to you i think what you've given us in these two-part series is essentially a master class on plg for that every founder should should watch and listen To i've learned a lot uh and as always it's it's a pleasure uh and anybody that's watching today if you'd love to if you'd like to talk about uh plg or if you have thoughts on that you'd like to share with us uh please do reach out to us we're at immerser.ai and uh we're always here to help you figure out how to take your data and turn that into revenue if you're a plg business look forward to uh continued interactions with you and uh Thanks again blake thank you so much team really enjoyed it [Music]

“The traditional thinking is that there’s a trade off between growth and profitability. You can either grow really fast but burn a lot to do it. Or you can burn less and also grow less. You can’t have it both ways. With PLG, you can have your cake, and eat it too.”

Blake Bartlett, Partner, OpenView

About The Guest

Blake is a partner at OpenView, an expansion stage venture firm, and has led investments in companies like Highspot, Calendly, Expensify, Postscript and Cypress, among others.

In 2016, Blake coined the term ‘product led growth’ or PLG, and continues to be a thought leader in the community as it has embraced PLG as the future of software.

What We Cover

In this episode, Blake takes us through his journey investing with product led growth companies. He starts off with how he moved into venture investing and spotted the product-led trend early.

Blake not only coined the term that has now become an industry movement, but speaks to how PLG companies like Zoom, Hubspot, Expensify and others are defining the PLG movement.

He walks through his definition of what it means to be a product-led company, how to design a PLG product, what metrics define PLG success and the future of PLG.

This is a must watch episode for every founder, sales & product leader, as they guide their SaaS business to drive revenue growth.