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Creating a Successful Product-Led Growth Business

Play Video about Blake Bartlett @OpenView- Funding a Successful Product-Led Growth Business Video Transcript: Welcome to founders friday this is a tell all for everyone that is interested in how do we produce revenue as startups and as scale businesses our theme for today is product led growth which is pretty consistent with what we've shared with you in the last few episodes but today's episode's a little bit different this is the first in a series of conversations with the vc that invests in plg companies my guest today is blake Bartlett investment partner at open new partners blake joined openview in 2013 and literally coined the term plg in 2016 as he was scanning the software landscape he's one of the first in the industry to identify the plg trend and then invest in it he has invested in companies like hi spot calumly and expensify among others wait thanks for joining the founders friday series today It's great to be here thanks for inviting me of course uh so we want to dig in a little bit deep into plg with you and you know take our audience through the entire journey of what building a plg business looks like and it's literally redefining the way sas companies operate today so we would love to get your perspective on that our goal is to educate and entertain so be yourself have some fun with it uh and we'll see where the conversation leads Perfect sounds good to me so let's let's start off by having the audience get to know you a little bit better beyond the professional uh part of the side of you that i just shared with them so tell us a little bit about yourself tell us what wake is yeah so um outside of the professional aspects i have uh i'm originally from southern california so i grew up in san diego um although i will say that i am one of the Few people uh the first question i get is so you're a surfer right and i said nope i hate surfing i don't surf so i'm one of the few san diegans uh who does not step foot on a surfboard but i did grow up there it was a wonderful place always sunny never rains so i can't complain about that and then went to school in in la and lived in la for a few years after that so it was kind of always southern California for me and despite not stepping foot on on a surfboard i definitely did grow up on other types of boards that you would expect in southern california skateboarding snowboarding all those types of things so very much through and through southern california guy but then in 2009 i had the opportunity to leave southern california go someplace else and made it out to boston when i originally joined battery Ventures and then thought that i would do a short little stint on the east coast at least that's what i promised my family and friends two to three years it turned into 11 years that i lived on on the east coast and lived in boston uh fell in love with boston loved it spent about four or five years at battery and then since then have been at open view in 2013 when i when i joined the firm um i have now made it back to la so i am Based in los angeles again back to uh to the home of southern california uh which was a move my wife and i did just about a year ago so that's some some high-level non-professional things about myself awesome awesome so does this mean you're going to get back or get into surfing this time around and you're in you're southern california we'll see might happen we'll see maybe if the water gets warmer that's always been my complaint if it wasn't so Early in the morning and if the water wasn't so cold so i think those are perennial features of surfing so i'll probably stay out of the water okay so you mentioned you were at battery before you went over to openview and of course you've been there for a long time tell us a little bit about what brought you into investing has it always been something what you've been doing or did you start somewhere else and then move Into into venture capital yeah so it has been what i've always been doing as a professional career but the way that i got into it was uh in undergraduate i studied business um and i thought i was going to go down one of the more common paths um that many go down was looking at investment banking but didn't really want to do finance um and then was looking at consulting and really liked consulting because it Allowed you to look at businesses you know in school i was doing these uh you know hbs case studies and things like that as an undergraduate and i like looking at the totality of a business you know what's going on in the market who are the competitors um you know how do you differentiate against those competitors what are the supplier problems you're having what are the customer demand problems you're having and you look at the totality of it and Then identify sort of what should be this uh the recommended solution for business problems given that totality the context so it's not just thinking about marketing it's not just thinking about counting it's thinking about you know really the all aspects of business strategy and i love that holistic view of things but i never made it to consulting uh because a really good friend of mine was working at a private equity firm in l.a And was really building out their direct sourcing team and so this is a team of individuals that basically every venture firm and private equity firm has now that acts as the sales force uh for these venture funds um to call call ceos uh to identify opportunities um and those types of things and then what you do on these calls is ultimately in 30 to 60 minutes try to assess the market the competitive landscape the team the product the differentiation the Trajectory as well and then make a decision you know is this one that we should continue pursuing is this one that we should pass on and not pursue any further but you're basically doing that exercise that i mentioned of looking holistically at a business and a market and then making a decision um about what to do with it in our case it was a pipeline decision of do we accelerate this opportunity forward or not but it Still had a lot of those similarities that i had really appreciated about consulting in terms of holistic thinking about business strategy so that's kind of what got me into investing it was actually through this consulting angle that led to sort of the sourcing angle which is kind of a sales role um and then i've been in my my uh in investing my entire career um and so i've been able to build on it and Develop those sourcing skills and then uh develop deal evaluation skills and due diligence skills and then ultimately get to a point where you know i'm a partner writing checks taking boarded seats and learning how to support companies operationally so it's really been the kind of um you know cradle to grave experience so to speak growing up as a vc very cool i think it's just fascinating to hear all the different aspects of the Business that you have to get involved with whether you're in consulting or in an adventure role um so tell me a little bit you probably get hundreds of inbounds and opportunities to sort of look at different businesses over the course of a year and you know it's probably a handful or a couple that you actually invest in what are some of the criteria that you look for what are some of the parameters that get you excited and you know in sort of get you to Commit to making an investment yeah well look there's things that every vc looks at everybody wants to know how big is the market what are the market dynamics in that segment right now that's driving a catalyst um you know what's the value prop and how strong is that value prop or the roi of the the solution you know the team and and you know how uniquely suited they are for that market so we look at those factors as anyone else would uh and then Openview has you know particular strategy you know there's a stage of company development that we we get involved so we kind of look at a specific lens but take those things aside you know kind of for me personally blake as a vc what am i looking for um you know really it starts with product um and i really love to understand first and foremost um why this product um what was so painful about this problem that you either Experienced before as a as somebody that was needed to use legacy solutions or as somebody that perhaps worked at one of the legacy vendors that caused you to want to dedicate you know perhaps the next decade of your life or perhaps you know the rest of your career to building this let's really get into that problem and then understand the solution of how you've um diagnosed the way to solve that problem um so it's always first principles from a product standpoint um And then really looking for things that are standing out and differentiating in terms of a product approach versus just well you know this space is big and you know we think we can have a easy to use solution in this space you know kind of more commonplace things really looking for things that spike above and say wow i haven't really heard somebody describe it that way or take that approach before you know expensify was a great a great Example and we can get into that example and others which was the key insight for them and that's kind of the thing yc called it a key insight or a unique insight was really flipping the equation on its head recognizing that expense management might not be the most exciting category in the world but it's a big category every business has expenses those expenses need to be managed if employees Are need to be reimbursed that has to happen and it has to be accurate but it had always been targeted at the cfo and viewed as a cfo problem give the cfo all the knobs and dials to be able to lock down tne and to manage expenses but expensify comes along and says that's not the problem the problem is the submitters of expense reports because every company has one cfo but then everybody else in the organization if it's a 10 000 person organization Then 909 999 people are submitting expense reports because they're not the cfo so let's solve that problem let's make it easier to submit and really think about it from the end user standpoint and you know that was a beautiful tie-in to their tagline which was expense reports that don't suck because everybody knows if you've submitted expense report it does suck it's painful and so that tagline you know immediately spoke to that that Individual and so that was kind of their unique insight flipping the model totally on its head and so i'm always looking for something like that tell me something i haven't heard before i don't want just another one of those in this category i want something that's kind of you know fundamentally different has a unique insight that stands out because those are the things that end up oftentimes having the highest likelihood of disrupting the space and then Becoming the winner take all yeah i completely agree and i think your key point about having a unique insight and starting with product as the first principles are the ones that you know definitely resonate with us as well as as we think about what we're doing here with with the mrsa but more about you and obp so let's maybe shift gears tell us a little bit about openview partners uh you know the firm itself and uh are there some specific Investment areas uh that you focus on what's kind of unique about the investing style that obp brings to the uh brings to the table sure so so openview as a firm was started back in 2006. um if you fast forward to today we're investing out of our sixth fund uh which is a 450 million dollar fund um and really the key things for openview i mentioned that unique model of what we look for um you know when we're out there in the in the world And you know there's a few things first from a sector standpoint if you will you know we only invest in b2b software so it's sas and infrastructure and it's been that way since since day one since again 2006. um and then we're also pretty specific about the stage that we get involved we call it the expansion stage which is really just a fancy term to describe businesses that are post-product market fit so oftentimes the rounds align to a Series a or a series b but we've really found that there's this key spot in a company's development where you have the traditional early stage which is all about building a product iterating on the product getting it out the door and then getting product market fit within your icp then you start to accelerate um and then there's a later stage which is the growth stage and the the kind of just add water phase everything's working we just need to Scale it up but that middle zone there's a lot of company building and a lot of professionalization and sort of building repeatability that has to happen when you go from identifying product market fit before you can get to you know just scale the thing that's already working and so that company building phase that when you hit that inflection point of growth when the market's starting to pull you um and in some cases pull you faster than you can Keep up with um that's the expansion stage and sometimes it happens as a series a for companies sometimes it happens at the series b for companies but if we can be at that critical point and focus there as an investor and then also bring a lot of operational resources to bear that really in many ways is the make or break point post-product market fit if you don't put repeatable processes in place if you don't hire the right team But the ceo isn't able to go from you know doing everything in the business to truly leading the business and you know kind of working on the business versus working in the business classic statement you know that can uh like i said be the make or break moment of will this reach escape velocity or will this sort of fizzle out under the complexity that every startup faces and so that's why we focused on this one stage the expansion Stage we think that it's really valuable and then we just fundamentally believe in the value of focus at open view you know vcs are constantly telling their portfolio companies you need to focus focus focus you can't be all things to all people pick a lane do one thing really well as opposed to a million things mediocre but then venture firms oftentimes turn around and break all of those own rules themselves and Inve try to be all things to all people invest in every sector every stage every geography you name it uh and so we actually try to practice what we preach and we believe that in addition to this being a critical stage of company development we also just believe that we will be at least have the chance of being the best in the world of what we do if we're trying to only do one thing so that's a little bit of our philosophy and focus and approach Um it makes a ton of sense uh blake and i'm probably gonna go in a bit of a controversial direction next uh you know we've seen a lot of shift in the venture industry in the last few years in particular in that growth stage in the expansion stage where you focus so you know we've seen later stage vcs move move up in those cycles we've seen even hedge funds move into those cycles And it's led to a completely different uh type of investing and scale of investing uh and frankly evaluation so how do you how do you sort of compete with that how do you look at that and what's the point of view that that you have around that particular type of investing and you know folks that are kind of coming in with a lot of money but not a lot of understanding of the space of the market yeah well i think on the one hand um It's it's very clear why um there already had been this massive wave of digital advanced transformation that had been happening and then obviously kovid accelerated that dramatically and continues to accelerate it um and for a while also um in the depths of the pandemic there wasn't really a lot of other places where investors wanted to put their their capital in terms of um areas of the economy other than technology because that was the one Thing everybody was relying upon uh so heavily and so there's obvious reasons why so much investor attention has been attracted to tech companies and startups i mean when you see what happened to companies like zoom overnight it already was a big successful company but then it became a global phenomenon and so folks investors say i want to be in the next zoom because what if this this business is The next one to take off and have that hockey stick style growth um so you understand what drives the interest however that can also go too far and just become sheer fomo whereas this might be the next zoom this might be the next zoom this might be the next shopify and you just are afraid that to miss out if you start placing bets on on everything and then you start placing bets you know okay a good firm did the series a well How about i just preempt the series b the next day because i don't want to miss the deal i don't want to lose the deal there might not be any progression from when the a was done to when the b was done but let me just get in now because i don't want to lose to my competitors because there's more money flashing around in the market and so it can over correct and it can lead to dynamics that um that aren't necessarily the most healthy just Pure fomo driving investment decisions um and but but i think that's kind of a way to think about it in terms of of what investors can do to because again we have competitors we have uh folks that we raise capital from you know all the dynamics that that um that founders experience operationally we we also see in our industry um and so i think that there are fundamentally two different ways you can play it uh one is To sort of join the the the fight and sort of do what others do and if if one firm's moving faster you try to move faster if somebody's you know moving in a week you try to move in six days if somebody's moving in six days you try to move in three days and it eventually gets to well there's only so fast you can possibly move there's only so many things you can cut out of the equation um and so you can kind of try to keep up the other approach is to To really try to focus and say we're not going to chase everything that comes our direction and be falling all over ourselves for a week sprint after week sprint after week sprint and instead say all right let's take a step back let's be a little bit more strategic we're not going to chase a deal and try to do you know in 24 hours so how can we pick the industries or even the companies that today we think Will be in our zone six months from now nine months from now 12 months from now build a relationship with them early understand the market and get all of our diligence done up front on everything that can be done on the market um and so then when there's the opportunity to preempt or to catalyze you're not you're not kind of going from a standing start you're going from you know well we've already done the vast majority of our work and now it's you know if you think About it as a sales cycle all we're doing now is trying to close as opposed to simultaneously trying to close intelligence and get all the stars to line within what's really in many ways become a multi-day process which used to be a multi-week or multi-month process uh years ago and so that's kind of the the way that that i've processed it and how we've uh tried to tackle it um as a firm awesome okay yeah and that it's just a Smart approach makes sense and i think your point about fomo is very relevant uh and i think it kind of leads to unnatural sort of uh states for companies and for founders even it's it's a uh kind of high pressure situation to resist those types of uh of inbounds um you know look i i want to take us back to 2013 your early days at ovp and obviously you know when you started investing plg was not necessarily even Coined or or recognized as a trend uh and you were of course one of the first and one of the early ones to to jump onto that and figure that out so take us back to that like you know what happened how did you how did you sort of uh tune into this and uh and then is there a backstory how did you come up with the term plg so take us through that a little bit yeah so it started by actually making investments into plg companies before we Had the term and then observing their performance and seeing how different it was both the performance in terms of their results and what the numbers looked like as well as how they delivered those numbers they just operated differently and so and then we just said all right well let's let's put a name to what those companies are doing because it seems to be special um but in terms of a little bit more detail on that which which companies am i talking About so the first one was datadog which we invested in um in 2014 early 2014 and then the second was was expensify which was about a year later in early uh 2015 that we actually finalized the investment and then thereafter calendly and a few others came along as well but as we sort of took a step back and looked at the performance of our portfolio we saw that those companies you know expensify calendly data dog businesses like this Always were head and shoulders above all of the other portfolio companies both in terms of their growth and and how consistently and they were growing even as they got to larger scale able to sustain that that growth and then they were doing it on a very capital efficient if not in some cases profitable basis on the bottom line and that really seemed to kind of violate a Fundamental law that at least i had assumed was true about startups which 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 but you'll also grow less but you can't have it both ways you know these are fundamentally inversely related however we saw that with these companies they had their cake and eat and they were eating it too in the sense of Growing really fast and having efficient bottom line and so that's what caused this to say alright there's something different about these businesses what really is going on here and we saw a few things i think one and this was what led to the the term we came up with we saw that any time there was a growth related or a metrics related goal or challenge in these businesses the first line of defense and the default answer was always okay we Want to hit that growth target what are we going to change in product uh we want to hit that growth target okay is there friction in the funnel somewhere that we can remove in order to you know increase throughput because we have the self-service uh flow um you know or you know there's pricing and packaging that's oriented towards our premium funnel what if we took this one feature that's behind the paywall and moved it In front of the paywall would that increase virality if we move it behind the paywall will that increase conversion rate and all of this experimentation it was a lot more like a b testing of features than it was let's go hire 50 sales reps that was never in the equation that was never the the sort of answer when we were trying to achieve growth uh related targets with datadog expensify calendly and so that kind of Led us to that initial aha moment of okay if any time a go-to-market question comes up or a goal comes up they lead with product these these businesses are product led and related in relation to their growth and so that's kind of how we came up with product like growth but what we really realized was under the surface it wasn't just the dna of how these companies operated but you could Actually just see it in the products themselves and the way that they were adopted and so we realized that fundamentally one of the biggest differences was that the customer journey started with self-service and so individuals you know could be an individual contributor who just joined the company a day ago could be you know any other employee at the organization acting as an individual Solving their own technology challenges for their sort of productivity can go on and adopt one of these solutions like a consumer app you know within minutes they can be up and running and kicking the tires on something like calendly or expensify datadog loom zoom slack you know dropbox the list goes on of companies that fit this bill um and so we saw that this self-service journey was was really different and we also saw that it was a product that Fundamentally was built for those individual users as opposed to just the budget holders executives at the top of the organization and so that that was kind of realizing there was this dna of leading with products when it came to go to market challenges and then really unpacking that to understand that the customer journey begins with self-service and that the product itself is oriented towards individual users as opposed to executive buyers that was Kind of a lot of the calculus and the dots that we were starting to connect it didn't happen like this all of that that i mentioned and those light bulbs going off took probably about six to 12 months before we said hey these are unique portfolio companies to hey this is actually a whole new movement that's happening here very cool and it's great that you know you were able to kind of spot that that early and i think Just to kind of recap what i heard uh kind of three key things that i heard in terms of how you define a plg business so number one it's product led that's what is is driving the business uh second it's sort of this uh self-service aspect to it where you can get up and started very quickly in a consumer-like fashion even though you're in a b2b setting and i think third probably the most fundamental shift here is that it it shifts the power from you know sort Of executive level top-down buying to the user making the decisions and saying this is what works best for me and um and so would you add anything else to that like i mean those kind of three characteristics are pretty pretty uh self-explanatory but anything else that you'd add to what constitutes a true plg business what are some of the elements that drive or define growth for these businesses those are the key elements and i think It's important to focus on those elements because product led growth doesn't mean you you think you have a good product yeah because a lot of times i see this uh this misconception it's like well we have a good product our product is better than our competitors we invest a lot in our products so therefore we're product led right um no we're talking about something very specific in terms of the customer journey it's not sort of something where Plg is in the eye of the beholder there actually is a way to do this um and the other thing that's that i can see as a misconception is sometimes it's okay well we want to do some of that plg stuff let's go hire a growth team okay we got a growth team now we're plg right um and no i think those are sort of window dressing elements um as opposed to truly the definitional piece of it and i think a litmus test that i often point to is What does it take if somebody just hears about your product today what does it take actually map out the process of how they can get started on your product if they have to talk to humans or if humans have to get involved in the background in order to provision an account or help implement the account or send a contract or negotiate legal or determine pricing like all of those things that typically have happened historically in software If people have to get involved from your team for any of those steps it's kind of not product led if it's again more consumer-like where any one of us can go and adopt instagram right now or uber or whatever the consumer app of your choice is you're not talking to a sales rep at instagram to buy the product you're not getting onboarded to uber from a csm you know the list goes on of things that you wouldn't tolerate as a consumer Why why do we expect that end users are going to tolerate them as business professionals i really think of in this day and age because of how many software choices we have as professionals you know it's more akin to call end users in the enterprise they're just consumers at work right and so you need to think about going after consumers as opposed to going after businesses um and yes this power dynamic has very much changed Um great and and so you know i mean i always kind of think about over this past couple years uh as as a pandemic has has uh you know shifted things for a lot of the ways that we work and operate uh if every person that signed up to zoom my dad 86 years old included it had to talk to a sales rep at zoo would we have seen the kind of astronomical growth that they saw this past couple years so i think That's that's kind of the point that i hear you make um now let me let me shift guys a little bit about you know there's there's a whole movement around plg now and and we hear that and it's sort of become mainstream vocabulary but there's a entire like 90 or 95 of the b2b sas space was not founded on plg and so what's in it for those companies are there elements of this approach that You can adapt or adopt uh as you're you know a traditional b2b sas software company uh and some of the big tech companies that are out there selling the historical traditional way in sas what do they do how do they deal with this whole plg phenomena yeah so if you think about what plg is it's it's cr ultimately you want to get to that point of anybody can show up they can you know start using your Product within a couple of clicks in a couple of minutes friction is removed and they can be on their journey to get to the aha moment and experience the point of value in your product that that's where you want to get to now if you're um starting from a point of more of a traditional existing fast business that doesn't have those things in place you know that's not an overnight transition it is a longer transition and so You know full disclosure uh it is not easy and it takes a while so if you want to embark upon this there are steps you can take along the way um and and i oftentimes i see that instead of trying to take a a you know an entirety of a legacy product that has a lot of customers a lot of dependencies and try to make it plg overnight instead how can we look at things that are ancillary That aren't our core product today and let's start plg there that one will learn how to do plg as an organization and two it's also just a little bit more of a reasonable size of something to bite off as opposed to our entire product and trying to transform that so that could entail you know a new product for example if you're looking to add something new to your product portfolio well start that new thing as a plg product As opposed to starting it in the way that you always build product or if there are certain features of your current existing product that you can sort of um hive off almost and make those individual sort of features self-service that then can be an on-ramp or a stepping stone to the broader adoption that can be sort of a good way to get there so so what's an example hubspot is a perfect example of this they have made The full product-led growth transition and it's also impressive for them because they created the concept of inbound i mean their conference is still called inbound if you want to refer to their style of growth that they pioneered as marketing led growth as opposed to product-led growth they are the ones that really put that on the map and so to see them make a transition from the thing they created um to now the next phase of product led it's Really impressive and they did it at scale so the way they did it was focusing on a new product like i had referenced and it was their sales product and so when it began they kind of created a startup within a startup you know put like three or four people in a room and said you know do whatever you think makes the most sense for this product don't do it in the hubspot way do it in the right way for this audience do it from first principles and see what You come up with and what they they started with was a product for an individual ae or an sdr and it was very very basic and very very tactical it was email open signals which is now a commodity feature that exists in basically everything that touches emails for sales reps but to see that moment did somebody open my email they opened it right now they forwarded it to their colleague they've opened it five times In the last 24 hours those signals are incredibly valuable i should call right now that was all the product did email open tracking but that was at the time that they launched it a novel feature a new feature and incredibly valuable and so they were able to let that take off like wildfire and then they added more workflows to it it became sort of an sdr workflow tool and then fast forward today They've continued to fuel the success and they have a full-fledged crm that you can adopt in a product-led way through these different tools and technologies that sort of lead you along the way to the full crm adoption and then they've transformed marketing uh marketing hub and support hub and all the other hubs that they have they have now transitioned those to product led as well but again it started with a new product it started with something that Felt incredibly tactical like this is definitely not a business this is just a feature of a feature of a feature but that was the perfect place um and so start small and in some cases start extremely small because you can build a lot from that starting point awesome great so blake i'm gonna just recap uh the part one of our conversation here for our audience and uh and then we'll pause and shift to the the second part of the the Conversation so uh you know we covered who blake is we covered uh you know how how you kind of came across this whole notion of plg with your first couple of investments uh at open new partners uh and let led to kind of coining a term that's now become a movement uh i think the definition that you could kind of put in place with uh what you you know what you think of as a plg business which is lead with product you know shift the value to the you the end user Let them make the call what they're going to go use uh and then the user journey and that experience has to be self-service uh really neatly sums up the the way that that you think about it um so i and it's not just for you know new companies that are forming now but existing companies have an opportunity with the hubspot example that you just shared uh to move in that direction as well so we're gonna take a pause here We're gonna about thank you for so much of the insight and the knowledge that you shared with us i'm gonna come back again next week and pick up phase two of this conversation that will lead into a different direction

“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.