How to Drive Growth at a PLG Business – Investor Perspective

Play Video about Jason Mendel @Battery Venture -How to Drive Growth at a PLG Business - Investor Perspective Video Transcript: [Music] [Music] uh welcome to founders friday this is a tell all for anyone that is interested in learning how to produce revenue for your companies our theme today uh is product led growth which is pretty consistent with our recent episodes uh today's episode is a little different though than the ones that we've done prior to this one This episode is one of a series with vcs that invest in product-led growth and my guest today is jason mendel at battery ventures hi jason hey eseem thanks for having me of course jason is invested in early stage companies as well as growth investments in cloud infra data security and enterprise applications uh his recent investments include arise cyprus and postman jason thanks for joining us for this Founders friday webcast uh we are we want to dig in deep with plg with you we want to understand how plg companies are redefining the way sas companies have operated for a long time in particular we'd love to understand how we now write product how do we sell it how do we deliver it to customers in this model uh and our goal is to educate as well as to entertain so let's keep our pun our responses punch you let's have some fun With it uh you know our audience would love to hear what's your secret sauce as as as a vc as you think about investing in these in these areas so let's go ahead and have some fun let's start with first understanding who's jason let's start with a little bit of your professional profile uh both of course at battery as well as prior to that yeah let's do it um so i guess the a little known fact about me is i Actually started my career working in the mall with a company called hollister and so the first real experience that i had with product was folding shirts and jeans as a high school student after that you know i started in investment banking at deutsche bank then moved to the investment side of the world and did it after that did a stint at Cisco on their corporate development team focusing on a lot of infrastructure security but really around this whole migration towards the cloud and sas products that they're going through um enjoying battery about a year and a half ago awesome and uh you know as i was going through your profile and i noticed that you went to harker which is a pretty well-known school here Around the bay area but then you also became a math tutor for a while tell us a little bit about that where did that come from um so i actually i had a lot of odd jobs during college one was tutoring math the other was coaching high school and middle school wrestling i was a baseball coach i worked in the mall but i've always really enjoyed working with kids and kind of teaching and coaching um and so that's what that Ultimately stemmed from i also loved math and was always really interested in math and science and so it was an easy way to make money but it was also something that i really enjoyed so i kind of naturally fell into it very cool um i'd love to hear you know of course to your career at battery you've started that about a year and a half ago uh tell us uh what areas of investment that you tend to focus on and Uh you know what sets battery apart from other venture funds that attracted you to uh to come work there yeah so um you know battery has been around for a while uh we're stage agnostic funds so we do everything from early stage to growth which i think is pretty unique and gives us a lot of flexibility to get in early but also support companies throughout their entire journey i got into venture investing I think a big part of it was the people aspect for me i think it's an amazing opportunity to interact with a lot of really interesting founders with different perspectives but also explore a bunch of different spaces and dive really really deep which i've always liked i like how somatic it is i like how thesis driven it is and there's a lot of self exploration that goes into it So for battery in general i think the biggest differentiator for us is that we have a team of domain experts with a lot of operating experience we like to be involved with our company so we help with go to market we help with things in terms of hiring everything like that but the biggest piece is that we have a team of domain experts so i work closely with the ex-ceo of mongodb he kind of scaled that business from 5 million to 100 million uh work closely with the ex-cmo and one of the early co-founders of palo alto networks um and so people with really deep domain expertise that have had a lot of experience um scaling businesses to you know public market scale and so we're able to provide a lot of operating advice along the way um but also help our portfolio companies with strategic decisions um and really anything they want Awesome uh very cool and you know i'd love to hear a little bit more about your investing approach uh for you personally so you know before an entrepreneur uh approaches you what should they know about you in terms of how you like to invest and what do you look for uh in companies or in teams as you as you engage with them yeah i think the biggest thing that we're ultimately looking for is passionate founders with a deep Understanding and unique advantages in the spaces that they spend time in um so what really gets us excited is working with someone with an awesome vision um that has a deep understanding of what they're doing we also love large market opportunities with kind of a key pain point but really it's the founder and the vision that get us excited at the end of the day got it got it now that that that makes a lot of sense jason and I'm curious you know uh some of the venture firms run uh eir programs where they invite entrepreneurs to sort of partner with them early on uh sort of precede stage to explore ideas and build uh build out a new company uh is there something similar okay into that at battery that uh our audience should be aware of yeah we have uh we have a pretty extensive eir program so like i mentioned um two directly on my team one Was the ex-ceo of mongodb um the other was the xcmo of palo alto networks um and then we also have some that are more on the operating side so we recently brought on um the [Music] ex-chief revenue officer of pendo and so they're really involved with our portfolio companies post and pre-investment with things like go to market hiring Pricing decisions things like that so really it's the the fact that they've been there and done it before and can help with decision making along the way got it got it very helpful so i'm going to switch gears a bit um i'll love to talk a little bit about product led growth it's obviously something that has entered the vocabulary in the last few years uh you mentioned uh bendo and uh you know one of their execs uh or previous execs on your uh On your on your team um you know product data has become obviously fairly relevant to how sas companies now operate and uh we'll come to that but let's just first start with how you view product-led growth and how what's your definition of it when you know when you search for companies to invest in uh how do you how do you sort of filter them based on certain criteria uh yeah that's a great question i think It ultimately comes down to two key things like one um the product is at the forefront and the focus is now on the user and not the buyer and so i think what we've seen um is just this broad consumerization of the enterprise and so customers today demand better experiences from their products and so ultimately now what we've seen is companies are starting to sell to the user versus the end buyer and that's what catalyzes the whole plg Motion in my view interesting so um you know it's interesting the shift that you define as sort of a natural extension of the consumerization of bp software so when you think about it from the buyer's lens right and you know i've experienced this in my previous role at a big company where you start to engage with a a product and before you know it your Entire team's using it and that's when the cio or the cto or somebody from procurement steps in to figure out what that contract should look like so how does this change the buying cycle from uh the perspective of uh you know the companies that consume these technologies how does that change as as plg proliferates more and more across across organizations yeah i think the biggest misconception With plg is that you don't need a sales team um and so what it ultimately does in my view is it changes the point at which you engage sales and so what's unique about plg is value is delivered before there's a commercial interaction and so customers get on the platform quickly or adopt the product quickly can use it in a free or unpaid capacity and then ultimately you want to use usage data to figure out who has a high Propensity to spend who's getting value from the product and then from there you can engage the sales team so it's just a different point at which you engage your sales and marketing team and it's a different person that you operate with from the beginning got it so so uh that makes sense i think i think your key point here is that uh the the sales team needs to engage at a different point in the cycle and it's Usually after there's some adoption and validation by the end user which is sort of the exact opposite of how traditionally sas software has been sold where a sales team comes in demos to decision makers make a call and then it starts you know the software starts to proliferate inside the organization um obviously this changes the dynamic quite a bit between how companies buy and how software's consumed um how do you see this evolving like where You know and what does it mean for for buying organizations like what do they need to start thinking about differently uh and yeah because you you you hear a little bit of uh uh you know particularly when you talk to cios or you know people responsible for making purchase decisions feeling like things now slip under their radar and it throws their budgets off a Little bit how do you how do you sort of respond to that audience like what how should they be how should they be thinking about as they as they look ahead uh and more and more software sort of starts to approach them in this way yeah i mean i think for for consumers of enterprise software um it's changed the dynamic a lot so i think historically it was one person making the decision for many so you would ultimately sell a product to a Customer who would roll it out to all of their end users but today i think what you've seen is the powers with the user and so like there are a lot of cases where product led growth doesn't work but for the cases where it does i think it's for things where there's an acute pain point across a wide range of users and someone is able to get onto the platform use the product find value with a lot of without a lot of different Engagements and then ultimately their pain point um drives an enterprise sale and so i think that it just changes the dynamic the purchasing dynamic where like the user and the practitioner is the person that's ultimately making the decision to buy the tool that they want to use versus someone else forcing them to use something that they don't necessarily want to use i think i think the way you express that Makes a ton of sense that you know the dynamic has shifted towards the end user uh making the call on what they want to use and then and making that making that buying decision effectively um so you also mentioned there are certain areas where plg may not be relevant or may not be applicable that not every product can be sold in this way or approached in this way what are some examples where or where would you kind of draw the boundary Around plg and what are some of the things that make sense when you're inside of that boundary what are some of the things that make sense to be outside that boundary yeah i think the biggest thing that plg needs to have or for plg need to work is the user has to have influence over the buyer and so where that where that interaction is disconnected it doesn't necessarily Work um the other thing is it has to be a product where someone can or the user specifically can realize value independently and quickly so there doesn't need to be a lot of onboarding supports or kind of post usage support and it has to be ultimately something that's simple without a lot of explanation needed and so if you just look at infrastructure software so data Developer tools security things like that i think we've seen a lot of plg take place in the data space um in the in the developer tool space but it's less of a security use case today in my opinion because that's still more of a top-down enterprise-wide sale got it got it okay um super helpful um so let's maybe shift gears and now look at it from the lens of the sas companies right so obviously any new company that is being formed Today or has formed recently is asking the question why not plg first um and so what advice would you have for companies that are just starting to build new product you know particularly from a product design standpoint what's different uh or how should we be thinking about product design in the dlg context yeah i think what's different is ultimately simplicity um and ease of use So that has to be the focus it has to be something that's intuitive for the user to pick up and use and then time to value becomes even more critical than it already is you want to make sure that it's a seamless and amazing user experience that someone can onboard quickly use it quickly find value quickly and then ultimately share it with other people i think that that's the one thing that's often missed is the virality aspect of Plg because your users are ultimately an extension of your marketing team and so when someone's deriving value from the product they're going to tell their friends they're going to tell other people in the organization and that's ultimately how you drive awareness and build a big community around your product because that's ultimately what's important is building mindshare building community and becoming the quote unquote standard Of excellence so that that's very helpful and i think uh you called out simplicity ease of use you talked about sort of uh you know designing for for virality or sharing inside the organization and creating that that amazing experience that encourages people to share with their colleagues and friends what they're working on how do you can you share some examples for of sort Of designing for virality that's not necessarily the i mean that's obviously in the consumer domain where the social media domain very well known as a concept but in the enterprise domain that's not how most uh product people think so what are some examples or what are some of the principles behind designing for virality that that enterprise product managers should be Aware of yeah i think uh i think a good one to look at is dropbox and and what they did early on so they made it really easy for people to get on the platform and then it didn't just stop there so once people were on the platform they made it easy to share files collaborate across users and it became embedded into the everyday workflow of that person and almost integral into what they were doing and that's ultimately how i think you drive One plurality and sort of widespread adoption but also longevity it's in staying power got it got it so um you know we've talked a little bit on the product side you know let's maybe shift gears talk a little bit about on the go to the market side what's different the way that uh plg Products can be taken to market um you know one myth that we hear pretty consistently is it's just free trials what's the big deal uh love for you know for the audience to hear your thoughts on that yeah i mean i think the free aspect is certainly a part of it um but it's more than that there are a lot of different ways that you can that you can Deliver the value of a free trial so you can have free trials you can have a free tier it can be an open source product but free is ultimately not enough i think it's all about focusing on the users the key persona not the buyer and making sure that that user can realize value independently without having to engage with the sales and marketing team up front and then there also has to be a natural Progression over time so as you start to think about where does the user go there has to be a natural migration from free to paid where they can realize value independently but then there are additional features or other pieces of the product that they can unlock over time with like a natural paid funnel got it got it um so jason you know if you look at it from from the lens of the sales team or from the selling organization With sas software there's a pretty well defined or b2b sas that's pretty well defined sales funnel you've got the mqls and sales accepted leads and so on and what does that look like in a in a plg context what's the sales funnel uh you know past the initial sort of try uh phase where you can just sign up and try the product and get a pretty uh visceral experience of what that might feel like what happens next gonna walk us through what you think that funnel Should look like and how's it evolving yeah so i i think i think you're right it starts with ultimately free sign ups and usage and then from there once you have a user on the platform you should be tracking the usage um pretty heavily and once they reach a certain threshold which you define as almost a product qualified lead where your product is qualifying whether or not someone has a high propensity to spend based on their user engagement data Then you decide to engage the sales team after you have that already product qualified lead so i think historically it was marketing qualified lead sales qualified lead and start the funnel broad and kind of get more narrow now you're letting your product qualify your lead so there doesn't need to be a person that's engaged at this at the beginning of the cycle and then once you've qualified that lead You engage the appropriate sales team and help people navigate the free-to-pay conversion funnel and in theory you should have a much higher conversion rate because you're dealing with people that are already finding value in the product and so you know it's working for them it's just about satisfying their future needs got it got it um and you know you touched on this a little bit earlier about uh That you know the myth about not needing a sales team is not necessarily true like you do need a sales team to engage in uh and take clients through through the sort of commercial part of the journey as well uh what's the as a startup scale and they're sort of approaching the market through a plg motion what's the right time for the founders to start thinking in terms of putting a sales team in place and you know you don't want to be too early but You don't want to be too late either so what when's the right time what are some of the signals that founders should look for as they're thinking about introducing a sales team into a plg motion um i think first and foremost it comes down to defining your product qualified lead so once you understand what that person looks like what the usage data looks like where you have a good sense of hey this person has a high propensity To spend that they're likely to convert i think that's a good time to start investing in sales and marketing the other thing is just seeing repeatability in the conversion motion so once you really understand the pain point and the value that the free product provides and then start to see the repeatable free to pay conversion motion then it's a great time to also invest in in Sales and marketing i think the other misconception is that it stops with a pql and so the the key thing about product led growth is that the customer journey matters even more and so when you start to think about it you have to think about post-sales support and success that continue to drive value and expansion over time um because that's the beauty of the product led motion is you can continue to nurture customers and help Them find increasing an increasing amount of value over time and so expansion retention success all these things start to become really really critical got it and i i think you just kind of touched on another interesting topic there as you as you went through that uh the narrative around you know expansion retention etc and renewals what what are some of the key metrics that uh one Should be thinking about as a founder especially as you're entering that sort of uh stage where you're trying to drive a repeatable motion you know so what what sort of metrics then become critical or important versus the traditional sas metrics right so you know we're all familiar with uh cac and uh the ratios and so on like what you know what should we be thinking about in the pq in the plg context yeah i think first and foremost is just Your free to paid conversion rate so understanding what that looks like and what you're trying to drive there and ultimately what are the different levers that you can pull to drive that and then the second piece is i think net retention is really really critical so the interesting thing about product led growth is i think customers tend to land at maybe a lower asp which means that they have a lot of potential To expand over time and so net retention is ultimately a metric of how much ongoing value your customers are realizing and if you look at the best companies in the public market they've consistently been able to deliver 130 plus net retention over time and so what that means is it takes some of the pressure off of your new land motion where you can nurture your existing customer base and continue to drive long-term durable growth over time With the existing platform with the existing customers on your platform all right very interesting i think it makes a ton of sense i mean just rationally to look at it and say what's my free debate conversion and then what's the net redemption and growth uh or expansion in that account uh makes makes a lot of sense um so you know i want to shift gears again and uh talk a little bit about the role of data right and uh Certainly uh you know i'd love to get your perspective on when you think about uh when you're evaluating startups you know what sort of um data are you looking uh do you expect the founders to be collecting and gathering in order to understand their business better uh what do you see different in the way that plg companies are operating with respect to data yeah i think so One of the biggest challenges for organizations is data silos today and so i think what we've seen is in the past three to five years have been focused on getting all this data we have more data now than ever before but it's now stored in siloed up across a bunch of different across a bunch of disparate sources and so companies are really struggling to create this holistic picture of what's going on and usage data becomes really really Critical for the plg motion because that's ultimately what indicates a person's propensity to buy or to convert from free to paid and so the issue is data isn't synonymous with intelligence and so you need the tooling and infrastructure in order to transform that data to intelligence but also present it in a way that the sales and marketing team Can consume it and make decisions from it and so it becomes it comes down to one like unifying the data across the silos and then two translating it to intelligence and three giving that intelligence to someone that can take action on it got it uh makes sense um you know one of the things so i think i think your point about obviously uh i mean mrsa we fundamentally believe product Data is a goldmine for signals for the sales and service teams uh or any customer facing function but historically it's been uh you know very useful for for product teams for engineering teams but not necessarily available outside of of those organizations so we kind of tend to think that think of that as the dark data problem right the data is available but it's dark with organizations that need it in order to Drive revenue and some some momentum so what you know love to hear your thoughts because like obviously you know you mentioned uh you guys are close to pandora and some of the uh one of the early uh companies in this domain that uh made product data thing uh in in our vocabulary and so what what do you feel like are some of the challenges around getting access to that data particularly if you're on the in a Customer-facing function yeah so i think that i think the biggest challenge is that again it comes back to the data silos all of your data isn't in one place and so there's pockets of intelligence that are stored across different applications whether that's salesforce your marketing software things like that that you need to unify that and provide a holistic picture of the customer in Order to make that decision um the other issue is how do you fit it naturally into the sales person's workflow um because everything has to be aligned with the way that they do work um and then it's about translating that data to intelligence so data points don't mean anything unless there's intelligence associated so how do you take that data and make a decision from it and I think data is the biggest indicator of usage today and so it's all about taking that product data translating it to intelligence making decisions and figuring out who's the right person to target and why and so that's ultimately where i think things are trying to go i think a lot of the focus today has been on qualifying what a pql looks like but there's ultimately a lot of data that goes in after that point and so in An ideal world your sales team your marketing team your customer success team your support team and your product team it should all be in sync to deliver the same value to the customer and so how do you give the right piece of data to the right person along that flywheel to make sure that they can use that in a way that's actionable um and in a way that improves the overall interaction got it got it uh Yeah and you know jason what you're describing for you know perfectly resonates for us as as we're talking to companies that are in the plg space and building solutions to help address some of the problems that you just described i think what's interesting is uh so we are currently tracking a list of a little over a thousand companies that we would consider as uh engaging in some level of a plg motion Uh in their in their product design and they go to market and so on and i'm curious i mean obviously this thing has become a movement in its own right over the last few years where does it lead to from here like what's next right so um as investors you're always looking around the corner so what would you share with your audience like what how do you see this evolving I think so i touched on this a little bit i think it's ultimately how does it expand beyond the initial piece of the workflow that qualifies um a product led lead and so what's really interesting is how companies expand across the tool stack to address the problems that customer success has the customer support has ultimately billings and how do you Ultimately tie everything back to product development because that's the key driver of product led growth is how do you continue to innovate and address the needs of your end customer or your end user in order to keep that flywheel motion going so it doesn't just stop at the pql or once you've identified the user it's how do you measure their engagement over time and then how do you tie it back to the different functions within your go to market um and product Teams awesome uh jason this has been uh fantastic every time we talk i learned something new uh and so yeah likewise really well i mean you know what you covered today in terms of the metrics really summed it up for me in terms of you know for as founders to kind of focus on that free-to-play conversion and figure out the repeatability pattern there and then to focus on net expansion because you Are starting with a smaller uh early sort of uh adopter site uh cycle and the goal should then be how do you how do you create that expansion um any any uh final thoughts uh for our audience in terms of you know just sort of netting out some of the discussion we've had today what are some of the key takeaways you'd like to leave them with yeah i think i think the biggest takeaway um is That the user should be front and center so everything that you should everything that you should be doing and every the key focus up front is on the user and making sure that they have an amazing customer experience i think the second piece is the sales team still matters it's just a question of when do you engage them and then the third piece is that post sale there's still a lot of work to do and so it's ultimately a question of How do you maintain engagement with your customer to make sure that one they're an extension of your marketing team but two they're kind of continuing to realize value and that you can continue to grow that relationship and expand them over time and so it's an ongoing thing it's not a point in time um and i think that that's the biggest um advantage of product led growth is it really focuses on the customer relationship And it provides an opportunity to create something that's lasting and valuable awesome jason so i'd love for you to share with the audience if any one of them needs to reach out to you what's the best way besides linkedin of course uh yeah you can email me at j mendel battery.com great jason thank you for joining us today as Always you know learn something new and uh walking away with some takeaways as a founder and how we should be thinking about how we run our business um we at marsa are in fact helping solve some of the problems and challenges related to plg and uh every time you know we we have one of these conversations we learned some new new sort of concepts that help us uh continue to make our business better so if anyone that's watching would like to engage in that Dialogue with us uh we'd welcome for you to reach out to us you can reach me at a seam at immersed ai and we'd love to talk to you about how data can help drive revenue for your plg business jason thank you so much for your time today yeah thank you as well as team it's a pleasure you

“ The user should be front and centre. The sales team still matters. PLG focuses on the customer relationship and it provides an opportunity that is lasting and valuable.”

Jason Mendel

About The Guest

Jason is a Venture Investor at Battery Venture, the firm backs companies at stages ranging from seed to growth and private equity, and invests globally from offices in Boston, Silicon Valley and Israel.

Jason focuses on early-stage and growth-equity investments in areas including cloud infrastructure, data, security and next-generation enterprise applications. His recent investments include Arize, Cypress and Postman.

What We Cover

Jason shares his professional journey that lead up to joining Battery Ventures as an investor. He shares what he looks for in companies that he invests in.

Jason shifts gears and focuses on product-led, defining and implementing PLG at the early stages of product design and ways to continuously iterate on product to improve conversion on product qualified leads.

We break down PLG from a variety of perspectives – delivering rapid value within consumable products, continuous product improvement within the complexities of SaaS as well as moving players within product data and sales teams.