Using Product Led Growth as an Indicator for Investment with OpenView

Editor's Notes

• #2: Today I’m going to talk a bit about Product Led Growth I’ve been an operator for 10 years in companies that experienced growth driven by a great product and community early on before I really knew what to call it. So when I saw OpenView coin the term PLG and it aligned perfectly with my background, it made sense for us to join forces.
• #3: So who am I? Engineer by education First 20 at Twilio and helped scale GTM for both developer and enterprise, pre-dated the sales team, pre-dated marketing automation, experienced giving out Twilio t-shirts at every event we could physically make it to while also building out the first drip campaigns, lead scoring, I did a little bit of everything. The twilio community was incredible and helped us reach 100s of thousands of developers in a short amount of time. First 10 at Parse and hired as “head of marketing” which basically meant I was the only person doing everything. We were acquired by Facebook where I stuck around working on Parse and Facebook developer strategy. Similar to Twilio, our great product and amazing community grew our audience very rapidly. First 15 at GitLab as CMO where I helped scale the company from 10 to 200 employees. I also was lucky enough to go on the fund raise circuit for our Series B where I got the venture bug and actually met OpenView. GitHub - Executive global VP of Marketing - Was at the company the 18 months leading up to acquisition so very different stage than what I had done previously but my experience leading a split GTM between developer and enterprise translated at that stage. You can talk about product led growth and community driven demand without mentioning GitHub I took a year and worked with countless CEOs and founders and did some angel investing. Then I joined OpenView 6 weeks ago as Venture Partner where I’m working with prospects and portfolio companies, joining boards, and learning everything I can about the venture world. With my experience in Product Led Growth companies and OpenView’s focus on that type of company, it just made sense for me. Great team, great strategy,
• #4: Quick overview on OpenView Super focused venture firm investing in PLG companies at Series A, B, and C Literally coined the term on Product Led growth Check out the content and podcast on our blog openviewpartners.com/blog DataDog,Calendly, Expensify
• #5: So what exactly is product led growth? This concept I’ve been describing which I’ve heard called everything from creating a network effect to prosumer to community-driven growth, at OpenView we’ve coined the phrase Product Led Growth. It’s the idea that your product can sell itself Atlassian is probably the most successful example of this, but there are many others including Slack, Dropbox, Twilio, Expensify, Calendly, SendGrid, etc.... or even LinkedIn. The more people who use LinkedIn as their de facto resumes, the more it draws in hiring managers and recruiters who learn to depend on LinkedIn as a recruiting tool. The first investment we made behind this go to market model was at expensify and I’ll dig into that a bit later. Anyone here use it? It’s a great product, but what’s so crazy is that they completely disrupted a giant market dominated by traditional field and inside sellers – by designing a product that was easy to use, easy to adopt and offered amazing service. To this day, they don’t have sales. They have a team of people who assist customers throughout their journey and have everyone in the company participate in customer support – taking a few hour shift every week to stay connected and understand the customer. Customer success is driving customer happiness, expansion, and adoption
• #6: Now you’re wondering, how do I know product led growth is the next frontier and not just a passing fad?  The numbers speak for themselves. First, and this is going to be a DUH moment, but it’s really hard to maintain growth rate as a company scales. You watch these early stage startups post 200, 300 percent growth yoy, but so few ever reach 10M ARR, fewer still keep growing at that rate. If you see a 50M ARR company grow 100% as an investor you are stoked. But have you ever thought about why that is? Most sales orgs rely heavily on people. If you look at the operating model for a company you’ll see that if you add sales reps in Q2, you get productivity in Q4...if you are good. Hitting revenue targets, relies on hitting hiring plans. Oh, and scaling your management team, maintaining the same quality of hire and consistency of message, which really means improving enablement, and increasing productivity...all with shrinking territories. Yea, big companies grow at a slower rate. But what if that wasn’t necessarily true? What if your product qualified your leads? What if each user of your product became an evangelist? What if they shared your product with their coworkers, their boss and even their network?
• #7: And this holds true in larger companies too. We recently built out a PLG Index which tracks 14 public companies leveraging product led growth as their primary GTM strategy. When compared to the broader set of public saas companies we track, they …[]
• #8: Faster revenue growth rates 35% versus 25% in the SaaS index mean 
• #9: Higher multiples 10X enterprise value by revenue versus 7.7 x from the SaaS index mean.
• #10: Worth 2x more of enterprise value Enterprise Value = market cap (stock price as of a date * total fully diluted shares outstanding) + net debt (total debt on balance sheet as of latest filing – total cash / cash equivalents on balance sheet as of latest filing date).   Said simply, it is the current amount a buyer would need to pay at a minimum to acquire a company. Openviewpartners.com/product-led-growth-index
• #14: So these numbers look great and it’s easy to say “sure, we’re a product led growth company” Our product is great! But what are some of the tactical things these companies are doing right.
• #15: Create a product that works. Create a product that people get excited to use. Best indicator that this is happening? Your customers will tell you. ”We love your product” Whether on twitter or in person or on a sales call, your users will be shouting from the rooftops that they love to use your product.
• #16: Calendly is the perfect example of this. Anyone here ever used Calendly? The tool is so simple – it allows you to eliminate the back and forth we all experience when booking meetings. And it naturally pulls other users in… The beauty of this viral loop is that the more people who use Calendly, the more people get exposed. You can actually see the growth accelerating. People love it. People share that they love it. And the cycle repeats.
• #17: This can be everything from easily downloading the expensify app to setting up your Calendly link But in my world, for developers this means just a few lines of code to do something interesting.
• #18: Hello World! With Twilio, a developer could text the phrase “hello world” within minutes of signup. It was so easy to get started. It replaced the need for old school telecom hardware and now, a few lines of code. Developers would send their first API call within minutes of signing up. It was magic.
• #19: Part of making it easy to get started is eliminating the payment barrier. Whether that be for 1 user tinkering around on a personal project or a free trial period for a team of 14 - 30 days (do your own research), make it dead simple for people to get started without paying.
• #20: GitLab’s free tier gives away SO much. For a while there we had given away too much for free but it looks like they’ve been able to pull that back a bit by releasing a ton of new features in the paid tiers. Try not to take away free features but instead really add to your paid tiers. Your free version should be powerful enough that your users can see the full product but limit based on high throughput or other feature tailored for high volume use cases.
• #21: Too many products focus only on making the decision maker or buyer’s life easier But what about the user? You want the person using your product day in and day out to actually enjoy that experience and make it as easy as possible Focusing on the users allows a product to benefit from the word of mouth growth engine. Especially today where opinions are more readily available, you want the opinion of your users to be a positive one.
• #22: Submitting expense reports has been pretty terrible traditionally Expensify makes it fun and simple to upload a photo of a receipt via the app’s camera Expensify then magically fills in all the fields And you can even set your expense reports to submit automatically The product focuses on the user, the person submitting the expense Happy User, Happy Manager, Happy Decision Maker.
• #23: A network effect is the effect described as the addition of a user to a product and what that addition has on the value of that product to others. When a network effect is present, the value of a product or service increases according to the number of others using it. More people = more sharing = more people. We get this interesting value - viral coefficient Viral Coefficient is the number of new users an existing user generates. This metric calculates the exponential referral cycle - sometimes called virality - that accelerates company growth. Virality is the inherent incentive for customers to refer friends or colleagues to your company. Why does this matter? Your product sells itself simply by being a great product that is inherently shareable and collaborative.
• #24: - Naturally sharable, it’s build into the product - You WANT to collaborate and share your work - And your work improves because of it. - The open source approach to collaboration where you invite feedback and collaboration and through that, create more GitHub users. This network effect caused global github growth Teams of developers creating single projects drove growth of a company to a 7.5 billion acquisition by Microsoft.
• #25: So that’s my story. I feel strongly that Product Led Growth is the future of how we think about scaling companies. Users matter. Great products matter. And the numbers show that.
• #26: Add name, email, twitter