[00:00:00] Blake Bartlett: What's at the core DNA of these companies? They lead with product as it pertains to growth, so that sounds like a good name for it. Product led growth. And so we kind of put it out there in about mid 2016 and started talking about it a lot and really until we were blue in the face for a number of years.

[00:00:22] And then a lot of other folks started to join the conversation and it became apparent that, you know, wasn't just us that saw this shift happening in the market.

[00:00:32] Dan Saks: That was Blake Bartlett, the man who coined the term product led growth back in 2016. Today, Blake continues to be a thought leader in the PLG community.

[00:00:42] He's also a VC at Open View where he has led investments in companies like HighSpot, Calendly, Expensify, Postscript, and more. In today's episode, Blake talks about his discovery of PLG and why companies like Zoom, Calendly, and Slack are so successful because of it. He also shares how other companies are structuring themselves to match the product led growth model to reap the benefits.

[00:01:08] This is Daniel Saks, president and co-founder of App Direct, and it's time to decode product-led growth and how PLG can help your business thrive in the digital economy.

[00:01:24] Welcome to Decoding Digital, a podcast for innovators looking to thrive in the digital economy. I'm your host, Daniel Saks, and I'll sit down with other founders, CEOs, and change makers to decode the trends that are transforming the way we work. Let's decode.

[00:01:45] Blake, welcome to Decoding Digital Super chat with you today.

[00:01:49] Blake Bartlett: Yeah, great to be here. Thanks for having me on the show.

[00:01:52] Dan Saks: Of course. So we're doing a series right now on PLG, and for those of you who don't know the term PLG, it's product-led growth. And Blake literally coined this term, so I'm thrilled to have him to share his insights on product-led growth.

[00:02:07] So Blake, take us back to 2016. When you came up with the term, what was the state of the market and what drove you to coin PLG?

[00:02:17] Blake Bartlett: Yeah, so. The state of the market was that we're really taking a step back. Open View, the firm that I work at, we're a venture capital firm based in Boston. We exclusively invest in SaaS companies.

[00:02:28] That's all we've ever done. And we look to be really finger on the pulse of what's happening in the software markets. And when we see big shifts happening, we obviously want to be mindful of those so we invest in the next great companies, but also call them out so that folks can embrace these shifts and embrace these new strategies that pop up.

[00:02:44] And so, at the time, back in, call it 2015, 2016, we were looking at our portfolio and saw a handful of companies that were performing head and shoulders above everyone else, and these were companies like Expensify and Datadog and others. And specifically they were kind of breaking the rules.

[00:03:03] And what I mean by that is there's traditional rules or best practices or rules of thumb that folks leverage in the VC community and talk about all the time. And one of them is the fundamental trade off between growth and profitability. You know, you can either burn a lot of capital in order to grow fast or you can burn less, but you'll also grow less as well.

[00:03:21] And so there's this kind of fundamental trade off between how much you're burning and how fast you're growing, but you can't have it both. All of these companies, Datadog, Expensify, and others, were having it both ways. They were growing incredibly fast on the top line and then break even if not in many cases, profitable on the bottom line.

[00:03:39] And so we kind of said, what's happening? Why are these companies breaking the rules in such a good way? And sort of started to realize that it wasn't just these companies in our portfolio. There are many others outside as well. Again, 2015, 2016 time period, Slack was taking off in a really big. Dropbox had already taken off in a really big way.

[00:03:58] Zoom was taking off in a really big way, et cetera, and we started to realize that there was commonalities amongst all of these companies, and it was fundamentally in the way that they were operating. And when it came to growth challenges or growth opportunities or growth goals, you know, the first line of defense and the default answer was always, what do we change in the product in order to achieve that goal?

[00:04:18] The default answer was never, let's add more sales reps. Let's triple the size of our sales team. And so that was really the first really interesting insight is that product was really at the core DNA of these companies when it came to growth-related priorities, goals, and challenges. And it was always what do we change in the product?

[00:04:37] Or what feature do we put in front of or behind the paywall? And how do we do these fast iterations in order to get to the place we want to go to? And again, that was fundamentally different than the just hire more sales reps, default that we had been familiar with in the SaaS ecosystem leading up to that.

[00:04:52] And so recognizing that, we said, all right, we think that there is this fundamental shift that's happening, and if it's happening, it needs a name. We need to be able to refer to these companies both internally, we just kinda refer to them as these special businesses at Open View, but also if there really is this sea change that's happening, then we should notify the market as well.

[00:05:11] Everybody else should be on this because this seems to be relatively big and these folks have figured out something that others haven't. And so we kind of looked around in the world and saw that, you know, people had recognized this to a degree, but really there was two ways to describe these types of businesses outside of Open View.

[00:05:27] There was one which was super inaccurate, which was these are just freemium companies. Oh Slack. Oh Zoom. Those companies, they're freemium businesses and that's why they're successful. But we took a look at it and said, freemium is a pricing strategy, and on its own, it does not explain the success of Slack.

[00:05:45] There's many other freemium companies that aren't Slack, so you know, there's gotta be more here. That's a bit of a misnomer, and the only other thing that was out in the market was bottom up, and that was accurate. These businesses did tend to go from bottom up in terms of its adoption within an organization.

[00:06:00] But the way I describe it is, you know, back then 2015, 2016, there was no way to double click into bottoms up. You know, there would be an occasional tweet or an occasional rogue blog post that talked about bottom up, but there was no bottom up community. There was no bottom up best practices. Again, there was no even real formal definition of what bottom up means or doesn't mean.

[00:06:19] And so we saw that that was accurate, but you know, there was no community around it at the time, and so we. Take a step back again, what's at the core DNA of these companies? They lead with product as it pertains to growth, so that sounds like a good name for it. Product-led growth. And so we kind of put it out there in about mid 2016 and started talking about it a lot and really until we were blue in the face for a number of years and then I would say probably in about 2019 time period, a lot of other folks started to join the conversation and it became apparent that, you know, wasn't just us that saw, you know, this shift happening in the market.

[00:06:53] And thought that product-led growth was a good way to, you know, describe it. Others were starting to really get gravitated towards it as well. And so that's a little bit of the backstory.

[00:07:03] Dan Saks: And today, how would you define product-led growth?

[00:07:05] Blake Bartlett: So product-led growth, our definition that we came up with in 2016, which still is just as relevant today, is that it's a growth strategy or a growth model that relies on the product itself as the primary driver of customer acquisition conversion, and expansion.

[00:07:23] And this is as opposed to the humans on your sales and marketing team as being the primary driver of customer growth in your business.

[00:07:31] Dan Saks: And how important are sales people in a PLG model?

[00:07:35] Blake Bartlett: Yeah, so this is a good question because certainly in the earlier days of PLG, I think it's evolving a lot now. But in the earlier days of PLG, this was a common misconception.

[00:07:44] There was kind of this mindset or these questions that we would get and we would see kind of all over the internet, which. So if this PLG thing is successful, does that mean that every sales rep is going to be out of a job? Does this mean the death of sales entirely? And the answer was and still is no.

[00:08:01] There very much is a role and always has been a role for sales and product-led growth. It just looks a little bit different. The way I'll describe it is that the order of operations has changed. It's actually directly inversed. So in the old world, you had to hire sales first because how else are you gonna get customers?

[00:08:18] Sales people go find the customers, go close the deals, and that's how you get them onto the roster. And then you have to implement them and then they get live and then you have to support them. So, you know, the kind of hiring order looks like sales to get the customers success or services or implementation teams or onboarding teams to get them live and then support to help them once they are live.

[00:08:39] But again, order of operations in PLG, entirely inversed. You get the users first because self-service is really at the core of PLG. So when you get the users, what do users need? They need support. So you would hire support first in this order of operations, and then as your bottoms up growth and as the viral growth or the collaboration or whatever it is, drives more adoption in an organization, then you start to go from individuals and just single users to small teams.

[00:09:06] And as you go to small teams, you're gonna need new things. What is this team's plan? How is it different than the individual pro plan? Help us learn how to use this as a team. What integrations should we turn on? How do we make sure we're doing best practices in this? And also some logistical things. We have 10 accounts with a bunch of swiped credit cards, and we kind of wanna move to 15 seats or 20 seats, and we wanna have an invoice and have payment terms.

[00:09:29] All of these things sound like kind of order filling in ways for a success team to help as you go from users to small teams. And so you would hire success perhaps second in this order of operations. And then as the customer journey continues, you go from small teams to larger teams, perhaps whole departments, or maybe if your product is built for it, like a Slack or a Zoom or something like that, you can even go wall to wall, an entire organization, and as the bottoms up continues and gets to that level, well, a salesperson's going to be needed because you're gonna start encountering things like one, the deal size just gets large enough.

[00:10:05] It's gonna get to six figures at some point. Might even get to seven figures. And obviously that's not gonna be swiped on a credit card. And when you have a budget being allocated of that size, you're still gonna have to go through the traditional steps. You're still gonna have to go through IT and security review.

[00:10:19] You're still gonna have to go through a procurement. You're still gonna have to make a business case and prove the ROI and the value and all those types of things andnd get to the other side of a sales process, but it's based off of already existing usage. And so the salesperson can come in and help you navigate that upsell to a much larger team or whole department or organization.

[00:10:40] But the sales role is very, very different. Instead of sitting on the opposite side of the table from the customer trying to convince you to buy, you've already bought, you're already using it. You just wanna buy more. And so we actually have the same shared goal, which is you using more of my product. And so how can I be on the same side of the table as you as a sales rep and act more like a Sherpa?

[00:11:00] You know, we know we wanna get to the intended destination, which is the summit, which is you using more of my product. You already love it. I'm gonna help you get there. I'm gonna walk with you through this procurement process, through the IT and security review, through the business case analysis, et cetera.

[00:11:14] And again, so that's the perfect role for a salesperson. Just looks a little bit different and it's hired in a slightly different order than in prior eras of Saas.

[00:11:24] Dan Saks: Many of the listeners on decoding digital are technology advisors and people who interact with businesses on a recurring basis. And one of the things that we've seen is that there's really a shift in the way that they interact in a product-led growth model.

[00:11:37] And the need to be much more consultative and to leverage the product and to be able to answer technical questions becomes really important in terms of commercial success. And many of our most successful sellers in a PLG world tend to be those who are a very innovative and who love tinkering with the technology themselves and experiencing the product and evangelizing that, but B, who have a certain level of intellectual curiosity and really kind of technical capacity to go deep on answering some of the true pain points.

[00:12:17] And a lot of the SaaS and sales training, whether that's a methodology like medic training and forecasting processes or other typical sales models can work with PLG, but there's not necessarily a focus methodology that we've seen in terms of how to get a seller to sell in a consistent way in a PLG model. Is there anything that you've seen in terms of a sales methodology or training that can enable technology seller or advisor to really transition to be a growth leader in PLG?

[00:12:44] Blake Bartlett: Yeah, it's a great question. You've seen this rise of what people are calling product led sales, and I think that this is where these new methodologies and thought processes are going to be coming from. And there's actually a number of platforms that enable product led sales as well. And so they're trying to drive both the product that you would use in order to do product-led sales, but also the methodology and the philosophy that you'd use as well.

[00:13:07] And some of these folks will describe product-led sales as well. It's just selling to people that already use your product. Which is true, and that's kind of the order of operations I described earlier. So if that's the dynamic here, then you know, if you take a company like, you know, I work with Calendly, they have millions of users.

[00:13:24] So within a sea of millions of users, if you're trying to do product-led sales and sell to people that already use your product, where do you start , right? Do you just start at, you know, customer number one or user number one and sort of just call down a list and eventually get to user 1 million? No, that would not be particularly efficient or scalable.

[00:13:45] And so what you're gonna need to do is look at, well, what is the product usage signals telling me? And this is where, you know, product analytics as a part of your sales process becomes incredibly important. You know, if you get one user at an account that has 10,000 employees, you probably shouldn't call them yet, but if you get 10 users, or maybe you get 20 users within that account, and the momentum of them using the product and the usage of the product is going up.

[00:14:10] And then you've done this identification. Yes. They are a good fit for us. They're in our IP there's 10,000 seats. We only have 20 of them or 30 of them, or however many of them, and there's a lot of activity in that account. Let's call that one. And so you use product analytics and you use product signals, and you use momentum while validating ICP in some of those things to figure out who you call, again, as that Sherpa, as that sort of concierge to help them get to the next phase of their journey with your product.

[00:14:36] And so I think that's one of the most important things is that you're not just using old school signals like MQLs for example, which is about rating content and sort of showing engagement. Those are important. Those are sort of valid. But I think even more important is basically a new version of lead scoring that involves a lot of product analytics and product signals PQLs people use for this as well.

[00:15:00] I don't know if that's necessarily a silver bullet, but just in general. Using product analytics to inform who you call and why based off of activity you're seeing in accounts.

[00:15:10] Dan Saks: So shifting a little bit to the origination of product. We've spoke on decoding digital a lot about product market fit, and we've had Eric Reese, the author of Lean Startup Methodology.

[00:15:20] What does the intersection of PLG and product market fit look like?

[00:15:24] Blake Bartlett: I think taking a step back, PLG is really about two things. It's not just merely sort of a set of tactics that you would use. I view it as a holistic company strategy because PLG touches both the product that you build and how you distribute it, and both of those things need to get dialed up the right way.

[00:15:46] And so if we focus on building the right kind of product for PLG, what does that mean? Well, I think if you look at the organization's data, if you look at enterprises today, if you look at businesses today, the way that new software gets adopted and discovered is through individual end users. It's people finding products that solve problems that they have in their day-to-day workflow, frustrations that they have with existing legacy systems.

[00:16:10] And they'll look for work arounds. So they'll look for apps that make things better, and people are constantly looking for tools, discovering tools, adopting tools into their stack personally. And then starting to tell their team members about it, and then that bottom up journey continues from there. So if that's how software products get discovered and adopted, a way to look at it is that the users of products under the new gatekeepers to getting your product into a new organization.

[00:16:36] And that's completely different. The world used to be that the gatekeeper was the senior executive who owned that team, and he had to convince that C level person or that VP level person, that your product was gonna deliver so much ROI that they should use you and not your competitor. And so the new gatekeeper has entirely flipped to be these users.

[00:16:55] So getting back to the product you build, you need to keep this in mind. You have to build the product for the end user, for the user of the product, not necessarily the owner or the leader of that department. Are we getting users to adopt our product? Are they then actually going through a product journey?

[00:17:11] That in some ways might look a little bit more like a consumer product journey in the initial phases. Did they sign up? Great. That's a starting point. Did they install my app or install my integration or install my thing? Great. That's a good starting point, but did they ever even get activated? Did they just install?

[00:17:28] Or did they actually create a username and password? Did they actually then set up the thing so that they could get value out of it? Did they actually use it beyond the first day or beyond the first week? Did they get to the activation metric, you know, whatever that might be for your product, or did they not?

[00:17:42] And once they got to the activation metric, did they continue to use it? And do they get to a point where they ultimately hit the paywall and swipe the credit card? And so thinking about it through this lens of the user journey, which is a lot more consumer. And wanting to see even absent of dollars.

[00:17:56] That used to be a big thing for product market fit in enterprise because again, you had to sell the customers up front with a contract, get them onboarded, and then they had to tell you, yes, we're getting value out of it and we're gonna continue to pay you. That was like product market fit in the old SaaS world.

[00:18:11] Now, because of this user orientation and because it is a lot more consumer-like in the early parts of the customer journey, even if there's no monetization, you can still be highly confident in product market fit because of the number of users you're acquiring, the rate at which they're activating the rate at which they're continuing to use the product, the rate at which they're inviting new users, whether that's in their organization, on their team, or external folks they're collaborating with to the product, the rate at which they're swiping the credit card and converting.

[00:18:37] And so looking at it through this more freemium oriented consumer-like customer journey at the early phases of a company. I think that's where the special sauce is for determining product market fit in a PLG environment.

[00:18:50] Dan Saks: You alluded a little bit to the user experience and the journey, but what are some of the metrics that you would use to guide success?

[00:18:58] And I know for us, one of the things we look at a lot is time to value. And in a non PLG model, it can sometimes take, you know, years to get to that goal of value, whether the metric is dollars generated or another element. But broadly, how do you see the importance of time to value and what are other metrics you might measure?

[00:19:16] Blake Bartlett: Yeah, I think time to value is super important in PLG. However, I would say instead of time to business value that I can quantify with roi, it's instead time to value for that individual user. So this is where the idea of an aha moment comes in. So how long does it take me to get to the aha moment in using the product, which is probably going to be about what the product actually does, and wanting to see people do more of that thing with the product.

[00:19:44] So a great example would be Calendly. I reference them. I work with them very closely. How only exists to schedule meetings. And so if you have gotten all these users, even if they've activated, even if they've, you know, set up the accounts and done all these things, if they're not scheduling meetings, they're not doing the core thing the product should do.

[00:20:03] And so there's a problem. If they are scheduling meetings and you see somebody sort of get quickly activated and then quickly start scheduling, you know, multiple meetings per week, and then over time it's many, many meetings per month. And then this just becomes a standard thing for how they operate and you just see that sustained usage at a pretty impressive level.

[00:20:21] Well then, you know, they've actually got to that aha moment and they may or may not have swiped the credit card at this point, but did they get to that aha moment? Are they you seeing the activity that, you know, a product is supposed to do? So I think that's kind of how I think about time to value in the context of PLG. Outside of Time to Value, I do think back to what I was saying before about more of a consumer like user journey in a consumer like conversion funnel, analyzing that sort of on a cohort basis.

[00:20:46] So are we acquiring more users or getting more installs or getting more signups this month than we did last month? That's an important first thing. But then from there on, it's like, okay, are they actually getting activated? Is our activation rate consistent or ideally going up from where it was last month and then after the activation rate, are they getting to the paywall and you know, so on and so forth.

[00:21:06] Are they taking each of these steps? And so looking at it kind of through this more consumer-like lens, when you're thinking about product analytics, all of those things are really important because it's hard to get to a 100K ACV deal through this bottoms up ocean. If people aren't ever getting activated in the first place.

[00:21:21] Or if you're Calendly and people never schedule meetings with it. And so that's why those, you know, kind of consumer like things are so important to ultimately lead to the true enterprise oriented business value and the big deals that we're, you know, all looking for in SaaS at some point.

[00:21:35] Dan Saks: So you spoke to a lot of the individual pain and I think there's a lot of stories out there like Dropbox or Zoom that are very relatable to anyone.

[00:21:42] But as we know with Saas, there's a lot of categories of enterprise software or SaaS products that get pretty. Specific and vertical based or very, very unique complex use cases. In those cases, can PLG still be applied and are they still solving the end user problem, or are they trying to identify a different persona?

[00:22:06] Blake Bartlett: Yeah, I think this is a really important distinction is that end users are every. Everywhere you look, every product has end users and everybody is an end user. There's developer end users, and there's millions of developer oriented products that leverage PLG. There's IT oriented end users, and I would say products like One Password and many others are great examples of IT focused or admin focused.

[00:22:30] PLG products in terms of the buying journey. And so really getting clear on this idea that everywhere you look there are end users, even if they look different from product to product, and then orienting towards that user and their problems and their pain and the things that are gonna make their life easier is always a good thing to do.

[00:22:47] So I think at the high level, that's kind of how I think about the framing of this. Now over time, I will also recognize that not all products are the same. Zoom has amazing inherent virality, and that is just inherent to the fact that you can't do a Zoom with yourself. There always has to be at least one other person on the other side.

[00:23:05] And so there's an inherent virality to the nature of the product they've built, and that does, in some ways give them an unfair advantage over folks that don't have as strong of an inherent virality to their product. But that doesn't mean that if you're not Zoom, then you don't have PLG. So looking for ways in which you can, you know, identify these opportunities, I think is incredibly important.

[00:23:26] Dan Saks: What are some viral strategies or ways that you can cultivate virality if it maybe naturally doesn't exist in the initial product?

[00:23:32] Blake Bartlett: Yeah. There are these strong, inherent viral ideas. Zoom is one, Calendly is another many products that you literally just can't use on your own. It requires somebody to be on the receiving end of it.

[00:23:45] And those are incredibly strong viral loops. There are others that also have the same nature of inherent virality, however, might be a little bit weaker in terms of how they produce. So, you know, SurveyMonkey or TypeForm would be a great example of this. You can't send a survey to yourself. There always has to be recipients.

[00:24:02] But those recipients might not necessarily be looking to run their own survey immediately. And so, you know, the viral loop will have an effect, but it might be a little bit of a weaker effect. So, you know, that's another example. But even outside, Also picking from my portfolio, Expensify, that's one where you might not look at it and think that it's inherently viral, but if you're somebody who's trying to get an expense approved and then reimbursed, you can't approve your own expenses.

[00:24:28] And so there's a natural virality or viral loop internally in an organization around expenses. I have an expense, I'm gonna submit it to my manager. The manager has to approve it, and then eventually it's gonna go to finance. And then finance has to approve it and then actually give me the payment and so.

[00:24:42] Expensify identified that and found ways to make that viral loop, this internal viral loop, which is a little bit less obvious, something that really works for them, you know? So everywhere you look, there can be virality of different flavors and different types, and then any product can have collaboration in it.

[00:24:58] And so instead of having to go out of band for collaboration and email or in Slack, put the collaboration directly in the product. And that is a form of a viral loop as. And so all products have it to a degree, and I think looking closely and not just immediately dismissing it because you don't have Zoom like virality is an important lens to look through.

[00:25:17] Dan Saks: When you think about PLG go-to-market strategies, I know that you've done some research on marketplaces and really app ecosystems. What are some of the keys to success in driving a product-led growth strategy through third party marketplaces and experiences?

[00:25:32] Blake Bartlett: I think this is a really important point because you can view app stores and marketplaces as more of a nice to have or more of sort of something that's on the margin, but I actually think that that's part and parcel to PLG distribution.

[00:25:48] With PLG distribution, I think there's a couple things you need to make it easy to discover the product, and then you need to make it easy to get started on the product. I've already been talking about and pointing to a lot of the getting started on the product stuff through self-service and this individual user journey and stuff.

[00:26:05] But if you think about the discovery piece, how do you make yourself easy to be discovered? Well, again, if it's an individual user, you need to distribute your product where they work, where they live. So if you're a user lives in Slack, well then you should probably have a Slack app. If your user primarily just, you know, is a modern day knowledge worker who's just constantly in the browser, they're most likely gonna be using Chrome.

[00:26:28] And so you should probably have an app in the Chrome web store. If you're selling a sales product, you should probably have something in the Salesforce app exchange, you know, so on and so forth. And so distributing your product where people work and where people live, so to speak, digitally when they're in their work life, is incredibly important because that's where they're looking for solutions to the problems that are coming from their day-to-day.

[00:26:48] And so I think first and foremost, just not viewing it as an optional thing, but viewing it as a necessary thing for ease of discovery is incredibly important. And then there's plenty of things, I'm not the expert on this, but app store distribution, viewing that as you know, you put just as much effort into your ASO, your app store distribution as you would your SEO, your search engine optimization, and basically building that out to be a dedicated effort versus just one of many tactics that you run can be incredibly important.

[00:27:15] Dan Saks: Any closing words of wisdom for people who want to embark on a PLG journey?

[00:27:22] Blake Bartlett: Yeah, just avoid thinking that PLG is an easy thing that you can just do in a quarter. I will often describe these things as the window dressing of PLG, where people will read a couple articles, they'll see everybody talking about PLG.

[00:27:36] They might go to a talk at a conference and be like, okay, team, we're doing PLG. Let's go. And then the instantiation of that can be, let's hire a growth. Or let's do a referral strategy on our product. And those things are good to do. There's nothing wrong with them. However, adding a growth team or creating sort of a referral loop that is not PLG on its own, those are small little tactics of an overall strategy.

[00:28:02] And so recognizing that this is a holistic strategy, it's a company strategy, it affects both, and it touches both the product you build as well as how you distribute that product. And that it really touches everything in your organization. And so looking at it through that lens and looking at it holistically and adopting it and embracing it holistically versus just looking for quick wins is the answer to PLG.

[00:28:25] So it's not easy, but it is the way of the future. It's the way that we're going, and it's the way that you're ultimately successful versus just having a flash in the pan and moving onto other tactics thereafter.

[00:28:36] Dan Saks: Blake, this was incredible. Thank you so much for joining.

[00:28:38] Blake Bartlett: Thank you for having me. I really enjoyed it.

[00:28:45] Dan Saks: Thanks for listening to Decoding Digital. Make sure you never miss an episode by subscribing to the show in your favorite podcast player. To learn more, visit decoding digital.com. Until next time.