Strategy & Business Model
Building blocks for early product-led growth motion
Author: Timo Felin, Investment Director at Vendep Capital
Product-led growth companies are often textbook examples of flawless UIs, frictionless onboarding flows, and truly sticky products – and which founder wouldn’t want to replicate that? Having their SaaS product responsible for growth, retention, and revenue is a dream for most founders. However, it takes a lot of experimentation and time to get there, and PLG isn’t a silver bullet for every startup. Depending on your product and your ICP, it may be an inferior business model.
I spent 6 months with our portfolio company Trustmary, and after watching how they built their own PLG model, I discovered some solid building blocks for the process that other founders could use. There’s no such thing as a silver bullet in PLG, but I recommend ensuring you have these blocks in place to get early traction.
What is product-led growth? PLG is a business model where the product drives the main growth factors of the business, such as user acquisition, expansion, conversion, and retention. Users can go from user to customer to evangelist wholly within the product and gain value before committing to anything. A successful PLG model means your entire company is aligned around your product, in its most basic form.
The essential ingredients for PLG
Crystal-clear understanding of your ICP
In an ideal product-led world, a customer would sign up for your product and convert to a paying user, all without contacting an actual person within your team. However, this only happens when your product solves a real need for a clear target market. Your initial target ICP needs to be specific enough that it identifies a real pain point, but large enough to make a business out of. Be careful of thinking too large though, as trying to be everything for everyone will prevent you from serving any particular ICP well enough to grow.
You should revisit your ICP(s) from time to time. As your PLG model develops, you’ll find new problems that your product can solve. But to make sure your features have the highest chance of converting users into customers, you need to ask yourself if your ICP experiences those problems. Different interactive channels (surveys, email, interviews, etc.) will provide you with the necessary qualitative feedback to make the right changes, and you should see those reflected in your conversion and retention numbers.
Buy-in across the whole company
A PLG model is an all-or-nothing approach. All teams need to be behind the product, or else there will be inevitable clashes that can derail it entirely. Depending on your product, you will need to make changes to accommodate the free sign ups that marketing brings, and decide how to attribute the sales (and how to use the sales team) now that the product is bringing in the revenue.
Five essential roles/skill sets
During my time at Trustmary, I discovered that these five skill sets were essential. I won’t limit them to just roles, because depending on your situation, one person can fit multiple.
Product roadmap influence – having someone who can steer the roadmap towards essential PLG features is, well, essential. This person needs to understand every aspect about your ICP so they can gear the product roadmap towards their success.
Design skills – at the heart of every great PLG model is a product with flawless usability. Losing conversions at the beginning will make it more difficult to learn how your ICP uses your product, so having a great designer at the onset will maximize your conversions through a seamless UX/UI geared to the workflow of target customers.
Tech/dev influence – the features planned on the roadmap need to get built, and built well. I make a separation between the two because in larger startups, there may already be separate product and development leads.
Marketing expertise – While your product is the key, you still need the right people to find it, and you need to differentiate it from the competition. Marketing’s job is to feed the right people into the product, so having someone who really understands who needs to be there and the best channels to reach them will keep a steady flow of signups. And more signups means more usage data for you to use when making meaningful decisions.
Data engineer – this is often overlooked when creating a PLG model. But data is the lifeblood of any successful PLG model. Having someone who can make sense of your analytics will steer you towards the right path, as you need to understand what your customers are doing, how they’re using your product, what they aren’t doing, where you’re losing customers, and much more.
A solid North Star/Activation metric
What separates those who are just testing your product from those who will become paying customers? There’s no way to Google this or use your network to find it – you’ll need to find it yourself. And that only happens through understanding how your customers use your product (hence the importance of a data engineer). It should be highly specific to your product and ICP too. For example, Trustmary closely followed the customers that had successfully installed a widget on their site.
Once you find it, then you can start running experiments to get more customers to that point. For example, we found that pushing the email confirmation later in the process helped more people reach our activation metric. But again, you need a lot of data, both qualitative and quantitative, to find your perfect metric.
Do things that don’t scale
At Trustmary, we never built anything until we had some proof that it would have an impact. And that meant manual outreach to customers to validate our hypotheses before we built anything. Unused features are the biggest example of wasted effort, but you can also waste valuable time in other ways, like by creating landing pages for audiences who are a poor fit for your product. You need to know beyond a reasonable doubt that what you build will provide value for your ICP(s), and that means picking up the phone or emailing your customers directly.
The only PLG playbook worth reading…
…is the one you write yourself. PLG playbooks are excellent for inspiration and as a starting point, but don’t make the mistake of copying another company’s playbook as your own. Instead, experiment early and often to get enough information to write your own.
If you’re thinking of going for pure-play PLG, these building blocks will help you lay down a strong foundation. To the question of whether PLG is right for your market, I often quote Mark Roberge from Stage 2 Capital: “If you try [PLG] and fail, all you’re left with is a very easy to adopt product.”
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