The Modern Growth Playbook: PLG + Sales to Achieve Breakout Scale

Atlassian. Shopify. Datadog. Zoom. Slack. Twilio. HubSpot. DocuSign. Stripe. Canva. Databricks. Airtable.

8 of the largest public SaaS companies and the 4 largest private SaaS companies in the world today all have something in common: they used a combination of Product-led Growth (PLG) and classic, tops-down sales to build legendary B2B software companies. When they were startups, they effectively used PLG early-on to gain user adoption and love. Then, they complemented PLG with tops-down sales and leveraged unprecedented, low customer acquisition costs (CAC) to achieve astonishing growth and consumer-like scale.

Today, we are in the midst of a massive shift in how decision-makers are purchasing and using business software. More users expect to consume software directly and immediately. These users conduct their own research and don’t need to have their hand held through a gated sales process. This trend was kickstarted by the newly gained accessibility offered by cloud and mobile-first software, and then noticeably accelerated by the pandemic. And, it presents one of the most significant opportunities in history for B2B startups to disrupt not just through technical innovation but via go-to-market (GTM), leveraging PLG. This is because PLG successfully can enable rapid growth at very low cost if planned for from product inception. And it is very difficult for current large incumbents to replicate.

But PLG is not a panacea. The most successful SaaS companies have a balanced go-to-market strategy that leverages both PLG and more traditional sales and marketing approaches. Let’s dive deep and understand the lessons from? today’s most iconic companies.

PLG Overview

What is PLG?

PLG is growth strategy that focuses on the end-user, and in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself. This is a stark contrast to more traditional, sales-driven companies, whose goal is to convince a buyer to make a purchasing decision through a series of steps gated by Sales. Instead, PLG companies give the end-user direct and immediate access to their product and help them experience meaningful outcomes in an incredibly short time, which the user can directly attribute to the product. Most users find, trial, and use the product in a “self-service” model where they have almost no contact with the company.

What PLG Can Do for You

There are 4 main benefits to PLG:

• Users (and the best products) win: Users are always the top priority. They get to experience the product’s value exactly when they need it, usually before ever having to pay.
• High engagement: Users interact with your product from the get-go and can give you direct, immediate feedback. You can iterate quickly to meet their needs, which can create a loyal customer base and community and identify power users to target for upsell
• Viral growth: If you can create a useful product, PLG gives you higher leverage to grow organically. Users can naturally spread the word directly to other users and share their experience. The product gets better through additional, direct user feedback, and, ideally, more people use it.
• Lower CAC: The Customer Acquisition Cost (CAC) of a highly-engaged user can often be extremely low if acquired directly, bottoms-up, as little to no capital is spent on an expensive sales process.

PLG Pitfalls

We at Khosla Ventures have been investing in companies using PLG for over a decade - including Stripe, GitLab, Webflow, and Coda - and have witnessed its power. My own investments over the last two years are largely in high-growth, B2B companies using PLG. However, I am starting to hear some founders equate PLG with “no sales,” and believe that “if we build it, they will come…” Some companies have attracted thousands of users in a completely organic, self-service way, and see no reason that growth shouldn’t continue. Why learn about building an outbound sales team, or guiding customers that come in organically, or even doing product marketing? These companies believe that all of their users are equal – that the next million will be like the first million. Or even that they have maxed out the purchasing power of the first million!

Companies with this mentality may continue to grow, but it will likely be linear not exponential growth. And they may not achieve the wall-to-wall organizational penetration in Enterprise they were initially expecting, which is where the biggest revenue dollars are made. Because the fact is, not all users are created equal. Some will have higher engagement, retention and potential for monetization than others. Some may be more ardent advocates than others. And relying only on PLG simply just may not work for attracting these more valuable users.

Where PLG Works … and Where it Doesn’t

Where PLG works -and where it doesn’t - is almost entirely based on who your users are, how they buy and where they are in their user journey. Segmenting your customers and prioritizing what works best for them is the real key to success. I have observed the following in my most successful portfolio companies:

Individuals vs Teams

PLG works well when selling to individual users with personal (and often simple) needs, where the user is the decision-maker. This is often where self-service provisioning with the ability to pay quickly by credit card works well. However, the reality of who can actually do this is often limited to individuals, very small teams and SMBs. It is also often the case that this mode of buying works well for products that require only an individual decision, like productivity tools (e.g. Airtable, Canva, Notion) and developer tools (e.g., Stripe, GitLab, Twilio) where an individual may choose to adopt software that helps her achieve solo tasks. But even these types of products can hit an adoption wall if a whole team wants to use them, especially at a larger organization. It is not easy to grow entirely self-serve if an individual has to (1) convince other team members to use something, (2) get budget approval from management (for example, when the bill starts to exceed one individual’s credit card allowance), and (3) bring in IT around security or data concerns. This is where a focused and effective sales team can be invaluable. Sales teams can also often be more effective when acquiring users for more collaborative or team-based software, which requires two or more people to work together (e.g., project management, internal business processes, or CRM). Or when different teams have different use cases but are all part of the same organization. This is because a good sales team can recognize when there is an expansion opportunity to be exploited and make a more holistic deal from the get-go that benefits the vendor and the customer

Free vs Paid

The fact that PLG can lead to rapid user adoption and growth often also means that successful implementation leads to large volumes of free users. Initially, this may be helpful to find strong advocates, to build a brand and community and to help identify your power users and use cases.?It also can be a rich source of data and feedback.

However, this could be disadvantageous if these free users never monetize, which is often the case and if any of the following are true:

• They are costly to support (e.g., increase cloud, data or machine learning infrastructure costs);
• They Have different needs than buyers who are willing to pay and distract or mis-prioritize your roadmap
• They Are completely disconnected from any kind of actual buyer, and
• They might have paid for the “basic” tier but were never pushed to monetize and may never need premium functionality.

Companies like Canva and Notion converted <10% of free users to paid customers in their early days, and founders often believe that this is the right model. These are magnificent companies. But you may or may not need to support 9 free users for every one that pays you. Instead, it may be more valuable if you mine your free user base for promising leads that could monetize, and then hire a focused sales team to upsell them.

Generally speaking, PLG can be extremely useful to help build a free user base but it does not in itself help you to truly understand the value of growing free users, to figure out the associated cost of supporting them, and to understand when to potentially stop doing it. It also does not naturally help you understand which leads could be monetized more fully e.g. if a self-service user is part of a team that could all benefit from using your product, or even upgrading. Implementing free trials or other monetization gates often works to bring this to a head, as does hiring a focused sales person or team that can mine your user data and figure this out. Otherwise, you can get into a cycle where your focus is forever optimized around growing user volume without ever unlocking revenue.

SMB vs. Enterprise:

As discussed above, PLG often works well for SMBs who have quicker, more consolidated decision-making processes and simpler requirements. If they want to buy a product for the whole company, the process may not much different than for 1 individual, and self-serve is not only doable, but often preferred.

However, if your ultimate goal is to move upmarket and unlock lucrative mid- or large Enterprise deals, PLG on its own is likely not sufficient. Enterprises usually have the following constraints / gates:

• Purchase restrictions, even for smaller groups/teams that would otherwise look like an SMB.
• IT reviews for products that require access to secure business systems, APIs, or data,
• Testing for things like compliance, scalability, and access control, and potentially, requirements around hybrid cloud or on-premise deployments.
• Limits or consolidation preferences around software vendors

In these cases, PLG alone is not sufficient and may not even be appropriate. Likewise, products that serve as the system of record for collaborative workflow (e.g., CRM, ERP, HR systems) may not have any individual value but may have tremendous value once the group/team has adopted it. These accounts need sales, customer success, and sales engineering help. But they can be tremendously lucrative with low churn and can help you scale to breakout growth and monetization.

The PLG + Sales Playbook

So, how and when should you use PLG? And when do you bring in a more dedicated sales teams? The following 5 principles have served my portfolio companies well:

1. Design your product with PLG in mind
2. Really, really understand your users
3. Light the fire with great marketing
4. Get pricing right
5. Land and expand with sales

1. Design Your Product with PLG in Mind

Your product must be designed with PLG in mind from the get-go for PLG to have a chance to succeed. While there is no one-size-fits-all model for building great products, the following can help you determine if you have a product that is optimized to take advantage of PLG:

• Have a “magic moment”: Solve a clear, burning problem that causes users real pain by, instead, delivering them not just a solution, but a “wow” moment.

Zoom founder Eric Yuan: “I wanted to spend my days delivering happiness…” with a product that just worked!

Calendly VP Product Oji Udezue: “PLG works only when every feature—what it does, how it does it and how it’s delivered—solves a real problem for your customers and makes them so happy that they are more likely to adopt your solution over the alternatives.”

• Ensure quick time to value: Strive constantly to minimize the time from which a potential user realizes they have a problem to solving it with your product.

Canva founder Melanie Perkins: “We continuously refined the experience until … people could jump in, and within five minutes had designed something…”

The following should all be extremely easy:

- Discovery : Optimize your website, have good SEO, and market your use case and value instead of “what” the tool is.

- Onboarding: Make it easy to get up and running via self-serve. No booked demos, lengthy documentation, or white glove onboarding.

- Navigation: Prioritize simplicity above all else ideally with a consumer-like experience. Progressively reveal new features based on user behavior.

- Value-creation: Provide real value before even considering charging

- Help: Short videos, product pop-ups, and FAQs should be instantly available and easy to find.

• Provide a killer single-player experience: No one will use a new tool if they first have to recruit others to make it valuable. If possible, focus on making the individual experience awesome, even if your value compounds with more users or your ultimate target is teams. This is not always possible (e.g. Zoom), but it helps a lot.

Figma founder Dylan Field: “Design is a team sport—it’s collaborative by nature.” But even though Figma was designed for collaboration, 48% of its users today still use it just as an individual product - because it is outstanding

• Build levers for virality: Let individuals see the increased value if others join them in the product; give them incentives to invite others, including free usage. Be on the lookout for triggers that might spur individuals to bring in teammates and make it easy for them to do at that point. Build in automatic communications through external channels like email, push, and SMS that bring users back into the product.

Calendly VP Product Oji Udezue “Each time someone sends an invite via Calendly, they are also automatically promoting the product and starting a viral loop.”

• Promote engagement: Find credible ways to bring users back to your tool. Prioritize features that will spur daily habits. Track and measure everything.

2. Really, Really, Understand Your Users

Claire Hughes Johnson, COO, Stripe: “We always start with what our users need or would like, and then consider things like like infrastructure, internal constraints, partnerships, product roadmap, and so on.”

Eric Yuan, CEO Zoom: “I just kept looking at everything from the customers' perspective … I’d talked with a lot of people, and no matter which solution they were using at the time -- WebEx, GoToMeeting, and others -- no one ever told me they liked the service they were using.”*

We have already established that not all users are created equal. But, before you even get to the problem of free vs paid users, you need to understand whose problem you are solving and whether your solution is a big enough improvement to their situation to warrant attention. It is crucial to understand your potential users before you build your product, then your current users after you launch, and finally, your current and potential new users on an ongoing basis. I have noticed the most successful startups do the following:

1. Cast a wide net: Initially, go broad to build top-of-funnel users and understand how they’re using your product. Your power users may come from unexpected places! This doesn’t mean you can’t focus on a smaller niche and then expand, but getting the word out is key in PLG, and this cannot be done if you’re only targeting a small group of users.
2. Measure: Figure out who is doing what in your product in fine-grained detail. Build your product with the right instrumentation to track everything.
3. Segment: Create well-defined personas (e.g. product managers, freelance designers) and segment users (e.g. SMB, mid-market, Enterprise) once you have data. This will help you better understand your target users, their needs and how to reach them.
4. Identify influencers: Find power users who will really advocate for your product or influencers like team admins who, once convinced, will do the work of onboarding others.
5. Become the standard: Early-on, it is often better to win mindshare instead of dollars, especially if your market is “winner take-all,” or has network effects. For example, GitHub succeeded by first winning buy-in from developers and effectively becoming a standard, before ever approaching other stakeholders to monetize.
6. Identify stakeholders: As you try to expand in an organization, the buyer may increasingly be different than the user. Gatekeepers like IT and Security may need to?buy-in. Have a plan to understand and address their needs and to figure out where the budget for your product comes from.
7. Prioritize customer feedback: Solve bugs quickly, prioritize requests from power users early, and optimize your long-term road map around the most important stakeholders, not just the loudest.

3. Light the Fire with Great Marketing

Wade Foster, CEO, Zapier: We set up landing pages for every combination of app-to-app that you could possible connect… So people who are looking for this stuff are finding us, so we’re harvesting that demand… I felt like we didn’t have the awareness of the company and what we were doing that we should have had, and so we decided to put our resources behind content marketing and getting people to know who we were so that when they did need our product, it was an easy choice.”

PLG can enable organic, word-of-mouth driven adoption, which can allow for quick initial growth at a low cost, once you get the flywheel going. However, if no one knows you exist, they will not come try your product and therefore all the potential virality in the world is useless. Figma, Canva, Notion, Airtable, Stripe and Zoom were all masters of product marketing and brand building. They spent a lot of time early on spreading the word themselves, figuring out where their target users were, and how to reach them with the right message.

I recommend that founders have a thesis about what type of marketing might suit your product and your target users at each stage of the user journey. Then, run a bunch of experiments to see if you are right. Test ruthlessly and iterate. What is the best way to reach influencers? Power users? Early adopters? While organic adoption is ideal, investing in paid user acquisition may make sense if that is the best way to target a handful of advocates who will convert many others organically. Or, content marketing might be useful if your market is new or early and users need education.

Here are some crucial strategies that have enabled our portfolio companies to really breakout:

1. SEO optimization: Make your website a sales tool! Make the content and structure visible and accessible to search engines to acquire users with high intent to purchase.
2. Community building: Connect and engage with your users over topics that matter to them to build long-term relationships. Try to truly understand their values and align this with your brand.
3. Content marketing: Create useful, meaningful articles, talks, webinars, or research papers to educate users, illustrate thought leadership and generate leads.
4. Paid media: Paid advertising can be very effective for brand awareness and even lead generation if you experiment enough to understand where and how to focus.
5. Influencer marketing: Get influencers - people and organizations who have a purported expert level of knowledge or social influence in their field - to use, endorse, tweet about or write about your product.

4. Get pricing right

Jay Simons, President, Atlassian: “In our model, we’ve focused on removing price as a potential point of friction, even at the upper end, which in turn aids velocity. It means that even an enterprise customer could come to the website, spend $10,000, start with a team of 10 or team of 50 and get going without actually needing to talk to us.”

Wade Foster, CEO, Zapier: “It’s not that we wanted to make money off of the beta, it’s that we wanted people who really thought this was important enough to pay for and spend some time with us for.”

While pricing for PLG is an emerging art, our most successful portfolio companies have found that the best way to monetize is to price map pricing to the user journey. While every product is different, there are consistencies in the “bottoms-up” user journey across markets that lend themselves to distinct tiers of pricing.

Users at different stages of the journey have different interests, requirements and willingness to pay. They often, therefore, have very different value, and the cost of acquiring and supporting them should be commensurate.

Pages could be written about the above chart but the following are a few key takeaways:

1. Deliberate Freemium vs Free Trial: Knowing how and when to incent users to graduate to the next tier is crucial to monetizing effectively. Be intentional with your “free” offer and make a conscious determination whether there is value in a “free forever.” Freemium may be very useful, initially, to gain mindshare and to understand your power users and high value use cases . However, if, over time, the cost of supporting “forever free” users is high or starts to distract from higher value users, I would consider discontinuing even if you lose some users. Consider implementing Free Trials far earlier than you might think, where users are exposed to your entire value proposition and may more readily convert to a premium plan. This is especially true in enterprise. Enterprise users tend to look for products when they have high need. If they convert to paid, I have seen it most often occur within 30 days, if not less. They do not tend to linger on Free plans for months and then suddenly convert. Therefore, it is important to showcase your value prop to the fullest early, make sure they get maximum value, and often, guide them to a broader sale vs just relying on self-service.
2. Find the budget: In PLG companies, the initial user of the product is not often the ultimate buyer. Pricing can be used to bridge discussions from user to buyer and to help find out where the real budget is and who controls it. In this case, it makes a lot of sense to charge very little for initial users and then layer on premium services when making a broader sale. It is also important to monitor where the bulk of your revenue is coming from and how that shifts over time. You may start with lower pricing tiers initially and get success from self-service channels. Enterprise may be slow and hard. But your velocity will change as your enterprise go-to-market engine matures, and because of its compounding nature, enterprise will be where most of your higher velocity growth ultimately comes from. I have seen this shift occur earlier and earlier with portfolio companies over the last 5 years. One B2B SaaS company monetized primarily from self-service for the first 3 years till about $8M ARR when enterprise started taking over. They then skyrocketed to $30M ARR. More recently, a popular B2B SaaS company saw this shift start to occur at $1.5M ARR, and when they embraced it, they grew to $10M ARR in 18 months.
3. Maximize to expand usage: Avoid introducing friction early-on, when customers want to expand the usage of the product. Charge heavily for power users/creators, moderately for mainstream users and very little for lightweight (“read-only”) users.

5. Land and Expand with Sales

Jay Simons, President, Atlassian: “If you’re a large enterprise customer that has more complexity, or potentially more value to us, we have a team that can help steer you in the right direction and answer a more complicated set of questions that you have. We call them enterprise advocates.”

You can use PLG to create a highly efficient sales funnel of large organizations at very low CAC. By first understanding how users are engaging with the product, you get informed as to who the product champions are. When different groups adopt in the same organization, it may be time for a sales team to engage and leverage these product-qualified leads (“PQLs”) as their foot in the door (“land”). They can “expand” the sale by spurring a group buying decision, upselling or communicating value across groups and use cases. Self-serve users that joined organically can be converted into high lifetime value and extremely sticky customers.

Look for the following evidence within a single organization as signs the market may be pulling you into a top-down sale:

• Multiple pockets of users
• High engagement and at least one strong evangelist,
• Some organic spread (within one team, or from one team/use case to another), and
• Users questions like “How can I roll this out to my entire team or department?” “Can we get discounted pricing if we buy more seats?” “Can you talk to our IT department for a security review?”

Because PLG involves different decision-makers than traditional, top-down sales processes, it is important to hire the right type of sales team that understands this and can bridge the user and the actual buyer. I recommend hiring a generalist who can be flexible based on your startup’s evolving needs. They should:

• Be comfortable digging into data,
• Be comfortable running experiments,
• Be highly collaborative and able to work across silos, and
• Understand how to upsell with use case-based selling.

As you evolve and find out what’s working, you can start specializing. Typically, you would hire as follows:

• Account Executives (AEs): Convert self-serve users to paid customers.
• Sales Assist: Educate and guide users on their journey to realize value.
• Sales or Business Development Reps (SDRs or BDRs): Manage inbound PQLs and mine them for leads.

When things are humming along, an SDR/BDR will mine data and run experiments to prioritize the right PQLs. The Sales Assist team will then help customers adopt the product and resolve friction to accelerate self-serve signup flows, surface new sales opportunities, and capture feedback to route back to product/marketing. AEs receives PQLs from SDR/BDRs and the Sales Assist team to help customers navigate from self-serve users to becoming enterprise customers while continuously finding new opportunities to expand.

Leveling the Playing Field

Despite the tumultuous socioeconomic times we live in, it has never been a better time to be a?B2B startup. PLG is an incredibly powerful strategy that favors strong, innovative product companies that truly care about the end user experience. It can lower the cost of initial growth significantly and level the playing field against cash-rich incumbents. Over the last decade, some of the most iconic software companies of this generation exploited PLG to achieve unprecedented success. But PLG is not a panacea. Its advantage lies with early-stage startups and founders who can be nimble and combine PLG with a more holistic GTM approach that involves top-down, organizational sales and world-class marketing. If you are such a founder, I’d love to hear from you and help you build the world’s next transformational software company!