Catching Lightning in a Bottle

Five crucial startup lessons from Founders of Product Led Growth Companies

Finding product-led growth sometimes feels like catching magic, or even lightning, in a bottle. Product-led growth (PLG) refers to a go-to-market strategy where the end user can discover, try, and pay for a company’s offering without help from anyone who works for the company.

If successful, unlike traditional enterprise sales where growth linearly scales with the size of a sales organization, a PLG engine can deliver non-linear growth without the same sales and marketing costs becoming a powerful machine.

You can understand the appeal in building such a business, but both aspiring and successful PLG founders have struggled with questions like:

• Do we have PLG product market fit?
• Should we even take a PLG approach?
• When is the right time to turn on paid marketing and sales?

Having invested in and spent time with a number of top product-led founding teams, I turned to three founders: Benjamin Humphrey, co-founder and CEO of Dovetail, Joe Thomas, co-founder and CEO of Loom, and Matt Martin, co-founder and CEO of Clockwise. All of their companies have hit escape velocity over the last five years, so I asked them to share some of their learnings on crossing the PLG valley.

Here are the top 5 lessons they shared with me:

1. Start with a Product-Led Approach

Almost every PLG company I have met made a decision to take a PLG approach at the outset. Starting with a sales-led approach and then building a PLG motion often fails. The initial product needs to be designed in such a way such that a customer can sign-up, purchase, and use the product without involvement from anyone in sales or customer success.

Starting with a sales-led approach and then building a PLG motion often fails.

Clockwise, Dovetail and Loom all made the decision to take a PLG go-to-market approach from the outset. “The three co-founders, Vinay, Shahed, and myself were all product oriented people by trade. I was a product manager. Shahed was a designer and Vinay was an engineer. None of us had worked on the go‑to‑market side in roles like sales, success, or marketing, so our original approach to building a company was to build product first.” said Thomas. Similarly, Clockwise was founded by three technical co-founders who had previously all worked very closely on products in the past. “While I don’t think that you ever want to over rotate towards the strengths of your founding team, I’d be lying if that wasn’t admitted to be a huge bias of ours.” said Martin.

Both Dovetail founders had grown up within Atlassian, one of the most iconic PLG companies, and “did not know what different looked like.” Especially as a team based in Sydney, many customers were outside of their time zone. Therefore, the team was maniacal about building a way to seamlessly service their customers without having to talk to them. They launched functionality ranging from an easy consumer-like billing checkout flow to a good help center for self-service support so that they did not have to hire customer support reps. When they saw 2–3 customers reach out about the same issue, they would try to build the request into a product as a feature rather than handle the issue manually.

2. Obsessively listen to your users and iterate

Successful product-led companies obsessively listen to their customers. Especially in the early days, many go through a number of pivots before landing on the final concept. The best product teams quickly iterate and adapt the product based on the customer feedback they receive.

The best product teams quickly iterate and adapt the product based on the customer feedback they receive.

Loom went through four notable pivots before the current incarnation of the product. The founding team knew they wanted to work together, proposed different ideas to try, picked one,and worked at it. Loom’s first product was a two-sided marketplace that paired product experts with companies looking for feedback. However, they found that their customers were less interested in the product experts and more focused on the UI video the team had built to collect feedback on their own users.

Understanding where the demand was, Loom began focusing on building a video recorder tool that plugged into websites. The team then started hearing: “I just want to record a video myself with the camera bubble, separate from the net promoter score (NPS) and feedback widget. Do you have the video recorder separately?” In their final pivot, the team made the decision to launch the video recorder as its own Chrome extension.

Dovetail went through two incarnations. Humphrey started by building a diary studies product during his spare time at Atlassian. Despite getting to 200 sign-ups, he kept noticing that users would finish their diary study and cancel. When Humphrey left Atlassian and paired up with his co-founder Brad, they rewrote the whole product and pivoted into Dovetail today. They went back to the initial 200 customers, did hours of customer interviews and concept testing, shared product design sketches over video and did co-design sessions before launching Dovetail 2.0.

“We had about 20 to 25 diehard fans that I would talk to a couple of times a week over slack or video calls during the first six months. As we would ship new features, they would give us feedback,” said Humphrey.

3. Knowing when you have PLG product market fit may be more of an instinctual feeling

Unlike a traditional B2B business, PLG models need some level of a viral pull from users in order to succeed. Gauging true product market fit and deciding when to double down are some of the hardest decisions teams navigate early on.

“It’s more obvious when it’s not working. When you’re starting out early, you often don’t have statistical significance so trying to find the true signal of the pull is deceptively tough,” said Martin. “Most of the time, it’s crickets. But, you can see when people get excited and you lean into that excitement.”

“There was a tweet from years back: ‘You will know when you have a product market fit emotionally before you see it quantitatively in your metrics’,” said Thomas. In June 2016, Loom released their chrome extension as a stand alone video recorder on ProductHunt. In just over a week, they had thousands of signups, and on a single Saturday Loom had more signups than it had ever had in the past 6 months.

‘I don’t know exactly what we did, but this is going to be the product we are building against.’

“I was at a wedding and remember turning to my now wife and saying ‘I don’t know exactly what we did, but this is going to be the product we are building against.’” said Thomas. “So, the reason why I say knowing when you have a product market fit is more qualitative versus quantitative, is because I didn’t know which metrics were important to the consumer. I never said that X Y and Z are the metrics that are going to determine if we have product market fit or not. It was the emotional response to something we had not seen before.”

4. Deciding when to charge users is an art, not a science

Dovetail started charging customers at the outset. They opted for this approach partially because they were bootstrapped and wanted to generate revenue and partially because the signal from paying users is so valuable. “The best measure of whether somebody finds your product valuable is if I pay for it and keep paying for it. Rather than build out any kind of activity instrumentation, we decided to put Stripe in there and charge. We then saw who paid and looked at our churn,” said Humphrey.

“I would tell companies not to overthink the price per seat, it’s way more important you understand what features deliver value for organizations.”

Loom’s core focus in the early days was, “how do we get people to be successful with the videos that they already were recording and make sure that they share with others?” However, Thomas notes that one market you always serve as a startup founder is your investors. “We were having conversations about what milestones Loom needed to hit in order for investors to be really excited about Loom,” said Thomas. As they started to get diminishing returns on some of their activation experiments, they introduced a paid tier. “I would tell companies not to overthink the price per seat, it’s way more important you understand what features deliver value for organizations.”

Clockwise knew the core benefit of their product came from when many people were using the product in the company. “It is not just a little bit better but an order-of-magnitude better than the value an individual user derives,” said Martin. Thus, the team’s initial focus was around adoption and virality prior to converting the value into payment. “There’s part of me that wishes we had coupled it with paid earlier because the risk of doing it in sequence instead of being parallel is that you miss the signal of value capture,” said Martin. The team got to a stage of maturity where they knew they needed to de-risk the business model. “You cannot feel confident in product market fit until you have the capture side of that value,” said Martin.

5. Most PLG companies wait for organic momentum before turning on paid marketing

Loom’s founders did not do any paid marketing until six years after they founded the company, rather solely focusing on product marketing. “For the users naturally and organically getting to Loom,” said Thomas, “how do we make sure they understand Loom in the most intuitive way possible?” It was important to the team to know the ROI on the marketing dollars before deploying them. Thomas’ advice is to start experimenting with paid once you have a paid offering but not to let those efforts distract the team early on.

“Product is the most high leverage investment you can make.”

Similarly for Clockwise, the team wanted to hone their acquisition, activation and referral loops and layer in their paywalls before spending marketing dollars. “The reason for not doing paid sooner is that we had no idea what the unit economics of the user were. Embarking on paid before we had a sense of what we could pay to acquire them just felt like a very foolhardy endeavor,” said Martin.

“Our paid marketing is still very nascent,” said Humphrey. He strongly believes that one of a company’s best assets is its website which should showcase the product and reinforces the brand.

Dovetail largely focused on content marketing, community and brand to drive organic search SEO. “I’m a big believer in cumulative marketing. If you turn the tap off. It doesn’t matter, We could stop writing articles today and we’ve got five years worth of content that we can ride. With paid, you turn off the tap and suddenly the leads just drop off a cliff,” said Humphrey. One principle the Dovetail team has been leveraging in marketing is “DOPE” — “do once, publish everywhere.” The technique involves taking one piece of content, such as a case study, and then turning it into an asset on a website, three interview articles, social snippets and YouTube videos. Thus one case study can be turned into a half dozen pieces of content.

“Product is the most high leverage investment you can make. People still buy JIRA for features that JIRA shipped 20 years ago,” said Humphrey. “People probably underinvest in design and brand and start paid ads vs thinking about how you can craft a narrative, brand and product that creates a whole movement and community around it.”