Inventing product-led growth
How PLG went from idea to the biggest trend in software
👋 Hi, I’m Kyle from OpenView and welcome to my newsletter, Growth Unhinged. Every other week I take a closer look at what drives a SaaS company’s growth. Expect deep dive takes on product-led growth, pricing, benchmarks, and much more.1
Product-led growth—PLG for those in the know—has become one of the biggest trends in software seemingly overnight.
Buzzwords come and go, but few have had the staying power of PLG. So how did it get created and how did it become a thing?
The story is actually an OpenView brainchild eight years in the making. It wasn’t some preordained conclusion. In fact, at one point PLG was seen as an investment risk rather than a massive opportunity. It came about through a combination of thoughtful observation, standup comedy-like improvisation, and plenty of help from the community.
I sat down with my colleague and OpenView Partner Blake Bartlett to talk about why he coined PLG and how it became a household term.
2012–2014: The inspiration for PLG
Blake entered VC steeped in what he now considers to be an old-school mindset. Any software category had a winner for the Enterprise and a winner for SMBs. If a category was large enough, you could have a winner in the Midmarket as well. Each player carved out their own market niche; it was rare for companies to cross paths. Or so Blake was led to believe.
Then he noticed companies like Optimizely started to serve everyone: individuals, freelancers, agencies, SMBs, and even large enterprises like Pizza Hut. Blake invested in Optimizely at Battery so he saw firsthand that with the right product, you could build a different kind of company.
In the early days of Optimizely, the website just had a search bar. You could type in a URL and try out Optimizely for yourself; you’re now editing a live website in just two clicks. Want to change the hero image in the New York Times? All of a sudden that’s possible.
There was true novelty here. Product was Optimizely’s top marketing asset. Users could see an “aha” moment almost instantly.
Observing disruptive products like Optimizely inspired Blake to write on his OG OpenView bio in 2013: “Blake helps identify value and lead investments in product-led businesses driving market dislocation.” He followed that up with a blog post in 2014 called Product-Market Fit Is Not Enough. In Blake’s mind achieving product-market fit is only half the battle. Founders should be obsessed with product distribution, too. Great companies pay close attention to how to remove friction and turn their product into a marketing asset.
“When the friction is removed, and time to value decreased, a company gets closer to true marketing nirvana – using your product as your primary marketing asset.” - Blake Bartlett in 2014, channeling PLG into existence
Blake and the OpenView team started investing in other disruptive companies like Datadog2 and Expensify*, and closely watched what was happening outside of the portfolio. This new crop of companies was wired differently and broke the traditional rules about how to grow. They didn’t have a way to ‘spend money to make money’, yet they still managed to achieve eye-popping growth.
“Back in 2013 we originally had a concern that Datadog hadn’t demonstrated how to spend money to make money. There was virtually no outbound motion. We didn’t fully get the concept of PLG yet.” -Blake Bartlett
There used to be a trade-off between growth versus profitability. These companies grew fast and profitably. They were outliers in the best possible sense. It was time to look closer.
2015–2016: Coining product-led growth
It was obvious these companies were different. Fundamentally different from their peers, in fact. And no one was catching on.
At the time, most were calling these business models “freemium” or “bottom up.” But those labels didn’t capture the breadth of what was going on, according to Blake. These companies were different on a DNA-level.
Meanwhile, the market continued to offer up tired best practices about inbound marketing, building an SDR team, and hiring a huge sales team—the old-school ways to grow.
No one was talking about a different way to grow.
“That’s what gave us the additional conviction that we could define a new mega trend. Barely anyone else was noticing, and no one else was trying to define it and evangelize it.” - Blake Bartlett
True to fashion, OpenView Founder Scott Maxwell pushed Blake to pull together a working group to study these proto-PLG companies and develop a set of frameworks and best practices around how they worked.
Blake started to identify the key differences between these companies and their peers. These companies were more focused on the end user rather than the executive buyer, for example. This led Blake to consider the term user-focused GTM, but that didn’t exactly roll off the tongue.
Blake collected more than 100 names in total. The one he kept coming back to was product-led growth.
Why? It sounded good.
Whenever Blake tried it out in an email or on a phone call, it just clicked. Fun fact: the first test case was Alex MacCaw, Founder of Clearbit, and it was on May 6, 2016.
The early definition of product-led growth: a go-to-market strategy that relies on product features and usage as the primary drivers of customer acquisition, retention and expansion.
Some questions remained unresolved at the time and Blake didn’t want to be overly prescriptive too soon. One was the role of sales in product-led growth (still a hot topic). There were companies that at the time said “we do not do sales” and it was working for them (ahem, Atlassian). But there were other examples like Datadog where sellers played an important role in working with customers to expand large accounts.
“We didn’t do a dramatic external A/B test of the term. We were looking for something that we really believed in. Since we were doing something new, we wanted to get internally aligned and really excited about it. Then we could iterate on how we’d describe and talk about it.” - Blake Bartlett
2016–2017: Testing and iterating on PLG
By 2016, Blake just started talking about PLG whenever he could get a microphone. An early trial run was a community webinar from June 2016. His first big test: the SaaStr podcast with Harry Stebbings. Then a keynote talk at SaaStr 2017. (Side note: Blake looked a little different back in the early days of PLG.)
It was a bit clunky at first with plenty of creative iteration. Like a comedian goes to open mics to craft their jokes, Blake would practice talking about PLG and see how folks responded. Maybe he’d workshop a rule of PLG, or maybe he’d compare and contrast against sales-led growth.
Others at OpenView (*guilty*) started to get excited and engaged. Anyone who had a keynote going on tried to opportunistically talk about it. Product-led growth became the theme of OpenView’s 2017 Product Leadership Forum. “We were putting a lot of effort into it, but it wasn’t a firm-wide priority,” confided Blake.
2018–2021: Putting PLG on the map
The promo efforts were going well, but PLG still wasn’t mainstream.
Once again Scott set Blake on the right path. Scott drove making PLG a core strategic pillar across the entire firm and OpenView’s #1 narrative message.
“As a team we decided to commit to category creation. It couldn’t be a side project.” - Blake Bartlett
OpenView’s goal for 2018 was explicit: “Put PLG on the map.” Every team was challenged to identify ways to contribute to that ambition.
That’s when OpenView put on its PLG West and PLG East summits. PLG became the whole theme of OpenView’s BUILD podcast. Every story the firm covered on the blog included PLG. The firm even measured the percentage of people in its executive network who were PLG leaders.
I asked Blake when he knew these efforts for working. His answer: when other people we didn’t know were using the term. Wes Bush at ProductLed (previously Traffic is Currency) became a vocal champion for PLG. Mickey Alon at Aptrinsic (now part of Gainsight) was another. In fact, Aptrinsic’s hero tagline explicitly mentioned product-led growth. The term was starting to break through into the mainstream.
By 2020 and 2021 the wave had really started to crest. More people were reading OpenView’s content, more people were using the term PLG. Other VCs were even taking notice.
Public company CEOs from MongoDB to Toast were increasingly talking about PLG being core to their strategy in earnings calls and S1s.
Tomasz Tunguz at Redpoint Ventures predicted that in 2021 “product-led growth becomes the standard GTM for software and infrastructure companies.”
Bessemer called product-led growth one of the “three GTM strategies top cloud companies employ in the New Normal” in its State of the Cloud 2021 Report.
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2022–Beyond: What’s next for PLG
In Blake’s view, PLG is going to touch every category and we’re still in the early years.
“It’s a decades-long transition. It took decades for companies to move to SaaS. Still most software companies don’t have a true PLG motion or a PLG leader.” - Blake Bartlett
He sees the lines blurring between B2B and B2C. At the end of the day, business users are just consumers at work. He expects the next mega companies will be hybrid B2B-B2C recurring revenue businesses like Grammarly, Calendly*, or Speechify.
As PLG goes from novelty to the norm in software, I suspect that companies will push what it means to be product-led even further. They’ll start to pair product-led distribution with API-first products, composable user experiences, usage-based pricing, and vibrant user communities.
Regardless of what happens, one thing is clear. We now live in a product-led era. I can’t wait to see what comes next.
*Note: Datadog is a former OpenView portfolio company. Expensify and Calendly are current OpenView portfolio companies.