We got the chance to chat with Kyle Poyar, Operating Partner at OpenView, and expert on what drives a fast company's growth. Kyle took us through the origins of product-led growth (PLG), how it became a household concept, and what the future looks like for PLG.
Here, you can read the key highlights from the session, but if you want to listen to the full interview, check out the podcast below.
Q: Where did the whole product-led growth concept come from? What drove you to share the origin story?
A: Product-led growth is actually our product at OpenView. We helped coin the term back in 2016, and it’s really worked for the last several years. I've tried to put it on the map and build a community around what it actually means to embrace PLG. It’s been really helpful for folks because everyone tries to build a new category or something that ends up getting adopted and it’s a very long and hard journey.
It took years before the term took off, and it required us as a firm to focus on putting all of our eggs in one basket rather than getting distracted. It also required a community partnership, so while we had a microphone, we could also share what we were seeing in our portfolio.
The only way it was able to take off was by having other people use it and put their spin on it. There can be a desire sometimes to keep a product tight-knit and close to you as its creator, but that actually limits the number of folks who will use it.
So I figured it would be helpful to go behind the scenes to learn why PLG was invented as a term, and also understand the fascinating history behind how it took off and became a household concept.
Q: What were those early product-led growth days like? What topics were you thinking about?
A: In 2014/2015, product-led growth wasn't even a term. Back then, there was a standard set of advice on how to grow a software company. It was all about how to build a BDR team as well as inside sales, customer success, subscription software pricing, and good, better, best packages. These were the things known as the Salesforce model, the concept model of building a cloud company.
So we started looking at companies in our portfolio and others that had a different approach. One of our early PLG investments was a company called Datadog. When OpenView was looking around, they noticed that Datadog was growing fast, but didn’t have an outbound sales motion. Even that was seen as an investment risk because they didn't have a way to spend money to make money,
We didn't fully understand the concept of product as a marketing channel and as a way of being your best sales rep. So it was watching not only that success story, but many others that showed us that something else was happening here.
Many of these companies appeared to be outliers in the best possible sense. They were growing extremely quickly, their customers loved them, they had very efficient business models, and yet they were seen as doing something wrong or against the principles of how to build a software company. But these companies were the ones that were wildly succeeding in many cases.
There was also talk about these companies being bottom-up or freemium companies that were riding the wave of the consumerization of IT. But those were tactics, there wasn't a cohesive playbook around thinking of it as just a set of principles that could be applied to both business contexts.
So that encouraged us to spend a lot of time in this area, and we actually convened a working group in 2016 to determine what these PLG principles were, what the characteristics of the outlier companies were, and what we should call this thing we were seeing in the market.
That was a very fun time, but also really challenging because there were a lot of principles that were to be determined, even the role of sales in a product-led growth company. Then other companies had really interesting approaches to pairing self-service and sales to expand enterprise accounts.
We had so many debates about not only names, but also what the core tenants were, what was required to be product-led, and what things could be optional or that could be figured out later.
Q: Why did you feel it was important for you to name the concept?
A: For us, it helped to crystallize the essence of what we were trying to say. Although, we didn't end up coming up with a name by committee. A group of folks came up with probably 100+ names in total, including names like user-focused go-to-market strategy. Now, that was a mouthful.
What ended up working best was when my partner colleague Blake Bartlett would start using terms in emails to founders that he trusted, or he’d try out a name or a new principle if he was going on a podcast. Just like a stand-up comedian goes to tons of open mics and tests how the audience will respond to a joke, that's what we had to do to pick a name that would really work.
We had to narrow down a list of the best candidates that we thought represented what we were talking about. We wanted something that people would viscerally understand and agree that it described the kind of company they were building.
Without being deeply resonant with that audience, I don't think we would’ve picked a name that was able to have as much access as product-led growth.
Q: Were there low points or parts of the journey that felt difficult? What was the attitude throughout that process?
Q: That creating journey was certainly a lot of fun because we were talking to amazing companies and deep in ideation mode. We had spent 2016 trying to figure out what this was and our initial content was about that. Anyone at the firm who was going to speak at an event just started trying to talk about PLG whenever they had the opportunity.
But then in mid to late 2017, fatigue started to kick in; we had been talking about this for a long time and were the only ones talking about it. We'd talked about the same principles over and over again, just in different ways.
As someone that loves to create, and loves new ideas, the challenge was really in the consistency and the focus, and it was especially difficult not seeing the immediate results.
Certainly, if you looked on Google around that time, we had taken over the entire first page of search results and felt super proud of ourselves for that. But no one else was using it externally, and it certainly hadn’t broken through to the mainstream yet.
It can be challenging to spend six months to a year or more writing and talking about something that's just not breaking through, especially when there are other topics that you’re breaking through on, so it’s hard to maintain that discipline.
We also debated endlessly about whether there should be a hyphen in ‘product-led growth’. We've actually gone back and forth between both multiple times.
Q: When do you feel like product-led growth started to be picked up and adopted? And how did that feel?
A: From 2018-2019, we’d decided as a firm that we had to commit to category creation. It couldn't be a side project or just a part of someone's time, we needed to go big or go home. So we decided that every event that we had was going to focus on PLG.
Our podcast was pretty general about how to build a software company at the time, so we decided it was going to be explicitly about PLG. We were even going to track how many executives introduced into our portfolio were from companies that we would consider to be product-led.
It was at that time that we started to see it break into the market. One of the main signals was that we started seeing it pop up from people that we didn't know, people who were totally unaffiliated with us and hadn't necessarily been to our events. One was a company called App Trinsic, which is now Gainsight Product Experience; the homepage for their product was actually all about PLG.
We thought this was super cool. Not only was PLG now a term, but companies were creating their product categories based on this term. Wes Bush, the owner of Traffic Is Currency, started teaching courses on how to do product-led growth and has since turned his agency into an exclusive PLG agency.
We also started to notice PLG meetups were being held both nationally and internationally, and when we saw this start to happen, that gave us a lot of conviction that this was taking off and had become something that people truly felt ownership in.
Q: Do you have any other advice you'd give to somebody who is embarking on that audacious goal of category creation?
A: Be patient, as it takes a while for it to pay off. Last year, product-led growth was named the buzzword of 2021. It wasn’t a new buzzword, but it wasn't until last year that it really took off and was used in the mainstream.
Another thing for us that was ultimately quite successful is that we would try to speak about the best practices of the companies that we really admired and co-market with them. If we saw companies doing really interesting and innovative things, we'd want to tell the story of how they built that company and how they optimized it over time.
This was partially to promote PLG best practices, but also so more people could understand the role models and have aspirational companies they could look up to by seeing the specific things they did. I think that helped inspire folks to replicate that model and help them wrap their head around what it meant to be PLG.
I would encourage folks to think about how to bring in other influencers and successful examples that are trying to do the thing that you want to evangelize. And the more you talk about what they're doing and how those are best practices, the less promotional it becomes, and the more it becomes trying to help and add value to your audience.
Q: What does the future look like for PLG?
A: I've been working with a couple of colleagues on another working group. Looking at the market, PLG has certainly taken off when you see a lot of the successful companies that are going public and raising unicorn valuations, they're adopting PLG characteristics, but you're also starting to see some nuances.
Oftentimes, these are API-first hyperconnected products where the users of a product might be other products, rather than human users. Or these companies are scaling with usage-based pricing, which allows folks to start for free and only pay as they see value.
This is a form of PLG because as you invest in R&D and drive more product option, you naturally generate more revenue. But that's not something that we thought of as classic PLG back in the early days, or even this rise of really innovative, indirect monetization methods.
Look at companies like Ramp, which offer a suite of finance-related tools and give them away for free, and then monetize on payments and financial transactions. You could even look at Shopify, which now generates most of its revenue not from software subscriptions but from other services.
If we live in a connected API-first model, the lines are blurring between software and non-software. People just expect a connected workflow to solve their work-related problems. When you look at these trends individually, they might not raise an eyebrow, but collectively, these indicate that we're in a new era for PLG.
We’ve debated for a while if this is something fundamentally different than PLG, or if it’s more of an evolution. And what I determined is that a lot of the same learnings about PLG apply, but now there are also new learnings that we have to take into account if we want to stay ahead of the pack and build that next generation of companies.
So essentially, the bar has been raised for what it really means to be PLG in this new era. We're calling it the age of connected work, and we’re excited in the coming weeks to share a new set of PLG principles to win in the age of connected work.
Q: Tell us a little bit about you and what's exciting you about the future. What's your next big thing?
A: My team at OpenView works with our portfolio companies on anything related to growth and go-to-market strategy. A lot of what we write about externally is about questions that we get from founders or their leadership teams. We try to study them and learn from what other companies are doing, and then anonymize those learnings and share them back out as a blog post or a benchmark report.
A constant focus for our team is staying on top of what founders are thinking about, understanding what their struggles are when it comes to building a software company or adopting PLG, and just trying to learn from what other companies are doing.
One of those other emerging areas is around usage-based pricing. We used to think about SaaS as synonymous with charging on a subscription basis. We often charged annually, a year upfront, and then maybe had a sales rep go and close those deals. They were compensated based on the committed booking, and then they handed off the deal to customer success to manage the renewal.
In a usage-based model, software acts a lot more like a utility. You can use it how you want, you can scale it up and down on-demand, and you can potentially churn any time by no longer using the product. For a software company wanting to sell on a usage basis, it requires rethinking all of the operating assumptions around how you build and scale this kind of business.
I've been fascinated by this topic over the last year and continue to be. There are so many unanswered questions. What does the org structure look like for a usage-based company? How should they compensate the sales team? Should sales stay with customers post-sale or not? There are just so many interesting questions that will continue to be a major focus of mine in the next six to 12 months.
Looking to accelerate your learning and master product-led growth?
Our Product-Led Growth Certified course will allow you to:
👊 Understand the breadth of product-led approaches.
🔥 Gain in-depth knowledge of the current state of PLG and how it came to be.
🚀 Walk away with and apply the common components of PLG with proven strategy.
👊 Up-skill yourself in the core competencies required for getting started in PLG.