Notorious PLG 10.26.21
Notorious PLG 10.26.21
Weekly update email on the most important product-led growth ("PLG") companies
Notorious PLG Startup of the Week:
Warmly is a free Zoom App to help VCs, founders, & GTM leaders to create 1-click virtual background “Business Cards” as a way to express yourself and what you care about. As we all know from the last 18 months, making a genuine connection over Zoom is really hard. Zoom backgrounds are such valuable real estate and an opportunity to share more about who we are, but we too often default to no background or the blurred background (boring).
With Warmly, add your pronouns or how to pronounce your name. On a per-meeting basis they can be updated to drive connections like adding the logo of anyone you meet with in your background. They can be serious, or you can toss a picture of your weekend escapades on there. It's a really fun way for teams, customers, or folks meeting for the first time to feel connected. In addition to creating a quick business card background, Warmly offers a powerful tool that provides context on every participant in the Zoom so users are better equipped for the meeting.
For this edition of Notorious PLG, Max (CEO + Co-founder) shared his thoughts on PLG with me:
“Oftentimes I ask VCs, why the heck do you back first time founders? We have NO idea what we’re doing. And funny enough the answer I get is “exactly.” It’s this reality, combined with a learner’s mindset that makes first time founders crazy enough to rethink traditional GTM motions like sales-led and instead opt for product-led.
When we were first thinking about growth at Warmly I was sent The Reforge Racecar Growth Framework and was struck by the difference between the growth strategy of “turbo boosts” (one off growth motions like a Product Hunt launch) and “engines” (repeatable, compounding efforts). Engines as a growth strategy got me excited because at the time I was being indoctrinated into the philosophy of network effects through my mentor & board member James Currier @ NFX. The idea of building a business where every new user adds more value into the system AND drives others to join the system too, is magic. Just… very hard to come by.
While Warmly (in it’s current form) only launched 4 months ago, we’ve been struck by two primary PLG nuggets:
Building a free, viral widget product is a powerful gateway drug into your full paid solution. Look at what Clearbit did with Clearbit Visitor Report (free who-visits-my-site) or what People.ai did with PeopleGlass (free faster SFDC notes). Both of these backed their way into this as a PLG lead gen tool. Warmly is following this model with Calendar Signatures by Warmly (free Linkedin info in your calendar).
PLG works best when the very action or use of the product is “broken” unless it's sharing it with someone else. For example, LinkedIn is broken unless you connect with others. For Warmly this means that you can see extra helpful information on the person you’re meeting with (like asks they have or how to pronounce their name) if you both have it.
Our PLG GTM strategy at Warmly is all about the “foot-in-the-door” tactic. We find 1 user at an account we can grow into, get them hooked on our free product, and then work to spread like wildfire in that organization. Typically, for us, it’s folks who spend a lot of time on Zoom calls that need to nail their first impressions. Since our product is built in such a way that allows users to invite, share virtual backgrounds, and build rapport with others in your organization, the word gets around quickly when people utilize our feature sets. Plus more, better, cooler things happen when your coworkers are on Warmly too.
Imagine Susie, an AE at Gainsight, who is in the all-hands meeting and Joe, a fellow coworker, strolls in the Zoom meeting with a cool Warmly Halloween background with info about himself on it. We call these virtual Business Cards. Susie sees it and says “hey where do I get one of those snazzy backgrounds?” and in 1-click, Joe can share his Halloween background (and Warmly) instantly with the whole team in that meeting. After a week, 33 AE’s in the org are already sporting Warmly backgrounds in their internal calls with teammates, customers & prospects.
Essentially, our philosophy is to use the product to create residual value that breadcrumbs behind each Warmly user, so for those that do not use Warmly, they’re easily exposed to and incentivized to join the network.
So far, we’re seeing positive results with high user density at Gainsight, Zoom, UiPath, Workato, CIENCE, and other orgs. If you want to add your business card to your Zoom or your Calendar, add Warmly for free.”
Please email any Notorious PLG of the Week suggestions to me at zach@wing.vc
PLG Tweet(s) of the Week:
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Recent PLG Financings (Private Companies):
Builder: a no-code platform to build and optimize digital experiences for ecommerce sites raised $14M Series A @ $68M post led by Greylock Partners.
Deci: a deep learning development platform raised $21M Series A led by Insight Partners
Hex: a collaborative data workspace raised $16M Series A led by Redpoint.
Primer: drag-and-drop framework to help merchants easily build payment stacks to sell online raised $50M Series B @ $425M post led led by ICONIQ.
Clarifai: a deep learning AI platform for computer vision, NLP and data labeling raised $60M Series C @ $775M post led by NEA.
Recent PLG Performance (Public Companies):
Financial data as of Friday market close.
Biggest Stock Gainers (1 week):
Asana: 15%
Zendesk: 9%
Cloudflare: 8%
Biggest Stock Gainers (1 month):
Cloudflare: 39%
New Relic: 27%
SurveyMonkey: 27%
Enterprise Value / TTM Revenue:
Top quartile: 46.9x
Median: 21.0x
Lower quartile: 11.0x
Enterprise Value / NTM Revenue:
Top quartile: 29.8x
Median: 14.7x
Lower quartile: 7.6x
Rule of 40 (TTM Revenue Growth % + FCF Margin %):
Top quartile: 50%
Median: 36%
Lower quartile: 28%
Median % of Sales:
S&M: 45%
R&D: 31%
G&A: 20%
Net Revenue Retention:
Top quartile: 128%
Median: 121%
Lower quartile: 113%
GM-Adjusted CAC Payback Period (Months):
Top quartile: 17
Median: 21
Lower quartile: 28
15 Highest EV / NTM Multiples:
Notorious PLG Dataset (click to zoom):
Note: TTM = Trailing Twelve Months; NTM = Next Twelve Months. Rule of 40 = TTM Revenue Growth % + FCF Margin %. GM-Adjusted CAC Payback = Change in Quarterly Revenue / (Gross Margin % * Prior Quarter Sales & Marketing Expense) * 12.
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