Notorious PLG 9.21.21
Weekly update on the most important product-led growth (PLG) companies
Notorious PLG Startup of the Week:
Linear is a modern, issue tracking tool that helps streamline software projects, sprints, tasks, and bug tracking. As the product becomes the epicenter of every technology company, developers and product teams need better tools to manage the software development process. Linear is not only user-friendly, intuitive and lightning fast, but it is opinionated. This means Linear doesn’t require significant setup time and configuration as it’s default settings guide users to best practices for managing software development.
Given that the best product often wins for PLG companies, I am always impressed when the founding team has design DNA. Karri Saarinen (CEO and co-founder) was formerly the head of design at Coinbase and a principal designer at Airbnb. I first met Karri over breakfast in 2019 and was impressed with his product depth, design style and user empathy. Two years later, it is no surprise that Karri has built a product that people love (see Twitter user love). Linear is quickly becoming the standard for high performing teams like Retool, Loom, Descript. Linear empowers teams to increase product momentum and ultimately find PMF faster.
For this edition of Notorious PLG, Karri shared his thoughts with me on PLG and Linear’s GTM approach:
“Linear has been product led from the very beginning. We would have never considered a sales model, since it’s not in DNA (the founders worked at Airbnb, Coinbase, Uber etc) and secondly because of our target market. Personally, I like to buy software that I can try out myself without having to spend time on sales calls. Our potential customers are people like us, engineers, designers, founders and software teams. Those people are usually very busy and very good at evaluating products and they value the experience over show or tell. It’s easy to say the product is fast and easy to use but it’s harder to build a product that meets or exceeds the customer’s expectation of what is fast and easy to use.
PLG model also forces you to make the product as best you can from the very beginning. Essentially the product and the built in onboarding is the sales motion, so it should be so good that people buy it based on that. Sales models often can hide problems in the product much more since the sales process can act as a workaround for a lot of problems. Not fixing these problems early on can mean they become major flaws later. If you can get good traction and retention without sales, it usually means that there is demand and the product is working well to meet that. With most customers at Linear we have no touch or very minimal interaction before they buy. They see the quality of the product and commit based on that. This also helps us scale much faster with a smaller team and keep our focus in improving the product.
That doesn’t mean that we would not never do sales alongside the product led growth. If you have very well working product led growth, then layering sales and marketing can increase that by 5-15x fold (Slack & Zoom are good examples). However, for now our focus has been making sure the customers who come to us are successful. From the very beginning we offered companies onboarding sessions or chats with their teams if they had questions or wanted to learn more. With our major customers, we also create shared Slack channels that we can use async both directions to get feedback, answer questions and help the customers to be more successful. The more of your customers are successful in the long term, the more they will grow and the more they will spread the word to bring us new customers.
Like with the consumer market, I believe PLG will be the main model for B2B (if it already hasn't) and eventually enterprise as well.”
Please email any Notorious PLG of the Week suggestions to me at zach@wing.vc
PLG Tweet(s) of the Week:
Extra credit: Productled.com recently published a comprehensive list of the ~200 tools and applications powering the PLG tech stack. Check it out here.
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Recent PLG Financings (Private Companies):
Folk: Paris-based collaborative tool to centralize, organize and activate contacts raised $3.3M seed round led by Accel.
The Org: network of public org charts for employees at startups raised $20M Series B at $100M post-money led by Tiger.
Supabase: open-source alternative to Firebase raised $30M Series A led by Coatue. P.S. I really like Supabase’s website.
Rewind: automatic data backup platform raised $65M Series B led by Insight.
StrongDM: infrastructure access platform raised $54M Series B led by Tiger.
Snyk: developer security platform integrating directly into development tools, workflows, and automation pipelines raised $300M Series F at $8.5B post-money led by Sands Capital and Tiger Global Management.
Fivetran: automated data deliver platform raised $565M Series D at $5.6B post-money led by A16Z. Fivetran announced the $700M acquisition of HVR. See Fivetran’s blog for more details.
There are many developer-focused companies that made the financing list this week. Developers are increasingly becoming the decision-makers and buyers of new products and services (PLG criteria: end user = buyer).
Recent PLG Performance (Public Companies):
Financial data as of Friday market close.
Biggest Stock Gainers (1 week):
Asana: 21%
Digital Ocean: 17%
WalkMe: 16%
Biggest Stock Gainers (1 month):
Asana: 59%
Digital Ocean: 55%
Bill.com: 41%
Enterprise Value / TTM Revenue:
Top quartile: 46.3x
Median: 20.7x
Lower quartile: 10.8x
Enterprise Value / NTM Revenue:
Top quartile: 34.0x
Median: 15.7x
Lower quartile: 8.3x
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: 19%
Net Revenue Retention:
Top quartile: 125%
Median: 120%
Lower quartile: 112%
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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