NPLG 10.13.22: PLG is Difficult
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PLG is Difficult
PLG is the hottest GTM motion out there and for good reason. For all its glory though, PLG is quite difficult. From prior benchmarking work we have done at NPLG (see here), 5-10% of website traffic converts to users. In a 2022 survey of 600+ SaaS companies by ProductLed, the average conversion rate from free to paid is 9%. PLG companies need to effectively win over customers twice: first as free users as they serve them with a killer product and then again paying customers as they serve them often with a feature-rich, team-focused product. Using these two benchmarks, if 100 users visit your website, ~5-10 will convert to users and ~1 will convert to paid. What are some winning tactics PLG companies can use to beat the odds? A few of my favorites:
Have a super clear call to action / value prop: A good litmus test if a user can’t understand exactly why they should use your product after reading the one sentence tag-line on your homepage, go back to the drawing board and try again.
Consider removing email login: how many times have you rolled your eyes and given up when a company asks you to login with email before you see the clear benefit of doing so? Considering going “ungated” and allowing users to engage with the product without having to login. Read more in this prior edition of NPLG.
Deliver value in less than 5 clicks: the bar keeps raising for how quickly PLG companies need to deliver value. If a user has to do more than 5 clicks to see value, they will likely give up and move on and go back to looking at TikTok. I would have said 10 clicks a year ago, but push your team to deliver value with fewer and fewer clicks.
Prove out PMF with a free product first: if you can’t demonstrate engagement and retention with your free product, you certainly won’t with your paid product.
Although difficult, PLG is worth the squeeze: more top of funnel, lower customer acquisition costs, higher retention, higher valuation multiples, etc.
I would love feedback. Please hit me up on twitter @zacharydewitt or email me at zach@wing.vc. If you were forwarded this email and are interested in getting a weekly update on the best PLG companies, please join our growing community by subscribing:
PLG Tweet(s) of the Week:
Recent PLG Financings (Private Companies):
Seed:
Lightdash, an open-source business intelligence (BI) platform, has raised $8.4M at a $30.4M valuation. The round was led by Accel, with participation from Moonfire and Y Combinator.
Series A:
Regie.ai, an AI content platform designed to offer an all-in-one content creation and management system, has raised $10M at a $55M valuation. The round was led by Scale Venture Partners, with participation from South Park Commons, Foundation Capital and Day One Ventures.
Xembly, a platform designed to automate the meeting life, has raised $15M. The round was led by Norwest Venture Partners, with participation from Ascend Venture Capital, Seven Peaks Ventures, Lightspeed Venture Partners, and Flex Capital.
Series B:
Golden, a self-constructing knowledge database platform intended to map and generate human knowledge in order to accelerate discovery and education, has raised $40M at a $160M valuation. The round was led by Andreessen Horowitz, with participation from Protocol Labs, OpenSea Ventures, FalconX, Scale Asia Ventures, tracvc, Xoogler Ventures, Chaac Ventures, Harpoon Ventures, MVP Ventures, Socii Capital, DCVC, Vela Partners and HNVR Technology Investment Management.
Tines, a no-code automation platform aimed at security teams, has raised $55M at a $355M valuation. The round was led by Felicis, with participation from Accel, Blossom Capital, Addition, and Lux Capital.
Series C:
Securiti, a startup with a broad platform of services to deal with not just privacy, but also data security, governance and compliance, has raised $75M. The round was led by Owl Rock Capital, with participation from Mayfield and General Catalyst.
Recent PLG Performance (Public Companies):
Financial data as of previous business day market close.
Best-in-Class PLG Benchmarking:
15 Highest EV / NTM Multiples:
15 Biggest Stock Gainers (1 month):
Complete 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. Recent IPOs will have temporary “N/A”s as Wall Street Research has to wait to initiate converge.