NPLG 8.10.22: What is Community-Led Growth?
The best PLG founders, startups, strategies, metrics and community. Every week.
Current subscribers: 2,242
What is Community-Led Growth
Community-led Growth is a powerful, emerging GTM strategy that is gaining momentum in the startup community. Powerhouse PLG companies like Notion, Figma and Miro are pioneering community-led growth. This is the first time I am writing about Community-led Growth and I plan to spend more time in future weeks covering the topic in more detail. The goal of today’s post is to introduce Community-led Growth by defining it.
What is Community-Led Growth? Community-led growth is a GTM strategy in which companies build and foster vibrant communities of passionate users and customers who become advocates and influencers. These passionate community members organically recruit new users into the product. A strong community not only helps drive new customer acquisition, but can increase engagement and upsells by directly improving the product experience and by increasing network effects.
What are some ways the community can help the business? There are many:
Customer acquisition. Today, we tend to trust people more than we trust brands. Thus, social proof is one of the most valuable currencies to acquire new users. Especially in today’s business context of “bring your own tool to work”, users pride themselves on what tools they choose. The tools become part of their professional identity. Passionate users quickly become advocates and help recruit friends, colleagues, and followers into the tools they love (example below). Notion has mastered this and community referrals and social are now their largest top of funnel user acquisition channel. A signal of strong community-led growth is community activity on Product Hunt: almost daily, I see a community member sharing a new Notion template or a Figma plugin. In fact, today there are 2 Notion templates and tools launching on Product Hunt.
Engagement and Upselling: Communities often drive engagement by coming together to share best practices, content, success stories, templates and discussions. User-generated content can help expose other users to new use cases and product functionality. For Notion, users create and share new templates that make the product experience better for other users. Notion features these user-generated templates directly on their website (see below). There is a positive feedback loop between engaged community members and product value. The richer the product experience, the more likely users are to upsell to premium features.
Customer support: Users can play the role of customer support. As users ask each other questions and answer how to troubleshoot issues, this builds up a repository of FAQs. Vibrant communities deflect many of the questions that would have gone to a customer service rep. The Tesla community is known for this as there are various forums where Tesla users help each other out and owners often report higher satisfaction with the community than with the actual Tesla service centers.
Product feedback: A vocal community is not shy about sharing product feedback in public and in private Slack channels.
I would love feedback. Please hit me up on twitter @zacharydewitt or email me at email@example.com. If you were forwarded this email and are interested in getting a weekly update on the best PLG companies (private & public), please join our growing community by subscriving:
PLG Tweet(s) of the Week:
Recent PLG Financings (Private Companies):
Footprint, a company aiming to change the way companies collect and store information, has raised $6M. The round was led by Index Ventures, with participation from BoxGroup, Operator Partners, Lerer Hippeau, Palm Tree Crew, Not Boring Capital and K5.
Halliday, a startup that is building a BNPL style financing product that targets gamers who want to pay off in-game purchases over time, has raised $6M. The round was led by a16z crypto, with participation from Hashed, a_capital and SV Angel.
Rill Data, a fully managed cloud service platform intended to provide data analytics for event streaming, has raised $12M. The round funded by Park West Asset Management, Sierra Ventures, Bloomberg Beta, True Ventures and DCVC.
Kurtosis, an end-to-end developer tool system for distributed crypto apps, has raised $20M at a $97.5M valuation. The round was led by Coatue, with participation from Coinbase Ventures and Mantis VC.
Sprig, a startup offering tools for user and software product research, has raised $30M at a $330M valuation. Investors include Andreessen Horowitz, Accel, First Round Capital, Elad Gil and Figma Ventures.
Cybrary, a cybersecurity training platform, has raised $25M. The round was led by BuildGroup and Gula Tech Adventure.
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.