How did the largest product-led growth enterprise company in the world find success? In this week’s episode of CRO Confidential, Cameron Deatsch, CRO of Atlassian, shares his wisdom with Founders Fund Partner Sam Blond.
Atlassian is trading at over $40B with revenue north of $3B. When the company started 20 years ago, it didn’t hire salespeople. Not because they planned to start as a product-led company but because they couldn’t afford to.
So what should earlier-stage companies do: immediately build out a big sales team or focus on product-led growth?
Atlassian’s PLG Model
To understand and potentially replicate Atlassian’s success, it helps to understand what made them different.
Currently, they have over 250,000 paying customers and hundreds of thousands of free customers. The company’s first decade was all about enabling a self-serving product experience for the entire journey, from awareness to long-term success. It wasn’t until 12 years in that they hired their first commission rep.
Now they have sales reps, but still consider themselves PLG. Here’s why.
There are three ways to buy from Atlassian.
- Directly off the website.
- Through one of their many 3rd party channel resellers.
- Directly through sales teams.
Unlike many sales teams, this one only engages with existing customers of a certain size. Out of the 250k paying customers, only five or six thousand connect with an account manager, and even then, it’s purely an expansion conversation.
By the time a customer engages with a human, they don’t need to be convinced of the value of Atlassian.
Millions From One Or Thousands From Many
The million-dollar question every company should answer as early as possible: Is your goal to have a few thousand customers and make millions from each or have hundreds of thousands of customers and make tens of thousands from each?
If you don’t know, the PLG approach is to get hundreds of thousands of customers. There’s no wrong answer here, but it will inform the path you take for your business.
For Atlassian, a product-led growth model has been great for providing solid growth consistently for many years. Of course, they’ve never had triple-digit growth. Instead, low to mid 30% growth every year for 20 years has brought the company to where it is today.
Deatsch’s advice for those starting out: be patient.
Atlassian had the advantage of no funding, so no board to answer to. But in general, urgency is always helpful, balanced with thoughtfulness for what you want your business to look like over the next 30 years.
Don’t Tie Revenue To Headcount
“You want to get away from a business model where every incremental dollar requires incremental hiring,” says Deatsch. So instead of focusing on scaling headcount quickly, work toward growing revenue quickly.
If headcount becomes the currency of your organization, your revenue becomes tied to the number of salespeople you have. Flip it on its head and figure out how to bring in more customers and dollars per customer through innovation instead of sales reps.
If you don’t instill this practice early on, it’s very difficult to add later.
Generate More Revenue Per Customer
The multi-product offering is a common consideration for startups to generate more revenue within an existing base. A “land and expand” model is how Atlassian does it. Land them for free and expand into paid additions and multiple products.
When you create a new product, determine whether it’s land (new buyer, cohort, or segment) or expand (expanding with an existing customer). It’s easy to get confused, which can hurt GTM.
For GTM tactics, you’ll approach land vs. expand differently.
Expanding is easier for immediate revenue because converting customers is simpler. If you’re expanding, you’ve trained your customer how to buy from you. All you need to do is make it look, smell, and taste a lot like what they’ve bought. Keep it as simple as possible.
For land, go the other way. Treat your new product almost like a separate business. This gives you infinite possibilities on how to bring it to market. You can train new buyers. Trello is a land product for Atlassian.
Product-Led Growth First and Sales Second
At Atlassian, a small portion of customers receive human-based support, and all are deeply engaged with the company before ever getting to this point.
Why do they do it this way?
By gathering five or ten years of historical sales data with customers — what they’ve bought, how they’ve grown, etc. — Atlassian’s team can ensure they’re engaging with an expensive sales resource. This means the return is huge compared to most inside or field sales organizations.
For example, say a company has organically grown 30% year-over-year. If Atlassian adds an expensive sales rep, they need to be sure they can grow the company by 50% year-over-year, so they don’t eat into profits.
Acquiring Customers Of All Different Sizes
It seems unique for an enterprise software company to serve the smallest companies in the world all the way up to the largest banks in the world. From a product strategy standpoint, how has Atlassian been so successful at acquiring customers of all different sizes?
The first questions they asked themselves were: what is our customer, and what are we building our software for?
For Atlassian, it was for teams within organizations. The goal wasn’t to land Adobe but to land a team within Adobe.
That’s how they reached companies across the board because it wasn’t a top-down approach.
Of course, every model will be different. HR management solutions can’t take a bottom-up approach. Specific tech categories will require centralized, top-down decision-making for the entire business.
But if you don’t require a top-down approach, pay attention to two things.
- Ask yourself if your product strategy can drive bottom-up organic adoption with a small set of users within an account.
- Determine whether you want to build a self-serve or sales business. It’s much easier to build self-service first and add sales later than build a sales business and add self-serve later.
Growing the largest product-led enterprise company in the world won’t look the same for any company. As early as possible, determine what kind of product you’re making, who it’s for, and whether you want to be more product-led or sales-focused. As you progress, continue iterating and adapting to what needs organically rise within the company.