Congratulations! You’ve built a product that’s proven itself in the marketplace! So how can you leverage that product’s success to obtain the valuation and funding you need to scale?
Ashley Smith, Venture Partner at OpenView provides insight on what investors are looking for in product metrics and growth indicators so you can capitalize on your product’s story for funding.
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Ashley Smith | Venture Partner @ OpenView
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I’m Ashley. I’m am a venture partner at OpenView, based out of Boston. I live in New York City. I’m the only New York partner. Everyone else is in Boston. I commute a lot.
Product-led growth is something, interestingly enough, that I’ve been doing my whole career. I’ll talk through my career in a bit, but it was … I never had a title for it, and then when I met OpenView, they gave me a title for what I do, which is kind of interesting. A lot of people here have been like, “Hey, I read your content. Hey, I read your content,” which feels really good, but I’ll talk through all this today. I’m talking about product-led growth as an investment strategy, but really my background is 10 years of operating experience in the product-led growth world. Now I’m investing in that. I say investment strategy, but really it’s like how do you build a company that’s focused on product-led growth?
I have a clicker, a microphone and a computer. Got this. That’s me. That’s my new headshot. I don’t like it. My background, I’m from Georgia. If you can hear a southern accent. Some people can’t, some can. I’m from the south in the US. Grew up on a farm, which everyone’s always like, “What do you mean?” I’m like, “I actually grew up on a farm.” Was obsessed with mathematics, went to college at 16, became an engineer. Thought I wanted to be an engineer, quickly realized I actually prefer the customer facing side of the startup world.
So, was about number 20 at Twilio. Twilio, for anyone who doesn’t know, is a voice and SMS API for communications. When I started, they only had voice. That’s how early I was. We launched SMS a year later. Who here’s heard of or used Twilio? Awesome. Okay. After that I went and led go-to-market at Parse. Parse was a mobile app platform that got acquired by Facebook. I was about 10 there and we got acquired and we were 20. Has anyone ever heard of Parse? Yes. Parse is my favorite company I’ve worked on because I put so much heart and love into that thing, and it was really truly product driven. So, we’ll talk through that.
GET Lab. GET Lab, I was as a CMO there. I was in the first 10. Actually it was a Dutch founded company, so got my European roots there. I’ve always lived in New York though. I unfortunately never lived over here. GET Lab, I was there through the series A, helped raise the series B, and as we were raising the series B I got the venture bug and realized that I actually wanted to work with the people I was pitching to. I enjoyed that weird dynamic of trying to impress them and get them to invest in my company.
And so, that’s kind of when I started saying, hey, I want to do this, but GET Lab is a perfect example of community driven growth. If anyone here knows the GET Lab community, it’s incredible. They told everyone about GET Lab, and that’s how we built that company. I didn’t have a hard job to do. Everyone’s always like, “how did you guys scale so quickly,” and like, everyone loves this product.
Then GitHub, who’s heard of GitHub? Yeah. GitHub was a very different story for me. I obviously am used to being in the first 10 to 20 of a company. At GitHub, I was in the last 18 months coming into acquisition, which is a nightmare, but I was one of 5 people running the company. The CEO of publicly stepped down and left it to us to take care of. And, wonderful products. When you think about product driven growth, there are not many companies in the world that you can say a community has driven a company to a $7.5 billion acquisition more so than GitHub.
So, super proud of my career, not because I was there, but just because of the products in my portfolio and my background, I loved them. I’m sure all of you that are startup founders love your companies and your products, but I have so much love for all of them. So that’s me. I actually met OpenView when I was raising the Series B for GET Lab. They were very nice to me and they helped me. They actually did what they said they were going to do, which a lot of venture firms did not help us. They told us they would do tons of all this pricing stuff and help us with hiring and introduce us to customers, and all of these things. That just didn’t happen, but OpenView, I had like 30 emails in my inbox of like, here’s the person you want to talk to you, here’s how you do pricing, here’s how your growth strategy should look like. They were so helpful.
Then so as I was moving into venture, I thought I want to join people that are helpful also, because I like helping founders. The reason I want to be an investor is to help founders. So, OpenView worked out for me. So super quickly, OpenView does $5 to $25 million checks, A, Bs and Cs. Three to five investments a year, and I have an entire expansion team that’s like three times the size of the investment team that helps with pricing, packaging, hiring, messaging, anything you can think of that you’re struggling with from a Series A to a Series C, I have someone to help you with it, which is really nice because I can do all of that, but I don’t have the time to help all the portfolio companies. So, that’s why I joined OpenView, and if you’re raising, come find me, I’d love to chat.
So what is PLG? Who here has heard of product led growth? Oh my God, that’s awesome. OpenView actually coined the phrase way before I was there. If you’ve looked at the content, it is incredible. It’s great, great content. So what is PLG? It’s this concept I’ve kind of been describing where your community or your network drives the growth of your product. If anyone’s been lucky enough to work at a company where you go on Twitter and you search for your company name and it’s like, oh my God, I love this company. Or you’re wearing the t-shirt from the company, you’re walking on the street and someone sees it and gets really excited. I call that product led growth.
At Twilio, I think my entire job there my first two years was throwing t-shirts at people, because everyone had a Twilio t-shirt I think in the developer community in 2010, and that was our marketing strategy. But it worked. Everyone was like, we love Twilio, we love this product. They wanted to tell their friends about it. They were proud to wear that t-shirt, and that’s a key part of product led growth.
So, define it. Its product drives the acquisition, retention and expansion. All of those things in SaaS we know we’re super important, but when you throw a product led growth strategy on top of it, it just powers that mechanism even more. Your sales team becomes more efficient, your customer success team becomes efficient, your customers like you more. When your customers are actually using the product and love the product, it’s such an easier sell. And if anyone’s gone through that process, they know I’m telling the truth.
Some companies doing this really well, Slack, obviously. Where did they come from? Oh my God, it was like chat had been solved and then it got re-solved and re-shared, and everyone was using it. So, Slack’s doing this really well. Dropbox obviously, Atlassian, and then Expensify, Calendly and Datadog, those three are in our portfolio. One that I always like to talk about is LinkedIn, which no one ever thinks about as a good product. I actually do, because to use LinkedIn, you have to be a user. You have to say, I’m going to share my resume with you. And you remember back in the day when you would get a LinkedIn link but not have a LinkedIn. You’re like, oh my God, I’ve got to get this product. That’s product driven growth.
I have a team of people who work on numbers. I did not create this. Product led growth index. This just got updated last week, and so these are not the most recent slides or the most recent numbers. So go to the internet, open Google, type in OpenView, product led growth index, and you’ll see the updated values. But it’s taking a look at all the public companies that have a product led growth strategy. Some things I want to call out here, faster growth rates. 35% versus 25% in SaaS. That’s incredible. That’s a lot of money, especially at this scale.
Higher multiples. Enterprise value per revenue is 10X. These are actual numbers you can dig into. I think they’re actually higher now if you go look at the updated index, which means your company’s worth about two times more. Enterprise value basically just means how much a company would acquire you for. So, we’ve done a lot of work, a ton of work on this, and have found that product led growth makes your company scale more quickly, it makes it worth more money, and you’re doing it more efficiently. So, Slack. Many of our users begin their journey with Slack on our free subscription plan. As organizations engage more deeply with Slack, they often upgrade to paid plans via our website. Product led growth.
Zoom. Zoom IPO has been incredible. If anyone’s spent the time to read that S1, their numbers are beautiful. I geeked out for like three days on that thing. Individuals typically begin using our platform when someone invites them to a Zoom meeting. We allow anyone to join or host a meeting for free. For free is the key here, and you invite people. You’re sharing, you’re opening up collaboration.
Atlassian. Atlassian famously does not have a sales team. They have a customer success team. Whatever you want to call it, they have a great product that’s driving the growth. As someone who marketed against them for years, I love Atlassian. They did a great job with their products. They say, “We recognize that users drive the adoption and proliferation of our products. We know that one happy user will beget another.” So it’s not just me standing here telling you this, it’s not our content blog, it’s a bunch of really important companies that have done really great things recently.
So what are they doing right? I don’t have time to go into a deep PLG conversation. I can point you to tons of stuff on our blog that can do that, but I do want to give you five kinds of things I’ve noticed that are trends in all product led growth companies that I’ve personally done. This isn’t it, and these aren’t true for everyone, but it’s been good for me.
This seems obvious, but everyone’s used a product that doesn’t work or that you hate, or that’s ugly or that they haven’t hired hired designers yet. There’s no UX engineer. This is really, really important. If you’re creating a beautiful and easy to use product, that product will sell itself. People will love using it. Like I said, people will tweet about it. I’m obsessed right now with three different new startups that I could never invest in because they’re not enterprise software. One’s called Future. It’s a workout app. It is incredible. I have told all of my friends. I have had 10 people sign up. I love the product. They put a ton of money into design. They worked super, super, super hard on getting a really good customer experience, and it’s just awesome.
And so, the way whenever I’m doing diligence in a company to tell if this is actually happening, is I call their customers. And if the first thing the customer says is, “Well, there are some challenges,” then I know it’s probably not a product led growth company. The people that are doing this right when you talk to their customers are screaming about how much they love that company. Like, oh my God, this made my life so much easier.
Example, Calendly. Has anyone here use Calendly? Does anyone love it like I do? I don’t have an admin right now and so I’ve been doing my own scheduling, which is a nightmare for anyone who’s tried to schedule time with me because I never know what time zone I’m in. Calendly has saved my life. We actually invest in this company. It’s naturally shareable. I send you a calendar link, you click it, you schedule. Then you’re like, oh my God, this is so much easier than dealing with the back and forth. It’s a great product. It’s easy to use. It actually works. There aren’t many bugs. Product led growth.
Another one. I just had a conversation downstairs about this. Make it really, really easy to get started. We’ve all been through the six months software setups situations, right? Has anyone had to deal with where you have seven engineers come in, teach your engineering team how to use the product, you have to hook into all … it’s just a nightmare, and in some cases you have to do that. Some enterprise software will require that and there’s no way around it, but the world’s moving towards an easier model, which is throw credit card in, or don’t, get a free tier and just sign up and start going. That’s how you can grow more quickly.
If people can just go to your website, click sign up and run, so much easier than going to a startup’s website that has no pricing listed, has no way to sign up, it just has contact sales. Sure. At some point you want to talk to sales, but it’s probably not the first thing the person’s gonna want to do.
I’m going to use Twilio here. I have a developer background. To some people, this is not easy to get started, but to a developer, the ability to use five lines of code to send an SMS or make your mother’s phone ring in different country was incredible. My poor mother, I used to build test sample apps that just texted her constantly, and I would know they were working because she would call me and ask me to stop. But with a few lines … I’m not even … she hates me sometimes. With a few lines of code you could do something that used to take stacks and stacks and stacks of hardware, and we just simplified that entire process. And so, the ability for a developer to do two-factor authentication … I cannot say that word. A two-factor auth with a few lines of code was game changing. You could do so much more with just this, and that was so much easier to get started than the traditional way.
SaaS, right? Self-service freemium to feed the funnel. I angel invested in a company year before last that still doesn’t have pricing on the page and still doesn’t have a free tier. That’s the bad thing about being an investor, is you can’t make anyone do anything and that’s not your job. You’re supposed to just influence. If you’re trying to build a product led growth company and there’s not at least something to give away for free that’s a full featured product, it’s not going to grow. If you have to convince everyone to pay before they use your product … it’s going to grow. You’re going to have to have a harder sell.
GET Lab. It’s kind of the bane of my existence, but we had a … who here was on the free GET Lab tier? Anyone, ever? It was so feature-full. It literally could do anything that Atlassian or GitHub enterprise could do, and we were like, free, sure, what could go wrong here? Then you take investor money and they’re like, you probably have to monetize this at some point. We slowly started pulling features out, putting it to charge, which I hate doing it that way. So if you’re going to build a company and you know you want a free tier, be very thoughtful in the beginning about what goes into that free tier because it’s really hard to email your customers and say, “Hey all, super sorry, we’re taking that free thing you love away and putting it into paid plan.”
There’s a really good way to do this. There’s a lot of literature on our website about how to do it. Extremely important. I had to send like three different emails I think at GET Lab that was like, “Hey, you know being able to collaborate with 15 people, that was awesome, right? We’re going to charge you for it now.” And you have to. If you take venture money, you can’t just have a fun project that’s free for everyone. You have to actually monetize.
Focus on the user first. Who here has done procurement or invoicing, and had to use your internal tools to do it? It is a nightmare. I was at Facebook for a while after Parse got acquired, and they had a three day training on how to use their invoicing system. I never used it. I literally was just like, what are they going to do? Fire me. Like if I don’t do this invoice, what’s going to happen? Someone’s not going to pay it. Which funnily enough, Facebook just was in the news. A guy stole like a few million dollars from them through invoicing because their system was so bad. So, focus on the user.
The point there is Expensify. I love Expensify. I actually enjoy doing my expense reports now, but expense reporting prior to Expensify was just awful. What Expensify has done is focus on the end user, which is a person like me going to dinner, taking a photo, uploading the receipt, and then procurement and everyone can deal with that side of the business. It’s a great user experience for everyone. We’re not just creating the product for the buyer. When you’re creating the product just for the buyer, you get a terrible user experience and it’s just not a good thing for your team.
This is my favorite thing in the whole world to do. Facilitate sharing and creating a network effect. I was just having this conversation with someone. There’s no greater feeling than when your customers are selling your product for you. When you can actually say, my customer introduced me to three new customers because they love my product so much, it just feels good. That way you don’t have an entire sales team or entire customer success team having to knock on doors. Your product is selling itself.
So if you’re not familiar with the network effect, it’s just a phrase … I’m going to read the definition. It’s the effect described as the addition of a user to a product and what that addition has on the value of that product to others. So, you actually get this thing where you have a viral coefficient, and I don’t mean like sharing cat videos and everyone re-sharing or re-tweeting and all of that. There’s an actual number you can calculate, and if you have a product that’s selling itself, I recommend digging into this a bit.
I was going to pitch last week and the founder actually calculated this for me and sent it to me. I’m like, no one’s ever sent me the viral coefficient, but it’s so smart because it shows you for every one person that’s using your product, how many people they’re going to tell about your product. And if you do attribution data, well you can actually find this out.
GitHub. I mentioned this earlier, but developer community drove a company after 10 years to a $7.5 billion acquisition based on sharing. There was a lot of sales motion. We had an incredible sales enterprise sales team, but over half that growth was 100% developer driven with no sales assist. So if you look at this project page, if anyone’s not familiar with GitHub, most big open source projects will have a project page. There’s tons of ways to collaborate. Bootstrap is super popular. It was created by a guy named Mark Otto who was my head designer at GitHub. Love him, love Bootstrap. You’ve probably all seen it on the internet without realizing it.
But look at all the ways to contribute here. You’ve got 33 branches, which means 33 people have branched this and are working on it with him. You’ve got 18,000 commits, which means 18,000 people have submitted code to this project to make an update. Where are the stars? 133,000 stars. GitHub is just collaborative. You want to work on this. If you’re a developer, you want to have and be involved in creating this. Finding a way to make your product collaborative like this is incredible.
You don’t have to be GitHub to do this. I’ll give an example. There’s a company in San Francisco that I’m advising, and they’re a developer tool because I work on developer software a lot. They had no way to actually collaborate as a team, which to me is counterintuitive, but we put a little tiny button that says, “invite your team members”, and it increased their signups by 10X. One button. That’s all you have to do. So just really think about this. When you’re going through your product and you’re looking at just the customer journey of everyone’s signing up for your product, how can you have them either sharing with team members, sharing with friends?
I hate saying social media strategy, but is there some interesting thing you can do to get them to tweet about something and and to get your name out there? It won’t work with the developer community because we’re kind of bratty and don’t like being marketed to, but it works in some communities. So really, really be thoughtful. Sit down with your team, your engineers, your product person and say, where is the point in my software where I can increase the number of people signing up, because one person signed up. It will completely change your revenue numbers. You saw the numbers. It’s 10X value or 2X the value of your company. It actually works.
So that’s my story. I love product led growth companies. I didn’t know what to call it. Luckily, OpenView found me. I guess I found them, and am now working there, investing in companies that do exactly what I love to do. These are just some tips. There’s tons of other stuff you can be doing. I would be happy to sit down with anyone and kind of give you feedback. Obviously, I can’t sit down with everyone today, but if you find me afterwards and set up some time, I’m happy to walk through your product with you and figure out how you can kind of integrate some of this into your website, or your product, or your app, or whatever it is that you’re building. Thank you.