4 Big Misconceptions about PLG for Startups
Many of the best product-led-growth software companies have products that democratize. Canva democratizes design. Shopify democratizes ecommerce. Stripe democratizes payments.
So it seems fitting that PLG, itself, has been democratized. Anyone can do it. But this has led to a number of serious misconceptions.
Openview, which coined the term “product-led growth,” has an inclusive view:
Any company…can adopt PLG principles to improve user experiences and increase go-to-market efficiency.
But should every company adopt PLG? This is leads to:
Big PLG Misconception #1: Every software company should do PLG
PLG means focusing on end users to drive growth. PLG products win on ease-of-use and delighting self-serve users. OTOH many legacy software players were successful without focusing on end users - for them, it’s never too late to start doing PLG.
But is PLG right for all early stage startups that haven’t yet found product-market-fit?
No.
Tight PMF is extremely hard to achieve. Focus is critical. Either go all-in on PLG or focus on a different strategy. Pre-PMF, some startups should definitely not do PLG.
Consider a pre-PMF startup selling an all-in-one solution to big customers. The product requires multiple executive approvals, then it can align multiple stakeholders & streamline disparate processes. This is a startup that should focus on a sales-led go-to-market. Sprinkling in some PLG will only distract.
Speaking of PLG distractions…
Big PLG Misconception #2: PLG is all about virality
Slack and Dropbox provided amazing examples of PLG growth. The viral loops in their products were the envy of PMs across Silicon Valley.
The problem is that those companies gave the impression that virality is a necessary feature in PLG. It’s not. Viral growth can be wonderful, but most software products don’t naturally have a powerful viral loop. Inserting a viral loop where it doesn’t naturally create value for users is a recipe for a spammy product.
The key to successful PLG is making a product that users love. This means high word-of-mouth (NPS), which creates a rock-solid foundation for scaling GTM. This is the precise formula followed by PLG greats Canva and Shopify. Their products had no significant viral loops. They have been spectacularly successful.
Founders who are pre-PMF and thinking about PLG should obsess about word of mouth, not virality. How to get an off-the-charts NPS? This brings me to…
Big PLG Misconception #3: GTM and job-to-be-done as equals
The commonality across PLG greats is that their early product solved a major problem for users. Dropbox’s key was not a GTM boosted by virality. It was offering users a dramatically better solution for the job-to-be-done of storing files.
The most successful software startups start with solving a job-to-be-done. Then, they pursue the GTM that flows organically from their product’s specific value proposition. They don’t let GTM strategy be the tail that wags the dog.
Some jobs-to-be-done need products that will lend themselves to PLG. Can a product provide a powerful “wow” moment that an individual user can experience in a few clicks? If so, that’s an ideal product for PLG.
What if the product can’t deliver a powerful “aha” moment to a self-serve user? The product is probably not a fit for PLG. That’s OK. Software markets are vast. There is still plenty of opportunity for software to scale without PLG. Which reminds me of…
Big PLG Misconception #4: PLG for PLG’s sake
I love PLG startups. But it’s not because of religion or ideology. It’s because the best software startups are the ones that scale the most with the least capital. My read of the evidence is that PLG offers the best formula for efficient hyper-growth.
But it’s not a slam-dunk case! Tableau raised only $15m in VC before IPO’ing and eventually selling to Salesforce for $15.7b. Veeva raised just $7m on its way to IPO and today has a market cap of ~$25b. Those are outrageously successful software companies and they didn’t do PLG.
These days, the ultra-efficient startups tend to be PLG:
Canva was cash flow positive at their A round and has scaled to $1b+ revenue
Zapier only raised $1.3m to hit unicorn status
Calendly needed just $550k
It’s understandable if early investors in these companies turn into PLG zealots, right?1 Although they would be missing the point. PLG is a phenomenal strategy, but it doesn’t have a monopoly on creating great software companies.
As a Canva investor, this is my defense if I’ve ever come across as a zealot!