TL;DR

1. GTM is the Biggest Worry for Founders

2. Customer Acquisition Costs are increasing rapidly

3. Founders are planning for a HIGHER Next Year Growth Rate vs. the Current Growth Rate

4. Buyers need to determine GTM motions

5. Outbound is creating more SPAM and they won't stop

6. Vertical AI SaaS Companies are growing faster with PLG

1. GTM is the Biggest Worry for Founders

Source: High Alpha - 2024 SaaS Benchmarks Report - by High Alpha

Thank you Kristian Andersen

B2B Industry Stats

Source: https://www.glencoco.com/state-of-outbound-sales-2024

• 54% noted customer acquisition costs increased in the last 12 months

2. Customer Acquisition Costs (CAC) is increasing…pretty rapidly

Source: Benchmarkit - Blended CAC Ratio. Thank you Ray Rike

https://www.benchmarkit.ai/2024benchmarks

3. Founders are planning for a HIGHER Next Year Growth Rate vs. The Current Growth Rate

Source: Benchmarkit > Company Growth Rate

https://www.benchmarkit.ai/2024benchmarks

4. Buyers need to determine GTM motions

The type of GTM motion depends on the type of Buyer. And there seem to be 2 distinct ones

1. Problem Aware and Immediate Needs --> Prefers a self-serve discovery of value. Signup, Try and Buy is a huge preference.

2. Problem (Un)Aware Or Deferred Need --> Prefers to learn by talking and interacting with humans.

5. Outbound is creating more SPAM and they won't stop

More SDRs are getting hired

It takes more tries to get to a meeting.

It takes seven or more touchpoints to land a meeting with prospects. Broken out by job title, VPs and Directors of Sales said it actually takes 10-15.

This MORE TRIES approach is creating 4x SPAM in general.

Buyer's mailboxes and LinkedIn messages are getting bombarded - leading to a Great Ignore - Mark Kosoglow 's favorite subject

6. Vertical AI SaaS Companies are growing faster with PLG

More and more AI SaaS companies are deploying Product-Led Self-Serve Motions faster than others.

The combination is causing Growth rates of these companies to surge.

Jason M. Lemkin - Why Vertical SaaS is Booming

Any other recommendations for year-end reading?

• Time to sale (conversion)

• Product price

Here you go.

• For low-touch, low-price, fast-moving sales:

  • AI SDR + PLG Freemium motions are very effective.

• For high-touch, high-price, slow-moving sales:

  • AI + SDR + PLG Paid Trials + Human-Led Sales are much more effective.

• Account research:

  • Crucial at the tipping point.

  • More necessary if sales need to engage with the buyer.

AI SDR (AI Sales Development Representative)

AI SDR represents a modern approach where artificial intelligence handles initial sales outreach.

Most effective for products with moderate pricing (<$1k ARR) and shorter sales cycles. The AI can prospect, qualify leads, and handle routine communications, making it cost-effective for scaling operations.

PLG (Product-Led Growth) Free Trial

PLG Freemium/Free Trial plan (no Credit Card Required) thrives in the lower-price, shorter sales cycle quadrant.

Users can sign up, try and buy the product with minimal/No sales intervention, making it ideal for products under $10k with immediate value proposition. Companies like Slack and Dropbox have successfully leveraged this approach.

AI+SDR (Hybrid Approach)

This hybrid model combines AI efficiency with human touch. Particularly effective for mid to high-priced products ($5K-$20K ARR) where AI handles initial qualification and routine tasks, while human SDRs manage complex interactions and relationship building.

SLG (Sales-Led Growth)

Traditional SLG remains dominant in the high-price, longer sales cycle quadrant. For products over $30K ARR with complex buying processes, dedicated sales teams build relationships and navigate enterprise requirements.

This is common in enterprise software and complex B2B solutions.

Account research

It is the process of gathering detailed information about a potential client's company, industry, and decision-makers. This information is used to tailor sales strategies and communication to address better the prospect's specific needs, challenges, and goals. Effective account research involves:

• Identifying key stakeholders and understanding their roles.

• Analyzing the company's market position, competitors, and recent news.

• Understanding the prospect's pain points, business objectives, and priorities.

• Leveraging data to personalize outreach and create compelling value propositions.

By investing in thorough account research, sales teams can build stronger relationships, increase engagement, and improve conversion rates.

Let us know if there are other such tactics you want us to examine

1. AI startups are on the rise.

2. Crowded markets require unique and creative strategies to acquire customers.

3. High signups with low usage are increasing hosting costs per account.

4. Success depends on balancing acquisition, adoption, and monetization.

5. ThriveStack offers a starter template to help:

   • Begin with a Product-Led approach.

   • Scale efficiently with Human-Led expansion.

1. AI Startups are on the rise

The generative AI boom shows no signs of slowing down. According to market analysts, the global generative AI market is projected to grow from $11.3 billion in 2023 to $51.8 billion by 2028, with startups leading the charge. These companies are innovating across industries.

AI funding is significantly up. And US based AI Startups now take 71 cents on a dollar of global AI equity funding.

— CB Insights

38% of this funding is going to early-stage startups.

Total AI Funding in 2024:

• As of September 2024, AI startups have raised approximately $23 billion in funding. This figure includes various sectors within AI, such as generative AI and machine learning applications.

Total SaaS Funding:

• In 2024, the total funding for all SaaS companies is estimated to be around $60 billion. This encompasses a wide range of SaaS applications beyond just AI.

Percentage Calculation:

This explosive growth has sparked fierce competition, leaving startups searching for strategies to acquire customers, optimize operations, and scale sustainably in a rapidly evolving market.

2. Crowded Markets Require Unique and Creative Strategies to Acquire Customers

In saturated markets, a generic acquisition strategy isn’t enough. Startups need to stand out not only with their products but also in how they present them to potential customers.

Product-led growth (PLG) has emerged as a dominant strategy, allowing startups to showcase their value directly through free trials or self-serve models.

However, PLG alone isn’t always sufficient in crowded spaces. Companies must pair it with personalized engagement and deep customer understanding. As McKinsey notes, 80% of B2B buyers prefer a mix of digital self-serve and human interactions, making a hybrid approach increasingly necessary

3. High Signups with Low Usage Are Increasing Hosting Costs per Account

While PLG attracts signups at scale, it can also backfire if the majority of those users fail to engage meaningfully with the product. This problem is especially critical for generative AI startups, where hosting costs can skyrocket. Each account might require provisioning expensive resources, like pre-trained models, resulting in unsustainable customer acquisition costs (CAC) and massive increase in COGS (Cost of Goods Sold).

For example, an AI startup offering a personalized LLM for enterprise clients might face significant infrastructure costs upfront, typically at the time of a signup, even if those clients never move beyond basic usage. This challenge makes it essential to differentiate between high-intent and low-intent users before allocating resources.

4. Success Depends on Balancing Acquisition, Adoption, and Monetization

To thrive in this space, startups must find a delicate balance:

• Acquisition: Bring in a steady stream of prospects through efficient and scalable marketing and onboarding strategies.

• Adoption: Ensure new users experience value quickly and deeply engage with the product.

• Monetization: Convert engaged users into paying customers by demonstrating ROI and long-term value.

Balancing these three pillars requires more than just a great product; it demands a well-designed workflow that minimizes waste, optimizes resource allocation, and maximizes customer satisfaction.

5. ThriveStack Offers a Starter Template to Help

Recognizing these challenges, ThriveStack recently shipped a PLG starter template specifically for cost-heavy SaaS startups, including those leveraging generative AI. This template simplifies the path to scalable growth by addressing inefficiencies in onboarding, engagement, and backend resource allocation.

Begin with a Product-Led Approach

ThriveStack’s template encourages startups to focus on PLG as a foundational strategy to acquire prospects with signups and try your products. The self-serve model enables prospects to explore the product’s capabilities without committing significant upfront resources.

To mitigate the high costs of provisioning accounts, ThriveStack’s COGS-heavy starter template allows you to Onboard your accounts first, and then provision the tenants.

With automatic data-driven insights, startups can identify high-value prospects who are most likely to convert.

This approach ensures that resources are allocated strategically, reducing costs associated with unqualified leads.

Scale Efficiently with Human-Led Expansion

While PLG can handle initial acquisition, ThriveStack emphasizes the importance of layering in human-led engagement for expansion. The product automatically scores and prioritizes accounts based on ICP-fit, Usage-Fit, and many other signals.

For high-value accounts, conversations with sales or customer success teams can make the difference between casual interest and long-term commitment.

By integrating human touchpoints into the later stages of the customer journey, startups can effectively nurture relationships and secure meaningful contracts. This hybrid model provides the best of both worlds: the efficiency of PLG and the depth of human interaction.

Conclusion: Thrive in the Gen AI Revolution

As generative AI reshapes industries, the startups leading this charge must navigate unique challenges in scaling efficiently. ThriveStack’s starter template equips these companies with the tools to balance acquisition, adoption, and monetization. By starting with a Product-Led approach and scaling with Human-Led engagement, startups can achieve sustainable growth and stand out in a crowded market.

Ready to transform your onboarding and scaling strategy? Learn more about ThriveStack’s starter template today!

Signup: Start Thriving Today

Talk to us: Anytime you decide to Thrive

Let us know what you think.

This difference often is the deciding factor for scalable (sustainable) growth in the long term, and often drives companies to build go-to-market strategies that start with PLG to fuel growth, and then introduce sales.

Why Product-Led Growth Drives Faster and Sustainable Scaling?

Product-led businesses scale faster because the product (when done right) can drive user adoption, generate a pipeline, which are leading indicators of future revenue growth. From startups to enterprises, PLG based GTM allows companies to expand quickly across different markets without relying heavily on sales teams.

According to OpenView article that PLG business usually takes off after hitting $10M ARR, generating a healthy pipeline of customers all along the way. This pipeline growth is the key to sustainable, scalable growth.

As the company matures, layering in a targeted sales strategy becomes a way to complement the organic product growth, ensuring that both SMB and enterprise customers get the support they need. This approach strengthens the foundation built by PLG, allowing for a smoother transition into larger revenue streams.

The Struggles of Layering PLG on SLG

Sales-led companies rely on structured sales processes, which often conflict with the agility needed for PLG to thrive. This creates operational friction and cultural resistance, making it difficult to succeed.

Two major hurdles often become the deterrent

1. One major hurdle is the absence of PLG infrastructure. Sales-led organizations often lack the systems required for self-serve trials, product engagement tracking, and customer feedback loops—critical elements for driving PLG success.

2. And the entire Organization with all its departments firing on all cylinders contributing to the growth of the scalable business. Wes Bush calls this as Product-Led Organization. ThriveStack has interviewed and written extensively on this mindset shift e.g.

By addressing these foundational issues, companies can create the right conditions for successfully layering PLG on top of a sales-led strategy.

Why Product-Led Growth Outpaces Sales-Led Strategies

Scaling a Product-Led business is inherently easier because it leverages the Product to deliver the experiences, enabling faster time-to-value by simplifying product activation, — and when done right, will drive Customer acquisition costs (CAC) down, and deliver a lead pipeline for the Sales team to pursue larger, multi-year deal sizes.

Organization decisions would be informed by actual user behavior—how customers interact with the product. This data-driven approach ensures companies can scale efficiently without guesswork, optimizing product features and growth strategies based on real-time feedback.

In contrast, Sales-Led businesses tend to depend heavily on buyer intent— indirect signals from marketing, outreach, or customer interest—rather than direct insights from how users are engaging with the product. This disconnect creates inefficiencies, as sales teams focus on closing deals without fully understanding the product’s role in the customer’s decision-making process.

Product-Led Sales (PLS) bridges this gap by arming sales teams with crucial product data, enabling more effective targeting and better-timed outreach based on actual user interactions.

Key technical infrastructure challenges for PLG scaling:

1. Enabling product for self-serve: Allowing users to signup, try and potentially buy without (or less) sales interactions.

2. Tracking user engagement: PLG companies need robust systems to monitor how users interact with the product.

3. Integrating usage data with sales efforts: Ensuring that both teams have access to product usage insights to align strategies.

Shameless plug: ThriveStack provides the above 3.

Sales-Led companies often lack these essential infrastructure systems (alongside organizational buy-in and incentives), resulting in slower growth and more friction when transitioning to a PLG model.

“When a product shortens the buyer’s journey of discovering and experiencing value, it accelerates the purchase decision and establishes a strong foundation for growth.”

— ThriveStack

What do you think?

• Multi-pronged GTM strategy combined with the Lean Revenue Factory model is key to scaling SaaS companies from $0 to $100M+ ARR.

• Segment GTM efforts by market tiers: SMB, Mid-Market, and Enterprise.

• Key strategies include:

  • Founder-led: Direct engagement with customers for rapid feedback.

  • Self-serve: Freemium models and free trials for quick user acquisition.

  • Product-led Sales: Upsell and cross-sell opportunities based on user data.

  • Enterprise Sales-led: Consultative selling for large organizations.

• Tailored strategies and metrics for each segment optimize revenue generation and drive sustainable growth.

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Multi-Pronged GTM Strategy

Successful SaaS companies leverage a combination of the following approaches to establish a robust GTM strategy:

1. Founder-led Revenue

In the initial stages, founders drive growth through direct engagement with customers. This hands-on approach allows for rapid feedback and iteration, helping to refine the product and establish a strong market presence.

2. Self-serve Revenue

As the product matures, a self-serve model enables users to onboard independently, often through freemium offerings or free trials. This method is particularly effective for products that can demonstrate value quickly, allowing for rapid user acquisition without significant sales overhead.

Read some of the fundamentals here: Fundamentals of self-service SaaS

3. Product-led Sales Revenue

With a product-led sales approach, the focus shifts to leveraging existing user data to identify upsell and cross-sell opportunities. This strategy enhances customer retention and maximizes the lifetime value of existing accounts.

Learn more from the McKinsey Report: From product-led growth to product-led sales: Beyond the PLG hype

4. Enterprise Sales-led Revenue

For larger organizations, an enterprise sales-led strategy becomes crucial. This involves a dedicated sales team that engages with decision-makers in enterprise accounts, addressing their specific needs and providing tailored solutions.

Lean Revenue Factory Model

The Lean Revenue Factory model treats revenue generation as a manufacturing process, where each GTM motion is viewed as a separate production line. This approach emphasizes efficiency, sustainability, and continuous improvement, inspired by lean manufacturing principles.

Segmenting Production Lines

To optimize revenue generation, it is essential to separate the production lines for different market segments: SMB, Mid-Market, and Enterprise. Each segment has unique characteristics and requires specific strategies.

1. SMB Segment

For the SMB segment, the focus is on self-serve and product-led sales. The goal is to minimize CAC while maximizing conversion rates. Companies should implement automated onboarding processes and leverage customer feedback to refine the product continuously. Key metrics include CAC, conversion rates, and churn rates.

2. Mid-Market Segment

The mid-market segment benefits from a hybrid approach, combining self-serve elements with enterprise sales strategies. This allows for greater flexibility and responsiveness to customer needs. Companies should focus on nurturing leads through targeted marketing campaigns and personalized outreach. Key metrics to monitor include Monthly Recurring Revenue (MRR), upsell rates, and customer lifetime value (CLV).

3. Enterprise Segment

A dedicated sales team is essential in the enterprise segment to manoeuvre the complex sales processes and engage multiple stakeholders. This approach requires a consultative selling strategy that addresses the unique needs of each enterprise client. Key metrics for this segment include gross revenue retention, sales cycle length, and average deal size.

For further insights into GTM efficiency and its impact on revenue production, refer to the original article by here.

Product-led GTM

How GTM Efficiency Affects IPO Readiness

By Dave Boyce and Jacco van der Kooij of Winning by Design…

Read more

2 years ago · 5 likes · 2 comments · Dave Boyce

While you're busy cracking the other stuff, how about letting us handle the self-serve part?

>97% of Buyers prefer to Discover Value by Signing up and Trying SaaS products.

We enable SaaS Companies to Build, Distribute, and Operate SaaS Products in this new Age of Self-Service.

Sign Up and Try

Traditional sales & marketing are not yielding great results, PLG is too R&D intensive to get started. Is there a faster, cheaper way to get to Hybrid GTM?

Although ThriveStack.ai is being built to reduce the R&D efforts of a PLG self-serve initiative, it does not (yet) have the answers to fast-track Hybrid GTM. With no handy answer, I kicked off some research, and this is what my team and I learned.

1). R&D spend starts higher and remains higher for PLG-dominant GTM companies.

• For PLG-dominant companies, R&D starts high and continues to be high over some time. (Our data is limited to the first 4-yrs of Operations)

• For Sales-led dominant companies, R&D spending drops like a rock after the first 3 years. To maintain growth, the leadership shifts its focus to increased S&M spending, hoping for larger results. This phenomenon now has a name GAAC (Growth-at-all-costs) as was interesting to experience firsthand.

2). Revenue split by GTM motions gets interesting as startups attempt a Hybrid GTM approach

Over a 6-8 year time window, the revenue split for a PLG-first company usually gets diversified. Most companies we talked to, started as a Founder-led motion almost until they hit $1M of ARR.

During this time, they built their underlying product for self-serve and used it to (mostly) iterate on easier onboarding, leaning more towards better UX, simplified pricing, and more.

These initial R&D investments gave them a boost in the next phase propelling them to go from $1-10M in a record time. PLG became their foundation.

Of course, we found that most of them got trapped in the $5-10M range, and adding Sales kicked off their next rung of growth.

3). Adding product capabilities incrementally is the biggest culprit in high R&D costs for PLG-First companies.

The illustration below is a summarized version of the learnings from the PLG journeys of StoryLane, CommonPaper, Narrato, and many 80+ others we talked to.

Refer to the PLG Self-Serve Implementation considerations here

and here

4). Using a signal-based selling approach takes a toll on the Product and a lean/non-existent SalesOps teams.

There are lots of non-verbal signals Buyers give to sellers - all of these are based on some actions buyers do across your marketing assets. These touchpoints, become important indicators for your personalized outreach campaigns.

Traditional Sales & Marketing teams struggle to cope with this. here’s an example of the signal strength corelative to conversion rates

Refer: How to run a signal-based go-to-market motion

References:

• Growth Channels By ARR Stage: PLG vs. SLG | by Scott Barker

• PLG & Profitability : More Product Doesn't Necessarily Mean Greater Profits | by Tomasz Tunguz

• https://clearbit.com/resources/reports/product-led-growth-companies

• How to run a signal-based go-to-market motion | by Kevin White

• Tomasz Tunguz https://tomtunguz.com/plg-less-profitable/

Late May 2024, Finn Thormeier, from the Founder-Led Marketing Show interviewed Gururaj Pandurangi, CEO of ThriveStack. Please check out the YouTube video. Following is the high-level insights from the interview.

In the ever-evolving world of SaaS, transitioning from a sales-led growth (SLG) model to a product-led growth (PLG) model can be a game-changer. Gururaj Pandurangi, the CEO and Founder of ThriveStack, is at the forefront of this transition. Having sold his previous company, Cloudneeti to Zscaler, for a substantial sum, Gururaj is now focused on helping other SaaS companies implement PLG strategies. In a recent podcast episode, he shared his insights on the challenges and opportunities of this transition.

Understanding the PLG Revolution

Gururaj’s journey into the world of PLC began with his experiences at Cloudneeti. Despite having a strong sales-led approach, they faced increasing competition from product-led companies. These competitors offered a seamless, self-serve experience that appealed to customers, especially during the early days of the pandemic when people preferred minimal human interaction.

The Pain Points

• Sales Team Reluctance: Sales teams were hesitant to engage with potential customers generating less than $30,000 to $40,000 in annual revenue. This left a gap that product-led companies quickly filled.

• Customer Preferences: Customers increasingly preferred to try products on their own without engaging with sales teams. This self-serve approach allowed them to understand the product's value independently.

• Friction in Sales: The traditional sales process involved cold calls and lengthy demos, which were less appealing to modern customers who valued a frictionless experience.

Building a PLG Motion

ThriveStack aims to simplify the transition to a PLG model for SaaS companies. The platform offers tools that facilitate user signups, product trials, purchases, and large-scale self-serve operations. Gururaj emphasizes that building a PLC motion is not just about adding a signup form to an existing product. It requires a fundamental shift in how the product is designed and delivered.

Key Considerations

• Product Readiness: B2B SaaS software often requires significant onboarding and implementation support. Simply adding a signup form won't suffice. The product must be intuitive and easy to navigate for self-serve users.

• Sales Compensation: Transitioning to a PLG model can create conflicts within the sales team. Companies need to rethink how they compensate sales reps, possibly shifting the focus from acquisition to upsell and retention.

• Engineering and Product Changes: Building a self-serve product requires a different approach. The product must guide users through their journey, addressing their specific pain points without the need for a sales rep.

Role of Partners - is often overlooked

Gururaj’s success with Cloudneeti was significantly bolstered by strategic partnerships with companies like Microsoft and Deloitte. These partnerships provided a robust distribution channel and credibility. Not all SaaS companies can benefit from such partnerships early on, but if there’s an opportunity to work with Cloud providers and service providers - don’t miss it. For new SaaS companies, building similar partnerships can be a game-changer.

Tips for Building Partnerships

• Leverage Existing Networks: Use your connections and industry experience to reach out to potential partners. Cold emails and demo videos can also be effective.

• Showcase Value: Demonstrate how your product can solve specific problems for potential partners and their customers. This can lead to joint marketing opportunities and increased visibility.

• Be Patient: Building meaningful partnerships takes time. It may take several months of dedicated effort to see results.

Learning from Past Mistakes

As a 2x+ entrepreneur, Gururaj has learned valuable lessons from his previous ventures. One key takeaway is the importance of distribution. Building a great product is essential, but getting it into the hands of users is equally crucial, if not more.

Balancing Product and Distribution

Founders should allocate 30% to 50% of their time to distribution efforts.
— Gururaj Pandurangi, CEO, ThriveStack

Distribution efforts would involve driving awareness of your product, engaging with potential customers, and partners, authoring a lot of content, gathering feedback, and continuously refining the product based on user needs.

Conclusion

Transitioning from a sales-led to a product-led growth model is challenging but rewarding. SaaS companies can successfully navigate this shift by focusing on product readiness, rethinking sales compensation, and leveraging strategic partnerships. Gururaj Pandurangi's journey with ThriveStack offers valuable insights for any founder looking to embrace the PLG revolution.

For more insights from Gururaj, you can connect with him on Linkedln.
Learn more about ThriveStack here https://www.thrivestack.ai/.

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End-users favor discovering the value independently through self-serve options

Let’s start with the end users of your product…

End users and buyers prefer to self-serve, try different products, and discover value. More often than not, a Sales-rep interaction at an early stage of discovery can be disruptive. Users prefer:

1. Simple account creation, service provisioning, and

2. Pricing transparency

Both of these are needed to incentivize them to Sign up, Try, and Buy.

SaaS companies should DECIDE early on  their Go-To-Market motions

Acquiring customers and getting them to use your products are some of the biggest challenges for a business. This is typically accomplished in three ways:

1. Sales teams led (SLG) - preferred when your products are complex, require lot of customizations, and are typically larger deal sizes (typically >$30K ACV)

2. Product-Led Growth (PLG) - beneficial for higher velocity deals that land with lower annual deal sizes (typically <$10K/year ACV). Adding a salesperson to close such deals might become prohibitively expensive.

3. Hybrid - Acquire customers with PLG motions and then upsell/expand with SLG.

Successful companies typically will layer SLG over PLG to drive Hybrid growth.

However, the key is to enable self-serve capabilities within the product before layering GTM motions. Typically, this becomes the most critical decision.

Layering SLG over PLG motions take substantial resources and often fails, especially if all the relevant departments (Product, Engineering, sales, Marketing, Data Analytics) do not come together.

Why is GTM difficult ?

#1 Building a PLG-enabled product is non-trivial

First and foremost, the biggest one, building a PLG product is very different from building a traditional sales-led SaaS product.

1. Complex user onboarding: It is challenging to create a frictionless signup and onboarding process that allows users to quickly derive value.

2. Technology integration: It is time-consuming and complex to Integrate various systems like user authentication, tenant provisioning, trial management, product analytics, and PLG CRM.  This almost seems like buying various components of an alarm clock and working to put it together and ensure that they never break - a really tough and time-consuming problem. 

3. Pricing transparency and Billing integrations: It is difficult to implement clear, flexible pricing that aligns with user value perception. Companies often fail to differentiate their pricing tiers, which are necessary for end users to pick the appropriate pricing plan.  

4. Product Usage Analytics: Product analytics helps understand areas where users are getting stuck/confused. This drives the need for  UX improvements. Product Analytics plays an outsized role in PLG products, much more than SLG-first products.

5. Self-Serve drives business Scalability: Building a product architecture that allows the buyer to be in control of experiences (including Signup, trial, buy, upgrade, downgrade, join/merge tenants, cleanup on expiry, understanding usage etc) is significantly different than a traditional Sales-led SaaS product. Lack of self-serve processes can hamper customer growth and scalability.  Adding salespeople to drive scale can often be cost-prohibitive and not that effective.

#2 Layering Sales on top of self-serve motion is all the more challenging

While Self-Serve can accelerate business growth the deal sizes typically start small. SaaS companies invest in layering a Sales approach on top of PLG - typically referred as Product-Led Sales (PLS) to further accelerate growth. This is more challenging for the following reasons and needs to evolve from traditional processes:

1. Sales role evolution: Sales teams need to adapt. Instead of traditional cold-calling, they need to increase their focus on understanding user behavior, interpreting product analytics, and delivering personalized value. They need to use customer signals like product usage, and marketing program engagement to drive pipeline and revenue.

2. Timing of sales engagement: One of the key challenges in PLS is determining the optimal moment for sales teams to engage with users. Engaging too early may disrupt the self-serve experience while engaging too late might miss opportunities for conversion or upselling.

Product usage data plays a crucial role in enabling effective Product-Led Sales enabling for account expansion and reduce churn.

Usage data allows GTM teams to identify opportunities to focus on accounts which are ready for expansion, upgrade, and reduce churn. There should be specific personalized motions at the right time set up for each of these account types.  This data also informs product development based on usage and common bumps faced by customers (e.g. unclear UX, difficult to set up etc).

ThriveStack.ai accelerates Product Growth

As a GTM leader with previous experiences in driving Hybrid GTM motions at companies like Amazon Web Services (AWS), Cloudflare, and SurveyMonkey, I found that ThriveStack provides a compelling and comprehensive suite of technology components, which enables various departments to focus on SaaS growth.

I spent some time with the product, and here are some of my thoughts…

1. Enabling Product & Engineering team: Most products that claim to enable PLG often are focused on enabling Marketing or Sales teams, often missing to enable Product. Product-Led growth typically should start from the Product. ThriveStack helps rapidly set up self-service businesses which includes the major technology components mentioned above. ThriveStack serves as a connective tissue between your marketing website and your SaaS application. Within an hour or so, developers can enable their products with a Signup and Login CTA and all the underlying technology components mentioned above are configured automatically.

2. PLG Analytics for Product and Analytics teams:  There are many tools that help SaaS companies analyze their product usage. Developers have to do a lot of instrumentation with heavy coding to onboard these tools and growth teams need to author numerous charts to understand product usage metrics. ThriveStack (probably) is the only one I found to automatically bring in the self-serve telemetry and out-of-the-box PLG analytics. What I found interesting is the ability to track customer acquisition metrics, analyze retention rates across various cohorts, and measure virality. This provides marketers with the data-driven insights necessary for informed decision-making.

3. Self-Serve CRM for GTM teams: Traditional CRMs are built for Sales-led customer acquisitions. However, the self-serve acquisition is different. Users sign up for products without sales interaction. ThriveStack has built an intuitive PLG CRM, enabling sales and marketing teams to understand the users, the accounts they belong to and their associated account journey (based on usage events). This allows GTM teams to create sophisticated customer segments based on criteria such as industry, tenure, and usage patterns.

Checkout their Product Introduction presentation here

ThriveStack Product Introduction

Requires passcode(ThriveNow12345) and your email id to view the document

— Amit Prakash

Join us for a Live webinar on a similar topic here

Registration Link: Has SaaS lost its GTM? 2024 Insights on low-cost, effective GTM motions

We decided to turn our learnings into a blog post.

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First off What Is Lead Enrichment?:

This is how Clearbit defines it

Lead enrichment is the process of finding and adding information, such as company and contact data, to a lead record to speed up your qualification and routing processes. For instance, let’s say you have the names and email addresses of the people who attended your breakout session at a third-party event. They’ve shown interest in your company and you want to engage them, but who do you reach out to first? And how do you make the conversation interesting and relevant for them?

• Contact Enrichment: Typically it involves doing a lookup on the newly Signed-Up User, and collecting associated traits like email ID, social profiles, location, job title/function.

• Company Enrichment: And if your SaaS Business is a B2B business, the user might be an employee of an Organization (aka Account), whose traits are critical for you to understand the buyer profile a lot better. Your teams will do a lookup of the account’s domain (e.g. acmecorp.com) and fetch company traits like Industry, Employee count, Revenue, HQ Location etc.

How is Lead Enrichment typically used?

The following is a list of primary use-cases and their secondary off-shoots.
And as you can tell, the usage of Lead-Enrichment is left shifting towards Product & Engineering.

Why Lead Enrichment Matters in PLG?

1. How does it matter?

• Enrichment accelerates Expansion: Accurate user and account representation helps identify large accounts where expansion is possible.

• Enrichment helps retention: Understanding accounts better help in (re)engagement, especially when the usage falls below threshold.

2. What are the Unique Challenges in PLG:

• In traditional B2B sales, companies typically know their customers because they go through a sales process.

• However, in PLG, product adoption often precedes an actual sale.

• Users adopt free or low-price product SKUs without going through a lengthy procurement process.

• Companies must connect the dots to identify users and understand their readiness to convert

The best time to understand your user (and ICP-fit) is at the earliest time the transactional user interacts with your SaaS Application.
And typically its the Signup/Registration step of your User Onboarding..

— ThriveStack

Let’s look at some history, mostly a pictorial view

Classic SaaS: Enrichment was primarily designed to support Marketing teams

Marketing teams used enrichment to target accounts that are mostly likely to convert. Some might remember about Marketing-Qualified-Leads (MQLs), which was the best game in town - and only the big kids could use these tools.

Enrichment evolved to start supporting adjacent Product & GTM use cases

Product-Led movement necessitated a need to combine product usage and enrichment data, primarily to enable Product-Led sales.

The beneficiaries were now Marketing, Sales and Growth teams who could use the combination to target what was working well (product-usage) with customer acquisition tactics (some refer to this as Product-Led Marketing)

The following diagram is a simplified representation of how it generally works…

Enrichment starts simplifying high volume of Self-Serve registrations and the entire Product-Led GTM

Customization and Personalization:

Enrichment data allows tailoring the onboarding experience. e.g.

• Based on the job function (e.g. Title) of the user automatically highlight JTBD functions that the user can feel connected to.

• Using their social handles like LinkedIn, Twitter to auto-populate how they can be contacted. Of course, trying to make it less creepy and allowing privacy is the key.

• Bringing auto-enrichment makes the downstream pipeline of PLG Analytics, PLG CRM all the more useful.

Shameless plug:

ThriveStack is pioneering the left-shift movement of User and Account enrichment into its Self-Serve Infrastructure thus enabling, personalized self-serve, PLG Analytics and PLG CRM in the fastest way possible.

Try it out here

Try ThriveStack Today

Let us know your thoughts!

This is the first installment in our series on how venture capital shapes startup growth.

Part 1: The VC-Startup Growth Challenge - We explore the reality behind startup financing and the implications on the Sales-Led growth (SLG), the dominant growth strategy today (current article).

Part 2: Paths to Sustainable Growth - The next article will discuss alternative strategies for achieving balanced and lasting growth in startups.

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With over 75% of venture-backed startups failing to exit, and many burning through substantial funding without sustainable growth, we face an urgent question:

Are VCs pushing startups toward an unsustainable grow-at-all-costs model?

Background

Venture capital is the fuel for many startups dreaming of an 'exit'. Yet, more than 75% fail to reach that milestone, with some estimates suggesting the failure rate could be even higher.

Source: Harvard Law School Forum on Corporate Governance

In 2023, PitchBook data revealed that 3,200 startups failed despite raising $27 billion in funding, highlighting a mismatch between investment and successful outcomes.

The conundrum deepens as growth rates fall, yet startups persist in expanding their sales and marketing (S&M) expenditures.

Problem Statement

The central concern for this blog post is the allocation of new VC capital, which is disproportionately channeled into S&M. This approach, while neglecting other vital aspects of the business, raises a fundamental question:

Are VCs championing a growth model that overlooks the nuances of sustainable scaling?

Venture capital's allure often pushes startups to prioritize sales-led strategies, aiming for aggressive growth to appease investor expectations. This growth model, heavily reliant on increasing sales and marketing (S&M) budgets, has resulted in a concerning trend:

The cycle is driven by a core assumption: that new capital, mostly from VCs, should primarily fund S&M efforts. The strategy may initially seem to pay off, driving early traction and boosting valuation. However, it ignores the hidden costs of rapid scaling - primarily, the long and expensive sales cycles and the ever-increasing cost of acquiring new customers.

These factors can lead to startups missing their growth targets, leading to a damaging cycle where further investment becomes a band-aid for deeper strategic flaws.

As VCs incentivize this grow-at-all-costs approach, the question becomes:

Are they inadvertently cultivating a startup landscape littered with companies ill-equipped for long-term survival?

Beyond the Sales-Driven Narrative

VC investments overwhelmingly fund sales and marketing (S&M), often sidelining other vital business needs. This approach can generate quick traction and inflate valuations, but it also raises a critical question:

Does this focus compromise long-term viability of your startup?

Startups, facing changing financial landscapes like the end of zero-interest-rate policies and lower valuations, must navigate cautiously.

Yet, the push for rapid S&M scaling persists.

This strategy might not only strain startups financially but also distract them from solving user needs, refining product value and customer experiences, leading to missed growth targets.

The cycle perpetuates as VCs fund apparent early success, reinforcing a sales-led growth model that may not be sustainable.

Will your startup sustain if you have massive S&M budgets ?

e.g. GTM spend ration of 264% as evident from David’s post

So, what’s the real deal with sustainable growth?

Venture capital shapes startup paths, but in the rush for quick sales, might a product-first approach hold the key to enduring success?

Stay tuned for Part 2 of our series, where we'll explore potential paths to achieving such sustainable growth within the startup ecosystem.

We're eager to hear your insights on this topic. What's your perspective?

Leave a comment

SaaS companies are figuring out how to balance the transition from a purely Sales-Led Growth (SLG) to a Hybrid growth model [PLG + SLG] and many are at a critical juncture for companies aiming to scale effectively.

This article explores the strategic shifts necessary for this transition, offering insights that go beyond the basic understanding of PLG and SLG. We thought that the best representation of the challenges therein might be using the Crossing the Chasm framework by Geoffrey Moore.

Market Research - Identifying Key Challenges

In developing the Modern GTM Playbook, we embarked on an extensive research initiative, blending insights from over 100 industry interviews. Since then we correlated with a few authoritative sources in the SaaS domain. Here’s what we found:

1. 75% emphasized the need for Self-Service and User Onboarding: A significant majority of our interviewees emphasized the importance of self-service and efficient onboarding. This is echoed by Gartner's report on B2B buying behaviors, which notes a growing preference for rep-free (self-service) options among B2B software buyers (Gartner, "B2B Buying Behaviors”).

2. 80% investing/planning to invest in Data-Driven Sales and Marketing: Slightly mature to more mature SaaS companies, pointed to the necessity of leveraging product usage data in sales and marketing. IDC's findings support this, showing that data-driven companies can achieve up to a 25% improvement in operational efficiency (IDC, "Selling more with Data," 2023).

3. 65% experiencing Scaling PLG Challenges: Many highlighted scaling issues with PLG, especially for larger deals. McKinsey’s analysis of growth strategies confirms this, indicating the need for a more nuanced approach beyond PLG for enterprise sales (McKinsey, "Beyond the PLG Hype," 2023).

4. 70% think the future of GTM is Hybrid Growth Models: The Majority advocated for a hybrid PLG and SLG model. Research by OpenView Partners highlights that SaaS companies with hybrid models report better customer metrics, including lifetime value and retention rates (OpenView Partners, "The Hybrid SaaS Model," 2023).

These discussions and corroborating research shaped our understanding of the current challenges and opportunities in SaaS growth, informing the strategic recommendations that form our playbook.

We have identified six distinct phases for a SaaS company as they go through this journey.

1. PLG Readiness Chasm

Embarking on the journey of PLG requires a fundamental shift in mindset. PLG Readiness Chasm represents the gap between deciding that your product should be product-led to launching it. Crossing this chasm necessitates aligning the entire organization towards a customer-centric, product-first mindset. It involves restructuring processes, metrics, and culture to focus on delivering exceptional user experiences and value through the product.

Readiness is the effort it takes to be PLG-ready. This includes creating a self-serve option for users to sign-up, try, and buy your product, developing robust analytics to track product usage and customer behavior, and implementing in-app checkouts for seamless transactions.

Example: Companies like Slack and Dropbox have excelled in this phase by building intuitive self-serve options that allow users to explore and adopt the product at their own pace.

Challenge: The main challenge in this phase is ensuring that the product is intuitive and user-friendly while also being robust and feature-rich.

Solution: Investing in user experience (UX) design and customer feedback loops can help overcome this challenge.

2. PLG Wins

Once the groundwork is laid, companies enter the PLG Wins phase. This is when the PLG model starts to work and begins to feel good. The efforts put into the readiness phase start to pay off, increasing signups, activations, and conversions.

Example: Atlassian’s products, like Jira and Confluence, have seen massive adoption due to their PLG model, leading to significant signups and conversions.

Challenge: The challenge here is maintaining the momentum and ensuring that the increased signups lead to active, long-term users.

Solution: This can be addressed by focusing on user onboarding, adding a tad bit of friction with white glove customer success, and continuous product improvement.

3. PLG Trap

However, there’s a potential pitfall known as the PLG Trap (refer Oliver Jay’s post). This phase is characterized by an over-reliance on the PLG model, leading to limited expansion. While the PLG model can bring in a steady stream of small contracts (typically $10-30K per annum), it may not facilitate much expansion beyond this.

Example: Many SaaS companies fall into this trap where they see a lot of initial success with small to mid-sized businesses (SMBs) but struggle to break into larger enterprise markets.

Challenge: The key challenge is evolving the product and business model to cater to larger organizations without alienating the existing SMB customer base.

Solution: Developing a tiered product offering that caters to both SMBs and enterprise clients can help overcome this challenge.

4. Enterprise (SLG) Readiness Chasm

To overcome the PLG Trap, companies need to cross the Enterprise (SLG) Readiness Chasm (refer to Crossing the Enterprise Chasm). This phase involves the effort it takes to be enterprise-ready. It requires building for enterprise security, compliance, procurement, and preparing for Requests for Proposals (RFPs). It also involves creating battle cards to equip the sales team with the necessary information to win deals.

Example: Companies like Salesforce and Adobe have successfully crossed this chasm by investing heavily in enterprise features clearing typical RFP/procurement questionnaires around security, compliance, data governance, etc.

Challenge: The challenge in this phase is meeting the stringent requirements of enterprise clients, which often involve complex security, compliance, and procurement processes.

Solution: Investing in enterprise-grade features and sales enablement activities to help overcome these challenges.

5. Product-Led Sales

This phase is all about converting small deals into larger Annual Contract Value (ACV) deals, also known as “catching whales”. This involves skimming through usage data to identify potential enterprise clients (the right Ideal Customer Profile, or ICP), and crafting effective sales pitches. (Refer OV: Your guide to Product-Led Sales)

Example: Companies like Zoom, Loom, and Shopify have excelled in this phase, leveraging their product usage data to identify potential enterprise clients and convert them into larger deals.

Challenge: The challenge here is identifying the right ICPs and effectively communicating the value proposition to them. Aligning the organization to the new role of Sales & Marketing, Sales compensations, and account ownership woes might run deep unless resolved with org-wide buy-ins.

Solution: Leveraging product usage data, investing in sales training, and continuously refining the sales pitch based on feedback can help overcome these challenges.

6. Hybrid Growth

This final phase prioritizes personalized interactions with existing/potential customers primarily for large and multi-year sales deals. Sales reps use a combination of usage signals and customer relationships to actively engage, guide, and close deals.

Example: Zoom, a video conferencing company, is now successfully selling to enterprise customers, significantly increasing the average contract value (>$100K ACV).

Challenge: Maintaining the product’s usability and appeal to smaller customers while catering to enterprise needs.

Solution: Zoom continues to invest in two distinct GTM motions, but brings them together, ensuring that the product is distributed easily for small customers and Upsell/cross-sell motions to large enterprises effectively.

—

In conclusion, transitioning from a PLG to an SLG model is not a straightforward process. It involves navigating through various phases, each with its own set of challenges and solutions. However, with the right strategies and learnings from companies that have successfully made this transition, it is achievable.

Go #HybridGTM!

Please tell us which phase you want to learn more about by commenting below. For example: “PLG Readiness Chasm”

Leave a comment

Introduction

Over the past weekend, I delved into a series of thought-provoking pieces that collectively painted a grim picture of the current state of SaaS (Software as a Service) Go-To-Market (GTM) strategies. The consensus seems to be that the traditional GTM playbook is showing cracks and a new approach is needed. Let’s explore this further.

The Broken SaaS GTM Landscape

1. Efficiency Gains

Jason Lemkin, in his 2024 State of SaaS report, highlights an interesting trend: companies are becoming more efficient in their operations. This efficiency extends across various aspects, from product development to customer support. But here’s the paradox: despite these gains, SaaS companies are facing challenges in achieving sustainable growth.

Revenue of $300K/US employee has started to become the new normal.

2. Declining Growth

David Spitz, in a candid LinkedIn post LinkedIn post, points out that growth rates are dwindling. Companies are no longer experiencing the explosive growth they once did. It’s as if the SaaS industry has hit a plateau. So, what’s causing this slowdown?

3. Rising S&M Costs

Multiple reports including David Spitz's post, indicate rising costs associated with Sales and Marketing (S&M) GTM strategies. SaaS companies are pouring significant resources into sales teams, marketing campaigns, and customer acquisition. Yet, the returns on these investments are diminishing.

The more they spend, the less efficient they become.

4. The Self-Serve Economy

TrustRadius’s 2023 B2B Buying Disconnect report reveals a fascinating shift: over 95% of B2B buyers now prefer self-serve options. It seems that the days of days of extensive hand-holding by sales reps might become a thing of the past.

Buyers want to explore, evaluate, and make decisions independently. This self-serve economy disrupts the traditional GTM model.

5. Linear Scaling Constraints

David Boyce’s reminder that “Human GTM can only scale linearly” hits the nail on the head. As companies grow, they hire more salespeople, expand marketing efforts, and invest in outreach. However, this linear scaling approach eventually hits a ceiling. Human resources are finite, and scaling beyond a certain point becomes impractical.

On correlating these, here’s the question that keeps popping up in my head…

The Paradox: Why More S&M Spending?

Now, let’s address the elephant in the room:

Why are SaaS companies increasing their S&M spending despite knowing that massive S&M spend is a primary cause of inefficiency?

1. Market Competition: The SaaS landscape is fiercely competitive. Companies vie for attention, market share, and customer loyalty. In this battle, S&M spending becomes a necessary evil. If you don’t shout louder, you risk being drowned out by competitors.

2. Customer Acquisition: While self-serve options are gaining popularity, designing and building a SaaS product for PLG is non-trivial.

3. Legacy Mindset: The traditional sales playbook is deeply ingrained. Sales teams are seen as revenue engines, and marketing campaigns as essential for brand visibility. Breaking away from this mindset is challenging.

4. Investor Expectations: The market closely monitors S&M spending. Salesforce, for instance, allocates around 45% of its revenue to S&M, which raises eyebrows. Striking a balance between growth and efficiency is a delicate dance. Most times, VC investments drive the SaaS companies to adopt the Sales-led acquisition playbook. And no doubt, it works well, until it doesn’t.

GTM options

SaaS companies have few GTM options

1. 🔥Low volume, High CAC, Sales-led approach to acquiring customers. Based on the numbers, this seems to be the predominant playbook.

2. High Volume, Low CAC. PLG approach to acquiring customers

Conclusion

The SaaS GTM landscape is indeed broken, but it’s not irreparable. Perhaps it’s time to rethink our approach. As we navigate this new era, embrace the self-serve economy, explore innovative channels, and find ways to scale beyond linear constraints. And who knows, maybe S&M spending will evolve into something more strategic and effective.

Until then, Long live S&M spend🚀🔥

An offer to all the ThriveStack subscribers,

Dave Rigotti from Inflection.io has generously offered a discount code THRIVE25 to save 25% off the ticket price to the PLGTM 2024 event.

Looking forward to seeing you April 16-17 in San Francisco.

25% off (THRIVE25)

Dave tells me that seats are limited. Register today.

Evolution Summary

• The 2000s: Sales-Led Growth (SLG):

  • The dominance of sales-led strategies in B2B SaaS.

  • Shift towards informed buyer journeys by decade's end.

• The 2010s: Rise of Inbound Marketing-Led Growth (MLG) and the beginnings of Self-Service:

  • Marketing qualified leads become prominent.

  • B2C companies make self-service default behavior to acquire users.

  • B2B lagged in embracing PLG self-service.

• The 2020s: Product-Led Growth Emergence (PLG):

  • PLG gains prominence and many PLG companies go public—a significant shift towards self-serve and remote purchase preferences.

  • 2020-2022: Surge in siloed PLG enablement tools.

  • 2023: Challenges in PLG implementation and PLS ecosystem.

• 2024+: Integrated Hybrid Growth Platforms: [PREDICTIONS]

  • Anticipated user-centric market with hybrid growth(PLG+SLG) models.

  • ThriveStack predicts an accelerated move from point solutions to integrated growth and monetization platforms.

The 2000s: The Era of Sales-Led SaaS

In the 2000s, B2B SaaS was synonymous with sales-led strategies. Direct sales interactions were crucial, with industry reports suggesting that nearly 70% of B2B software discoveries were initiated through sales engagements. Sales professionals played a pivotal role, often being the primary influencers in guiding potential clients through the product landscape.

However, a shift emerged in the latter half of the 2000s.

Inbound marketing started to resonate more with buyers, who increasingly preferred to conduct their research.

Studies indicated that B2B buyers spent up to 60% of their journey in independent exploration (e.g. product datasheets, web-page content, blogs, etc) before contacting sales teams. This trend was a precursor to a more customer-centric approach in the SaaS world, setting the stage for the rise of Marketing-Led growth strategies.

The 2010s - Rise of Inbound Marketing-Led Growth (MLG) and the Beginnings of Self-Service

• As the decade progressed, marketing qualified leads (MQLs) grew in importance for B2B strategies, marking a shift from the direct sales focus of the 2000s.

• B2C sectors led the way in making self-service the default for user acquisition, with B2B sectors gradually embracing self-service models in line with PLG.

• Driven by Millennials and Gen Z, who favoured self-service and independent research, over 40% of Gen Z and 29% of Millennials turned to review sites as their first step in the buying process.

• The demand for self-service options surged, evidenced by 70% of buyers preferring published pricing and valuing demos or free trials.

• The prominence of product demos and free trials rose, with 74% of buyers using demos, and free trial usage increased notably from 67% in 2021 to 77% in 2023.

Emergence of Product-Led Growth (PLG)

Alongside the trends, the mid-2010s witnessed the rise of PLG, a strategy where the product itself drives customer acquisition and expansion. This approach gained significant traction, with several PLG companies like Dropbox, Calendly, Miro, Canva, Slack, Grammarly, and others successfully going public.

Their success stories have made PLG a prominent strategy in the B2B SaaS sector. However, the rapid adoption of PLG also highlighted the complexities and technical challenges involved in its implementation.

And that’s when the SaaS builders faced a tech puzzle

As interest in PLG increased, SaaS builders faced a complex technological puzzle. Integrating over 300+ tools across more than 20 categories became essential to create user-centric platforms.

This jigsaw was essential for seamless self-serve experiences but came with its own set of challenges:

• Integration Overload: Orchestrating a symphony of tools, from authentication to revenue management, demanded hefty investments and cross-functional expertise.

• Resource Intensive: Companies had to earmark $1-3M yearly, with teams often exceeding eight specialists, including engineers and data scientists, to manage a 12-18 month journey to market. Refer to details in our blog: Comparing readiness efforts between PLG-first vs SLG first companies

• Custom Builds: To stay ahead, nearly every SaaS builder had to custom-build parts of their stack, ensuring their toolset was as unique as their product.

2020-2023: The Proliferation of Siloed PLG Tools

Between 2020 and 2022, the B2B SaaS industry saw an explosion of PLG enablement point solutions. These tools, essential for operations ranging from user acquisition to retention, became a staple in many SaaS companies' tech stacks.

As companies increasingly relied on their products to acquire customers, the demand for PLG tools that could enhance product features and user experience grew.

However, this period also saw the emergence of a problem: the overwhelming number of available tools made it difficult for companies to identify the right ones for their specific needs.

The market was flooded with a plethora of options, leading to potential confusion and inefficiency.

2023: Decline of Product-Led Sales (PLS) as an independent category

In 2023, as the B2B SaaS market continued to evolve, Product-Led Sales (PLS) faced significant challenges. Despite the industry's move towards Hybrid Growth strategies, several factors contributed to the struggles of PLS.

Refer to a detailed report on The State of Product-Led Sales

PLS Adoption Challenges: Despite $140M in VC investments, startups overestimated the market size and grappled with monetization. The lack of usage data standardization and the closure of some PLS startups highlighted the market's volatility.

SaaS Builders' Preference: A significant 89% of SaaS builders preferred developing their own PLS solutions. While 67% acknowledged its future importance, few prioritized it, pointing to a gap between potential and present value.

Learning from the PLS Decline: Bridging the Product-Led to Sales-Led Continuum

The experiences of 2023 highlighted a crucial gap: hardly any product effectively bridged the continuum from product-led to sales-led strategies. Elena Verna's insights underline this opportunity for innovation:

• The shift from traditional marketing-sales dynamics, with products now creating the sales pipeline in product-led sales.

• Limitations in self-serve monetization, especially for larger enterprise solutions, necessitate a shift to product-led sales.

• The need for proactive strategies to engage enterprise buyers as organic user demand often plateaus.

These insights emphasize the transition as a unique opportunity for SaaS market innovation.

2024 and Beyond - Predicting The Rise of Integrated Hybrid Growth Enablement Platforms

Looking ahead to 2024 and beyond, the SaaS market is expected to evolve into a more user-centric space with hybrid growth models becoming the norm.

We at ThriveStack, predict the emergence of a consolidated growth and monetization platform based on 2023's lessons, indicating a trend toward integrated solutions that combine the strengths of both product-led and sales-led approaches.

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The State Of Product Les Sales, Nov 2023

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1. Key takeaways

The widespread adoption of PLG self-service in B2B products drives the demand for Hybrid GTM strategies, (potentially) even in small and medium-sized businesses, highlighting the growing importance of Product-Led Sales momentum.

There’s a clear & secular trend in the industry to move to Hybrid Growth, however, the market needs more PLG startups for PLS (enables hybrid) to work

1. SaaS builders don’t see PLS as a product they should buy now.

2. The market is too small for PLS to succeed

3. PLS vendors compete with home-grown data engineering projects

4. Most PLS Vendors are struggling to find a footing

5. PLS vendors made bad assumptions

6. VC’s pumped a lot of money into the segment that’s not (yet an) independent category

1.1 SaaS builders don’t see PLS as a product they should buy.

We asked 74 SaaS builders (Founders and GTM leaders) across Seed to Series-C stage companies, and the responses we got indicated that most of them were

1. Either dissatisfied with the existing PLS vendors

2. or planning to do it themselves, using their data engineering teams

Although, there are some outliers, here’s the simplest way we found to represent their answers.

1.2. The SAM (Serviceable Addressable Market) is still too small for PLS to succeed as an independent category.

3 things need to happen (and it seems to be a pipeline problem)

1. Need more PLG Self-Service enabled SaaS products: The number of B2B SaaS products in the market is significantly low.

   1. In 2023, <5% of new startups, 10% of Series-A, and 15% of Series-B startups are PLG self-service enabled. The good news is that most want to get there, but it’s pretty damn difficult.

2. More of these PLG SaaS companies find the need for PLS (as a step function to get to Hybrid strategy)

3. More SaaS companies go hybrid GTM (PLG+GTM): Even though there’s a desire in the market to get there, the infrastructure and setup needed is massive.

Shameless plug: Explore our PLG self-service infrastructure—designed to seamlessly distribute your SaaS product through Product-Led Growth (point #1 above). Connect for a demo!

Contact ThriveStack for a demo

1.3. PLS vendors compete with home-grown data engineering projects.

SaaS startups find it a lot easier to whip up a simpler set of monetization signals, than pay >$75K+ annually and rely on PLS vendors

1.4. Most PLS Vendors are struggling to find a footing

1. Low penetration of PLS: Lots of hype, but <7% of penetration of PLS products. Source: OpenView Which tools do you need for PLG?

2. Calixa closing down shop: One of the earliest products (2020) closing down Dec 2023

3. Lots of PLS vendors struggling: Variance, Bliinx, RevenueHero, Pace, and Groundswell… seem to be in similar shape.

4. Stories from the horse’s mouth…

   1. Calixa’s blog from Thomas Schiavone | CEO and Co-founder

   2. Groundswell learnings from Brendon Short | CEO and Co-Founder of Groundswell

1.5. Major bad assumptions by PLS vendors

This is a small list of why the market went ahead of itself.

1. TAM was assumed to be big.

2. Investors will keep funding the category

3. Customers have acute pain and they will buy it, right now.

4. Product deployment will be simple

5. PLS vendors can take the liberty to be sales-led

1.6. VCs pumped a lot of money into the segment, that’s not (yet an) independent category

(A Sample List)

Now that’s out of the way, let’s understand PLS better.

<tldr;>

2. What is Product-Led Sales?

A lot has been written about PLS. Here’s the simplest definition we found that explains it the best (to date)

The critical piece of product-led sales is “understanding when sales should reach out to users”.

• by OpenView, Your Guide to Product-Led Sales

3. History of Product-Led Sales

Here’s the brief (dark) history of Product-Led Sales and a tad bit of prediction for 2024.

4. How do PLS products work?

4.1 Part-I: Architecture

PLS products typically are layered on top of the Product Analytics(PA), Data warehouse (EDW), CDP products, and traditional CRM products and enable outcomes via various GTM tools.

The below diagram is the best we could find (although the orange box mentions PLG CRM, we think that the market rushed to call it PLG CRM - as it was meant to help the sales team. Instead, it should have been called PLS (that’s just our take).

Source: Sapphire Ventures PLG CRM

4.2 Part-II: Signals needed for it to work

PLS products typically collect and combine data from many places and turn them into signals for the Sales team to act upon

1. Product usage - from DW, Usage Analytics tools.

2. Customer Fit – through Data Enrichment, Marketing automation tools

3. Intent to buy – through Website Click analytics tools

Notable PLS Resources

• Lenny’s Podcast: The ultimate guide to product-led sales | Elena Verna

• Product Led: Decoding Product-Led Growth vs Product-Led Sales: Understanding the Differences

• McKinsey: From product-led growth to product-led sales: Beyond the PLG hype

• OpenView: Your Guide To Product-Led Sales

• McKinsey: From product-led growth to product-led sales: Beyond the PLG hype

• TechCrunch: The rise of product-led sales, or why product-led growth requires a sales makeover

• TechCrunch: The rise of product-led growth is creating opportunities for startups

• Leah Tharin: Leah's Product-Led Growth Guide 3.0

• Calixa’s Product-Led Sales Learnings

• Brenden Short: What we learned at Groundswell

• Gartner: 2023: The State of Product-Led Sales

Market Research Data

ThriveStack has undertaken a comprehensive market research study to understand the pains, perils, and ways to overcome them, spanning various startup stages and personas from Seed to Series C companies.

The key insights presented in this report are on the topic of Product-Led Sales as heard from 74 SaaS Operators (Founders and Growth leaders), 10+ PLG influencers, and 7 PLS vendors.

Our aim is to share our knowledge and foster ongoing dialogues with our network to promote continuous learning.

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• Meetup Group: Seattle Product-Led Growth Group

• Date/Time: Wednesday, October 25, 2023 at 6:00 PM to 8:00 PM PDT

• Presenter: Hari Nayak, Co-Founder and CTO of Groundswell

• Materials Presented:

Product Led Sales 101

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Summary

In an insightful presentation, Hari delved into the world of Product-Led Sales (PLS), offering a comprehensive overview that covered the what, why, when, and how of this fascinating growth strategy. The audience was in for a treat as we explored real-world examples, including the success stories of Loom and Calendly.

Presentation

Understanding the Basics:

Hari's presentation began with the fundamental question: What is PLS and why do we need it? With clarity and expertise, he walked us through the intricacies of this growth approach. We discussed not just the 'what' but also the 'when' – when is the right time to embrace PLS.

Real-World Inspiration:

Nothing beats learning from successful examples, and the cases of Loom and Calendly were brought into the spotlight. These two companies demonstrated how PLS can propel a business to remarkable success.

The How of PLS:

We dived deeper into the 'how' of PLS, examining the nuts and bolts of implementation. A cross-functional team, a robust data strategy, and understanding of PQLs (Product Qualified Leads) and PQAs (Product Qualified Accounts) were integral to our discussion. We uncovered the high-level signals needed to identify these key metrics.

Who needs this solution?

Hari left no stone unturned as he addressed a crucial question: Who should be considering PLS? We also pondered over who the potential buyers of this strategy might be, adding layers of understanding to this fascinating concept.

Q&A and In-Depth Discussions:

After Hari's presentation, the floor was open for a lively Q&A session. The audience delved into critical queries:

• Who truly needs PLS, and how can they decide whether to build or buy?

• We unraveled the challenges associated with constructing a product in this space.

• Exploring the signals that make PLS a viable option for businesses was another hot topic.

• The session touched on the internal organizational conflicts and challenges that can arise during the deployment of PLS within a company.

Intense Deliberations:

What followed was an intense, 45-minute to one-hour discussion that left no stone unturned. We pondered deeply:

• The profiles of those who stand to benefit most from PLS.

• The critical decision between building or buying.

• The inherent difficulties in constructing a product centered around PLS.

• Identifying the specific signals that make PLS a strategic move for a business.

• We also tackled the intricate web of organizational conflicts and challenges that can sometimes hinder the seamless adoption of PLS.

Hari's presentation and the subsequent discussions provided a holistic understanding of PLS, shedding light on its significance, practicality, and potential challenges. It was an engaging and enlightening session that left the audience with a newfound appreciation for the power of Product-Led Sales.

However, SaaS companies find it difficult to layer these two strategies. In this article, we investigate how SaaS companies are adapting to this trend.

“The market has tipped towards favoring efficient growth over growth at all costs,” Howie Liu, Airtable CEO, tells Forbes. “We must operate the business in a more mature way that puts us on a path to become a public company and to have durability and efficiency in how we grow.

What is SaaS Hybrid Growth Strategy?

A hybrid growth strategy for SaaS combines product-led and sales-led approaches to acquire and retain customers. It involves using a free or low-cost product that users can try and adopt on their own, and a sales team that can assist and upsell larger or more complex accounts. A hybrid growth strategy can help SaaS companies cover a wider range of market segments, optimize customer acquisition costs, and increase customer lifetime value. Some examples of SaaS companies that use a hybrid growth strategy are Slack, Dropbox, Zoom, and Clearbit.

We asked: Is it easier to layer PLG over SLG, or otherwise?

We asked SaaS Founders, CTOs, and GTM leaders across Seed, Series-A, and Series-B companies. The high-level consensus was that layering PLG on top of successful SLG is a lot harder - changes across Org structure, compensation, product, and engineering take a major shift.

No surprise here… Expansion seems a lot easier with SLG-first companies. However, efforts on Free-User Acquisitions, Activations, Engagement, and Monetization were thought to be much more easier for PLG-first companies.

We tested against the Product readiness checklist typically used before GTM’g the product.

1. Checklist: We used a detailed checklist, by combining OpenView’s 11 PLG Principles with the Engineering+Data Analytics list of ToDos) and tested the high-level answers against it.

2. Weights: We gave weights, purely indicating the efforts the SaaS builders will need to take to be GTM-ready. e.g. if an SLG first company will need a lot more effort to re-design their system for Acquire.8 - Design for high drop-offs. Engineering items like creating micro-tenants, automating cleanup of dropped-off users, etc.
   A PLG-first company will find it relatively easier to design its systems for high drop-offs from the very outset.

3. Departments: We assigned the ownership of the checklist items based on the KPIs that each of the departments might need to own. For reference, here’s the reference article from on who owns growth in SLG vs PLG companies.

What do you think? Please comment here or DM us on LinkedIn.

Leave a comment

References

1. How we're changing from Sales-Led Growth (SLG) to Product-Led Growth (PLG) - By Are W. Sandvik, ShiftX

2. PLG + SLG: Maximize your business growth with a hybrid GTM strategy - By @Leah Messenger

3. Who Owns Growth in SaaS? It Depends. Here’s What the Data Says - By

4. 11 PLG Principles - By Kyle Poyar, Sanjiv Kalevar and Chris Gaertner

   May 17, 2022

5. 5 SaaS Growth Strategies to Scale Your Business - By Shubham Gupta, Gartner

6. Keys to Product-Led Growth for Tech Providers - By David Yockelson, Gartner

Table of content

1. Summary

2. Why did we pick these cities and these topics?

   1. Bangalore: We Started with a Bang!

   2. Mumbai: Small Crowd, Big Insights!

   3. Gurugram: A Heartwarming End to Our SaaS Journey

3. Summarized Insights & Conversations

   1. Insight: B2B SaaS startups find PLG self-service difficult to build

   2. Insight: Layering SLG on top of PLG is much easier than PLG on top of SLG

4. Join our Community

Summary

ThriveStack collaborated with the India SaaS community in late September 2023, to organize in-person meetups in 3 cities, Bengaluru, Mumbai, and Delhi. In total, it was attended by ~200+ individuals, with lots of presentations, conversations, and insights.

• India's SaaS market is growing extremely fast.

• Founders and SaaS leaders have an insatiable appetite to learn and try new things.

• Sales-led growth (SLG) is the primary mechanism for SaaS growth. Product-led growth (PLG) is upcoming and SaaS leaders are finding it difficult to build/apply.

We've just wrapped up the SaaS Growth Summit 2023, and oh, what a ride it’s been!

Zooming through Bangalore, Mumbai, and Gurugram, we connected, conversed, and deep-dived into discussions with the spirited SaaS community across India.

• In Bangalore, the startup hub, we chatted about the nuts and bolts of monetizing and scaling PLG strategies. Who attended?: SaaS founders and CTOs from (mostly) B2B SaaS companies.

• Moving to Mumbai, our cozy gathering led to deep, rich conversations on keeping users engaged and sticking around. Who attended?: B2B SaaS founders, Growth & Marketing leaders.

• Finally, Gurugram saw us brainstorming on starting up businesses in a community-led environment, turning ideas into reality with swift solutions. Who attended?: B2B SaaS founders, Growth & Marketing & Technology leaders.

Why did we pick these cities and these topics?

Well, after many cups of coffee and team debates, we decided to head straight into the beating heart of India’s SaaS world. We aimed to connect with the SaaS builders - the thinkers, the doers, the creators - and delve into topics that are shaping the SaaS space.

Every city brought something new to the table. Bangalore, with its larger SaaS crowd, buzzed with energy and ideas. Mumbai and Gurugram, with their smaller, intimate setups, allowed for deeper, more involved discussions, particularly around B2B, steering our conversations into highly relevant territories.

From discussing rapid building solutions in Gurugram to untying user lifecycle management in Mumbai, and navigating through scaling and monetization in Bangalore, the Summit was a treasure trove of real, actionable insights.

Now, we’re here to spill the beans and share the stories, the learning, and the absolute joy of the journey through the SaaS Growth Summit 2023.

Bangalore: We Started with a Bang!

”I had a great time at the SaaS Growth Summit - Bangalore edition!

The attendees brought so much energy and enthusiasm to the table, making it clear that everyone was keen to learn about product management and go-to-market strategies. It's refreshing to see such awareness and evolution in the industry over the last few years.

What really made the event special, though, was connecting other founders and product leaders building SaaS products. It was good to network with like-minded folks, swap stories, and learn from each other on how they are tackling their growth challenges. I definitely gained a lot of fresh perspectives from the event.”

Mumbai: Small Crowd, Big Insights!

Ashish R Bedekar

“Great experience moderating the panel discussion. We had a good insightful exchange of ideas between all the attendees.”

Kshitij Ingle

“ThriveStack SaaS Growth Summit was a phenomenal event that exceeded my expectations. It was a great opportunity to learn from some of the best minds in the B2B SaaS industry, who shared their insights, strategies, and best practices for achieving growth and success. I especially enjoyed the sessions that covered topics such as product-led growth by Gururaj and the discussion lead by Ashish. The speakers were engaging, knowledgeable, and inspiring. They also provided actionable tips and tools that I could apply to my own business right away.

The event also offered a chance to network with other B2B SaaS builders who were passionate about growth and innovation. I met some amazing people who shared their experiences, challenges, and solutions. I gained valuable connections and feedback that will help me grow my knowledge stack. The community was vibrant, supportive, and collaborative.”

Surendra Baliga

“It was great interacting with your team and other members of the SaaS fraternity. The idea exchange on growth hacks, hits and misses and other real-life anecdotes were like an accelerated learning program! Thanks and look forward to more interaction.”

Ankur Gattani

"It's always exciting to have a diverse bunch of perspectives shared in a small curated gathering - makes for deeper insights, more candid conversations. Great initiative team, wish you all the best"

Gurugram: A Heartwarming End to Our SaaS Journey

Piyush Gupta
”My experience at the Gurugram SaaS Growth Summit was enriching, with lively discussions primarily revolving around community-led growth and the hurdles of managing such communities in India's diverse B2C segment. We navigated through various use cases, such as the Urban Clap community and Baba Ramdev’s temple-style approach, dissecting how he leveraged a community base for Patanjali.

We also explored SaaS communities like Slack, Webflow, and Notion. An insightful realization was the evident need for Indian entrepreneurs to distinguish between product managers and product marketing managers, as the expectations from both roles are quite distinctive and pivotal.”

Summarized Insights & Conversations

#1 Insight: B2B SaaS startups find PLG self-service difficult to build.

Building products to become a distribution mechanism is not core to most startups. At best, early-stage startups build the Self-service registration (Authenticate and register user), but the rest is very difficult to build. There’s no real playbook for them to bank on.

#2 Insight: Layering SLG on top of PLG is much easier than PLG on top of SLG.

The effort taken to layer PLG on top of an existing (successful) SLG business (SLG+PLG) is way more than starting with PLG and then layering SLG on top (PLG+SLG). We had a lot more discussions on the problems (than solutions) with SLG + PLG.

There was a major hesitancy to the SLG+PLG approach. More on this in a later blog...

Join our Community

To continue these discussions, approaches & solutions, join our Discord community here.

Join Thrivestack Discord

At Thrive Stack, we thrive on catalyzing business growth. Meet Osman Polat, our visionary collaborator, who brings a treasure trove of industry wisdom to our table. Having orchestrated and booking meetings, honing his understanding of the complexities and nuances of business communication and powered growth at ViDGREETS, a Dutch startup, his insights into the intricate SaaS landscape are unparalleled.  

Join us as we dive deep into the winds of change reshaping software buying. Osman’s insights form the backbone of our exploration into the shift towards Product-Led Growth in the software buying process.  

Our collaborator for this discussion, Osman, brings a wealth of industry experience to the table. In his previous role, Osman was deeply involved in orchestrating and booking meetings, honing his understanding of the complexities and nuances of business communication. He was later approached by ViDGREETS, a Dutch startup, to leverage his expertise in facilitating product growth. His unique experiences have equipped him with a profound understanding of the intricacies of the SaaS landscape. His insights form the backbone of our exploration into the shift towards Product-Led Growth in the software buying process. 

In the ever-evolving world of software, the buying process is undergoing a significant transformation.

As a company that focuses on driving growth for businesses, we at Thrive Stack have been closely monitoring this shift. Recently, we had the opportunity to collaborate with Osman, an industry expert, to discuss the changing landscape and how it's influencing both buyers and users. 

Budget Holders and Traditional Procedures 

The first point of discussion was the role of budget holders in organizations. Interestingly, Osman noted that these individuals have not changed significantly over time, often sticking to traditional buying procedures. As we at Thrive Stack have observed, this lack of change can lead to a disconnect between what is purchased and the evolving needs of end users. 

The Modern End User 

End users today have different expectations than they did a few years ago. They prefer direct, unmediated experiences with products or services, a trend Osman has also noticed. Users want the ability to easily sign up and try a product, without having to first schedule a meeting with a salesperson. However, many organizations still insist on following traditional models, which can often result in user frustration and product abandonment. 

Reaching the Decision Makers 

One of the challenges both Thrive Stack and Osman have identified is the difficulty of reaching decision-makers. These individuals, such as ecommerce managers, marketing managers, and product managers, are often inundated with offers and tools, which makes standing out a tough task. The challenge is to be heard among the cacophony of voices vying for their attention. 

First-Party Data Conversion 

In his previous role, Osman worked on marketing gamification solutions that converted website traffic into first-party data. This experience is particularly relevant to our discussion on Product-Led Growth (PLG) as the ability to gather and effectively utilize first-party data is a crucial aspect of many successful PLG strategies. Despite achieving impressive conversion rates, they faced scepticism from marketing managers reluctant to adopt yet another marketing tool. This reflects the broader challenge in the SaaS industry - adopting new strategies and tools that may disrupt familiar workflows. 

The PLG Strategy: A Magic Pill for SaaS Growth?  

A common misconception is that the PLG strategy is a magic pill that can instantly boost the growth of any SaaS business. However, as with any strategy, it requires careful planning, execution, and constant iteration. It's not a one-size-fits-all solution, and what works for one business may not work for another. Stay tuned for our next blog post where we'll delve into why the PLG strategy isn't always the right choice for every SaaS business. 

The Future of Software Buying 

At Thrive Stack, we firmly believe that a user-centric approach that allows for easy access, trial, and evaluation of a product or service is the way forward. This aligns with the shift towards product-led growth (PLG), a methodology that focuses on the product as the main driver of customer acquisition, conversion, and expansion. 

Osman echoed these sentiments, envisioning a future where software companies design their products and services with the end user in mind. He foresees a world where users can effortlessly explore and adopt new tools without the need for lengthy meetings and sales pitches. 

As we continue to navigate these changes, Thrive Stack is committed to driving conversations and actions that push towards a more user-friendly, efficient, and effective software buying process. Collaborations like these, with industry experts like Osman, are crucial in keeping us aligned with the evolving needs of our customers and the industry at large. 

Stay tuned for more insights and collaborations from Thrive Stack as we continue to explore the changing landscape of software buying. 

............. 

Stay tuned for more insights and collaborations from Thrive Stack as we continue to explore the changing landscape of software buying. 

In the journey of a startup, achieving Product-Market Fit (PMF) and reaching a beta product stage often precedes the need to focus on aspects such as compliance, security, and scalability. These elements become crucial as the product gains traction, prepares to scale up, and especially when it begins to enter the enterprise market. 

Compliance

Compliance, while important, can be a challenging and resource-intensive endeavor. Therefore, it's beneficial to be mindful of compliance requirements during the design phase but cautious about how far you delve into achieving full compliance before validating your product and gaining traction. 

Security

Similarly, while security should be a consideration from the early stages, it needn't be an overwhelming focus that bogs down the team. Data privacy and evolving security threats are indeed pressing issues, but these can often be managed effectively by leveraging off-the-shelf solutions that have been battle-tested. Nonetheless, being mindful of best security practices, especially when developing in the Cloud, is crucial. 

Scalability

Scalability is not a day-one requirement, but shaping your architecture to support future growth can be beneficial. It is not recommended to build for scale on day one, but when you're targeting the enterprise market, you will eventually need to factor in enterprise-level scalability. Therefore, while compliance, security, and scalability are not immediate concerns for an early-stage startup, they should be considered and planned for from the early days to ensure smooth growth and transition as the startup evolves. 

Scaling Success Story: Airbnb, once a humble startup, redefined the travel industry by connecting hosts with travelers seeking unique accommodations. As their platform gained momentum, they faced the monumental challenge of scaling their operations for a global audience. With strategies like microservices, cloud hosting, data-driven decisions, and rigorous security measures, Airbnb seamlessly transitioned from serving backpackers to accommodating corporate travelers and families. Today, they stand as a global hospitality giant, demonstrating how smart scaling can turn a startup into an enterprise-level success story.

Best Practices for Startups

• Compliance Checklist: Create a comprehensive checklist for startups to follow during the design phase. Include key considerations such as data protection, accessibility, and industry-specific regulations. Explain why each item is important.

• Security Guidelines: Offer a set of security best practices tailored to early-stage development. Cover topics like code reviews, penetration testing, and employee training on security awareness.

• Scalability Tips: Provide actionable tips for startups on how to architect their systems for future growth. Discuss the advantages of microservices, load balancing, and monitoring tools.

Future Trends

AI-Driven Security

In an era marked by an increasing number of cyber threats, the role of artificial intelligence (AI) in cybersecurity cannot be overstated. AI-driven security solutions are becoming indispensable for startups aiming to safeguard their digital assets effectively.

Artificial intelligence can analyze vast datasets in real-time, detecting anomalies and identifying potential security threats faster than any human. It can also automate responses, preventing or mitigating breaches before they escalate into catastrophes.

Quantum Computing

Quantum computing is no longer a distant theory; it's approaching practical reality. While it promises incredible computing power for solving complex problems, it also threatens current encryption methods, potentially rendering much of today's data protection obsolete.

Evolving Data Laws

Data protection laws and regulations are continuously evolving to address emerging challenges and technologies. For startups, compliance with these laws is not just a legal requirement but also a crucial aspect of building trust with customers.

Final Thoughts

With this, we come to the end of our three-series blog journey exploring the intricate path that startups traverse on their road to success. In this final installment, we've delved into the often-overlooked but absolutely essential trio As our series concludes, we hope you've found it insightful and inspiring. May your entrepreneurial journey be filled with innovation and success as you navigate the dynamic startup world.

In our previous blog - Balancing Speed and Precision in Product Development, we embarked on an exploration of the diverse strategies that shape the landscape of product development in the startup world. We threaded these strategies together, revealing the compass that directs startups toward successful product creation.

Now, shifting gears, let's delve into another crucial aspect.

When developing a product, the selection of the right frameworks plays a pivotal role in ensuring the product's long-term success and scalability. The choice of frameworks can significantly influence the product's architecture, feature set, and overall user experience. 

One of the key aspects to consider when selecting frameworks is their ability to support the product's long-term vision and scalability. This implies that even if all features are not built out from day one, the chosen framework should be able to accommodate these enhancements in the future. This is particularly crucial when designing a system that needs to support different levels of capabilities or access, such as a freemium to a paid subscription model. 

Today, there are numerous frameworks available, each with its strengths and weaknesses. The choice largely depends on the specific needs of the product. For instance, some frameworks may be more suited for feature flagging like LaunchDarkly- enabling or disabling certain features for different users. This could be particularly useful in a SaaS product with varying levels of user entitlements. 

However, it's important to note that the selection of a technology stack and framework is not just a technical decision but also a strategic one. It's closely tied to the kind of talent the startup is looking to hire.

The Importance of Framework Selection in Product Development

Ensures Long-term Success: The right framework can ensure the product's scalability and longevity. Let’s consider React Native vs Flutter. One may choose React Native if you prioritize a larger developer community and easier integration with existing JavaScript projects. On the other hand, a team with Flutter experience can deliver a consistent UI from a single codebase for Web, iOS and Android. The important factors here are team expertise, project requirements, and ecosystem support when making your decision. A well-architected monolith with well-structured code might be more suitable when designing a simple application or prototype. But If you go with a distributed environment, microservices can serve the purpose in the longer run for scale.

Influences Design & UX: The choice of a tech stack can significantly influence design and user experience (UX). For example, using JavaScript and React for a web application can enable capabilities for smooth animations (performance), responsive design, real-time updates, and interactive features. This choice directly affects how users engage with the application, making it seamless and engaging while maintaining code quality for design iterations.

In complex scenarios such as micro frontends, where multiple autonomous teams collaborate to build different sections of a web app, the need for concurrent work becomes crucial. This architectural approach divides the user interface into smaller parts, enabling large teams to focus on specific features, expediting development and deployment.

Supports Future Enhancements: Frameworks should be flexible to support future iterations. Software systems change rapidly as product requirements evolve. The less prescriptive and more modular a framework is, the easier it can be adapted to your evolving software product. When making a decision to enable flexibility on the API layer, engineers are opting for a GraphQL layer. REST API contracts are strict, and if there is a change, both the client and the API must agree on the change before it can be implemented. Otherwise the API needs to provide backwards compatibility and support versioning. REST is still relevant, and is still commonplace today, but many modern applications composed of a front end client consuming a backend API, GraphQL has been a benefit.

Choosing the right tech stack

It's important to note picking the right tech stack isn't just a technical choice – it's strategic. It's tied to the talent your startup wants to bring in. The technologies you use can attract specific types of talent. Say you choose React over Angular – both great frameworks, not one better than the other. But they resonate with different developer groups.

Engineers often seek chances to work with specific technologies, boosting their skills. For startups, risks exist, but if engineers spot the chance to dive into the tech they're passionate about, risk can fade against opportunity. Also, your tech stack and attracted talent shape your development timeline.

Remember, your tech pick affects not only your product but also the team you're building.

Here are some pointers to help you make an informed decision:

💡Deciding between Microservice and Monolith

Team Proficiency: Your development team's expertise plays a crucial role in determining the right tech stack. Leveraging technologies that your team is already familiar with, like Python for data science or Golang for high-concurrency applications, can significantly expedite the development process. For instance, while some may argue that Python or Ruby are slower compared to other languages, their performance is sufficient for applications that don't require ultra-low latency or high throughput.

Scalability: The term "scalability" often gets thrown around, but it's essential to define it in the context of your project. Different tools handle various scalability requirements. For instance, a framework that handles 1000 requests per second for static data isn't the same as one that serves dynamic content from a database. Beware of tutorials showcasing extreme scale under specific conditions; real-world scalability depends on internal factors more than external validations.

💡Choosing the Right Cloud and Staying Vendor Agnostic

Community Support:  When considering which cloud services to use, opt for those that are simple to implement. If your team has experience with them, even better. It is important to be mindful of vendor lock in, however, if you are considering migrating from one vendor to another there should be a strong value proposition behind it. Even if your tech is cloud agnostic, it is still work to lift and shift to a new platform. You have to balance the benefits and risks of time to market. Building on top of proven cloud technologies, even if it creates some form of vendor lock in, can potentially accelerate your time to market. As an example, every major cloud provider has some form of file storage. AWS has S3 and Google has Cloud Storage. Depending on which platform you are on you will have some dependency on said service. There is a balance to being cloud agnostic and cloud dependent and it will have a direct impact on your speed to market. Another example is ElasticSearch on AWS. AWS forked ElasticSearch open source and created OpenSearch. It’s not as powerful as ElasticSearch, and locks you in to AWS. It gets the job done, but you may require more of the value that Elastic can provide as new updates and features come out. When choosing between major cloud providers like AWS, Azure, and GCP, keep in mind the benefits and challenges each platform brings.

Open Source Advantage:  Open source tech stacks often provide an edge due to their extensive communities and developer resources. Not only can you tap into community contributions, but you're likely to find skilled engineers who are familiar with these tools. As with any open source tool, you will need to stay on top of security patches and be aware of any vulnerabilities that exist. Open source is a double edged sword in that respect. Being that it’s open, if the community is big enough they can identify and patch issues quicker. However, if there is limited community support and an exploit is created, it could take time to identify and patch, exposing risk to your business.

💡 Prioritizing Documentation and Ease of Use

Comprehensive Documentation: Frameworks with thorough and well-maintained documentation are your allies. Clear documentation facilitates ease of use and contributes to the creation of high-quality software. Take ReactJS and Angular, for example. Their well-written documentation not only simplifies the integration process but also eases the onboarding of new team members, leading to faster development cycles.

💡 Choosing Right Databases 

A complex web framework in a complex language that can handle 500,000 “hello world” requests per second, when connected to a database that can only handle 1000 queries per second, can then only handle 1000 requests per second. If this database bottleneck cannot be improved, might as well use a simpler framework with less throughput to make life easy. It is important to understand the global bottlenecks, which almost always are databases, before making fine-grained optimizations and decisions. If the Engineer in the team only knows about using <insert-framework-here>, this problem can take down the whole of your application.

Remember, your choices today set the stage for your project's success. As we wrap up this chapter, stay tuned for the third and final blog in the Engineering Insight series.