20Growth: Inside Dropbox, Salesforce & Heroku's Product-Led Growth Engine; What Works & What Doesn't | Why Startups Doing Paid Under $100M ARR are not PLG | Why PLG is a Business Model, Not a Go-To-Market Motion with Adam Gross, Former CEO @ Vimeo

0:00PLG is not for everybody and PLG is not a go -to -market motion. PLG is a business model. Every not even great but good PLG business I've seen has some specialized customer acquisition piece that is not paid acquisition. If you are doing PLG and you're doing paid acquisition, sub -100 million in revenue, I'm not sure you're really PLG. This is 20 growth with me Harry Stebings and we're joined stay by an all -time massed of product like growth or PLG, Adam Gross, hailing from Salesforce Dropbox and Heroku. Adam has seen the good and the great of PLG, and this episode is a masterclass in when PLG works, how it works, lessons from the best, and mistakes that founders can and need to avoid if they want to execute a PLG strategy well.

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3:26You have now arrived at your destination. Adam, I've wanted to do this one for a long time, so first thank you so much for joining me today. Harry, it's been a long time coming. I'm delighted that we finally got it scheduled and nice to spend some virtual FaceTime with you. I'll do this is going to be great. So we're going to start with like a an interesting quick fire. So when we look at the different companies that you've been at, there's some iconic brands there. And I want to do basically what's your biggest takeaway from each and how did it impact your mindset? And so if we start with number one Salesforce, what would that be for you?

3:59I'll try and keep these brief. You know, so I was very lucky to be very early at Salesforce. I joined in 2003. One of the things that people don't maybe understand about Salesforce looking at it as this huge big enterprise offer company now is that thing was built brick by brick. That thing was built through the pure energy and intentionality of all the people on the team there, which was amazing. And so what I really learned there was just the kind of genuine power of a growth mindset. And what that really means and what that means applied every single day. That thing was forged into existence.

4:30It didn't just kind of get lucky right place right time. And that was a very powerful lesson. Can I ask you, sorry, what is a growth mindset? We hear it from everyone as the book... Sure. How to whack, what is it? It's really interesting and we'll talk about some of the other companies. I've worked a lot of companies that have enjoyed a lot of fast growth and Salesforce was different. Salesforce owned its own growth. The growth didn't happen to it. It didn't just kind of experience, you know, kind of a viral growth and kind of took off on the internet. When it started, maybe the internet wasn't even big enough for that to happen, it owned it through understanding the power of marketing, understanding the power of a message, understanding the power of an industry, transformation narrative, and really being intentional on owning it.

5:12So when we think about the ownership of growth that I've been sales for. If we were to move the drop box another of the iconic brands. What would be the takeaway from that? I was a drop box in the very beginning. I was employee 11, so it was 2010 when I started. And it was already clear, even in the very early days that they were onto something very, very special from a customer acquisition point of view. One of the many things I learned from Dropbox was the power of being really innovative around customer acquisition. One of the things that I think is maybe underrated that I'm really attracted to, and I encourage entrepreneurs to think a lot about, is what's changing?

5:49Where is their innovation in customer acquisition? I mean, it's hard to find a company that was more innovative in customer acquisition than Dropbox. I had Kip Bodner, who's like CMO, HubSpot on the show, and he said that actually, it takes one channel to get to 50 million in there or two channels to get to 100 million in there or Do you agree with that in terms of how to think about channel alignment to growth? I would hope that one channel could get me Further than 50 and I've certainly seen PLG businesses that got well past 50 on one channel or even back to drop -box got Well past 50 in one channel that that seems a little low to me I would I would hope I would get more given how hard it is to build a channel We've mentioned the word growth a lot and so I do want to dig in and start there.

6:32It's a little bit misused today as a term. When we think about what growth is, what is growth and what is it not Adam? I honestly don't love like the title VP of growth and I don't love growth function. All of that stuff, it is a lot of local maxima. It's improving a flow, it's improving a journey. All of that is really, really important but that's more kind of bottoms up growth. where I spend a lot of time with the companies I've led or work with as an angel investor, a board member, is a little more of the top -down idea of growth, which is fundamentally how do you set a vision for yourself, for your customers, that you can articulate and communicate at scale, that is going to be transformative for them and is going to be really, really valuable and is empathetic to where they are as an organization.

7:20So, one thing I like to think a lot about and talk to companies and founders I work with lot about is, what's your theory of your business? Which is another way of saying kind of holistically, where are your customers are going to come from? How are you going to make them successful? How are you ultimately going to make them profitable growing customers both in terms of them getting value and your business getting revenue? The thing about kind of just bottoms up growth is it's just very narrow in its perspective. It doesn't take the kind of holistic view of how does your product value proposition, interact with customer experience of how they engage with your product, how, what's the journey that your customer goes on?

7:58If they start as an individual free user and then convert to a self -serve paid user, maybe as a team, and then from there, convert into an enterprise customer, each of these kind of different phase transitions, this is kind of a whole architecture of a business. I really encourage founders to think more holistically about all the pieces and how they come together because that is the hardest thing about growth in the modern SaaS era. It requires all the pieces coming together. Should they think holistically about it from day one, or do you really just need to focus on the next step, the next step in zero to one phase?

8:32Maybe not day one, but definitely year two. At some point, you need to decide who is your customer, not just from a use case and value proposition point of view, but from a go -to -market point of view, which the best proxy for that is deal size. Are you going to get from your one to your three, from seed to a or maybe a to b depending on how you name the rounds, right? Are you going to get there by getting X customers at 50 k a pop or Y customers at 5 k a pop? The physics of those two systems are entirely different and at some point you got to decide and you have to decide pretty early because nobody has ever raised an A or I would think a B doing both.

9:14You just would spread yourself far too thin attempting to do both. And it's a very, very challenging discussion to have, especially in the early days, because if you're doing founder -led sales or even early right MVP development, by definition, you're more in the category of fewer, larger customers, right? Because it's very personal and engaged. So companies can say, oh, well, I'm gonna go down or founders go down that path and say, great, I'll just get more of those and you realize, well, you know, it's easy to get the first five, but then you've got to build the whole customer acquisition machine to get the next 50 versus you know the challenges as well on the on the smaller side you have to get the expert and hold it from kind of customer acquisition.

9:51Listen you're the PLG expert you mentioned there they're kind of are they paying 50 or are they paying five? I think the thing that I see at Lord and have a lot of portfolio companies do is they spend on the customer acquisition like they're a 50 they have customer success less like they're a 50, the enterprise cost structure is then shifted to a 5 ,000 ACV customer who doesn't expand in the way that they think it will do. And that's for me the biggest problem with PLG actually. The business is on good because they don't expand in the way they think they will but the cost base is so high. I'll channel Jason Lemkin here.

10:24PLG is not for everybody. And PLG is not a go -to -market motion. PLG is a business model. It is a, again, holistic way of architecting and constructing your product, your business, and your entire organization. It is not something that you add on, say, you know, G wouldn't this be nice to have as a kind of additional distribution channel. You know, it has to be really, really intentional. With that in mind, every not even great, but good PLG business I've seen has some specialized customer acquisition piece that is not paid acquisition. If you are doing PLG and you're doing paid acquisition in the early days, and I'll even say like sub -100 million in revenue.

11:05So pretty far up. If you're doing paid acquisition, I'm not sure you're really PLG. Whenever I talk to founders, a good PLG business, even at the 5 -10 million range, they usually have discovered one good acquisition mechanism that is contributing to a disproportionate 50 -60 -70 % of their actual customer acquisition volume. And usually that's like one or two things. The distribution of acquisition methods are specifically even content, right, is highly asymptotic. One good piece, two good pieces will move the needle as opposed to doing a thousand. How do you advise founders on channel diversification that you say they're about kind of having that one channel that works, that one innovative customer acquisition channel?

11:50I hear a lot who are like, you know, I need to diversify what happens if you know we have too much channel risk. How do you advise them on that? And when's the right time to try and add a second channel. Going back to kind of one of the things before, you know, enterprise versus PLG or self -serve. How do you think about that decision? My rule of thumb there is you only get to have one, one of those until at least 10 million, if not further. If you're up at like five, six million, and you're like, gee, now's the time to add enterprise, usually the challenge is companies going enterprise too soon, because it's very tempting.

12:22It can be the other way of companies trying to go into PLG from enterprise, which is a much harder path to go. So if you're doing that under 10 million, I just think you're not big enough. It's too distracting. You haven't built enough of the machine. I would hope that a channel would get you pretty far again into the, you mentioned 50 before 100. And maybe it's also, you know, I think about a full -fledged channel as in a full -fledged enterprise sales organization with all the SCs and SDRs and all the mechanics and machinery. That takes a lot to really get spout. If you're a startup founder listening with the POG Emotion, the question then is like, How do I have the sharpest point going into an organization?

12:59How do I hook the champion most effectively? How do you acquire champions in companies most effectively? How do you get that first user to love your product? So much that they sell it to the rest of their team. One of the key things to understand about PLG is it's not linear. It's not a single product that you have a value proposition for or an experience for, that you sell to one user, market to one user, that you then take the same thing and then try and get them to adopt a Zootime and then get the same thing adopt to an enterprise. What makes PLG PLG is it has these distinct discrete but complementary motions and value propositions.

13:38I'll give you a specific example. I think when you look at PLG, this does tend to be true. That first step, that individual free, typically free step, is usually a creation value proposition. Right? In the heroic case, creation meant like building and deploying it out. The second step, which is usually your team self -serve step is usually a collaboration value proposition. GitHub is another great example of company I did some work with as a consultant. As an individual developer, I'm using GitHub to find code, find samples, find libraries, whatever. Right, creation oriented. As a team, I'm using it as part of my workflow as in a team in order to collaborate, right, collaboration value proposition, and then enterprise what's the value there?

14:19It's compliance. That's where I have my security, That's where I have my auditability. That's where I have my observability, all those kinds of pieces. These are distinct products. They're distinct value propositions and they're distinct go -to -market motions that you assemble in a kind of adjacent way into a layer cake, if you will. So yes, you start with that individual free user. But in order to make the jump to team, you're going to have to have a different value proposition and probably a different product, complimentary product. What is the biggest mistake that founders make when moving from stage one creation to stage two collaboration in teams?

14:55I think the biggest mistake is not understanding that it's different. Not approaching it with the intentionality of it's going to require a different value proposition that having a single player product a product that has value on a single player basis and that you can then build a multiplayer collaboration product experience on. You're doing MVP, you're doing a product market fit twice. And I've seen this a bunch and I've seen companies I've invested and not make it where they get the individual value proposition, but they're not able to translate to the collaborative value proposition. How do you do a fact of product marketing there?

15:35So you have a billboard and you want to emphasize the abilities that you're able to to live with creation tools. And then you also want to emphasize the team and the collaboration features. How do you do two stages of product marketing on one billboard or one advert? Excellent question. And usually this debate comes up not in the billboard, but in the homepage of the website. Imagine now when you've got the full Fletch PLG model, you've got Enterprise 2. How do you manage that? Friend of mine runs the website for GitHub, and this is classic GitHub problem in space. My default is the website is about the top of the funnel.

16:09is about establishing the initial customer relationship. You want to yoke towards that free customer acquisition and that's kind of the primary thing. Because once you are engaged with them in the product, you have all kinds of additional communication mechanisms in product, out of product, events, you name it to engage with them and move them on the journey. But the website is frankly a kind of a blunt instrument and so I point it at that largest pool of unwashed masses and then as you kind of pull them up into your journey, into your company experience, you reveal the different ways of engaging with them and delivering these other messages.

16:45You know, the Heroku Core website really was always just about getting free developers to sign up. And in fact, a lot of the work we did, and again, this is my error was 2013 or 2018. So this is a while ago. The enterprise products that we built and spent, you know, customers would spend millions of dollars on. Most of like your hacker news crowd didn't even know that stuff existed, but that's because it was, we would communicate with them individually or differently versus what you would experience on the website or in this case, maybe the billboard. You know, we mentioned that kind of creation with regards to a Heroku and signing up developers.

17:15Respectfully, it almost feels like an easier product marketing challenge than other horizontal tools because we know we're developing developers specifically. Okay, we know where they hang out, we know what messaging resonates. If we take something like notion, there's dentists, there's data scientists, there's mothers and farmers, the horizontal product audience is so large. How do you think about effective product marketing with such horizontal products? Really at its core, it's what is the narrative of your company? What is your industry transformation narrative? How are your customers even going to imagine your product and how the impact it's going to have for them?

17:54What was an industry transformation story? Is that it? Narrative. That's that? No, I really like you Adam, but that feels like it came out of an SAP book. Like what's an industry transformation narrative? I don't know what it is. If your company doesn't have one it should, what you're always trying to do is navigate your company on two dimensions. One is be emotive and the other is be strategic. You need to be emotive, right? Because you want people to carry, you want people to have an experience with your product that they feel emotionally and passionately and viscerally connected to. What if we done to create these emotive brands and how do you create a motive brand, Son?

18:29You start by thinking that it's important to do so. Have some intentionality to say, this is important, experience is important. This is why do like big old software companies suck because they're not experience oriented. They don't care about these things. They've lost the connection to the individual user. It's why these companies tend to be PLG companies because to get the individual user, you have to be empathetic, you have to care about experience, You have to have meetings with the CEO and the management team where you're debating minor switches in the command line, which trust me, we did it, Herokim.

19:04So you have to care. But a motive is just half of it, right? The other part you have to do is be strategic. And if you're emotive and you're not strategic, you're interesting and cool, but you'll never command the kind of business impact and ultimately budgets and ultimately growth for your company that you're trying to look for. And it's on that strategic dimension that this idea of transformation area or just strategic impact is maybe another way of thinking about that. That's so important. What do people get wrong on the strategic impact side? What are the mistakes that are made there? They think about the world too much from their worldview, their situation, their consciousness out versus customer in.

19:42The hardest thing about being strategic and about having that transformation narrative is having genuine, what I like to think about sometimes is enterprise empathy. It's very hard for organizations to do is have enterprise empathy, which really means being able to understand how your product sits in the full context of your customer. Politics, its org structure, its business processes, its successes, its dysfunctions, all products are kind of sitting in this context and to genuinely understand that takes a real kind of presence of mind. What are the most common ways that you see growth plateau in fast growing companies?

20:20In companies that do plateau in growth, why? Maybe kind of the implicit contradiction of being a high growth company. I see this play out all the time. You have this initial thing, this initial idea that whether you're GitHub, again, Drop box rogu you name it that has generated unimaginable success. You've gone not just from 0 to 1 but 0 to 10, 0 to 100. You've broken through on the internet. One of the rarest things to do. You developed internal ideas and theories about why that was the case. This one thing that you did, the set of values that that they represented was this thing that got you to this unimaginable place of success relative to all the odds and all the other companies out there.

21:03Then you have to say, I'm going to put those aside or I'm going to challenge those or I'm going to think beyond that and develop a new framework of value or a way of contradicting even maybe some of the principles that got us this far in order to serve customers at that next level of impact or death. And that is a very, very hard thing for organizations to do. Alex Nordstrom is the co -president and the chief business officer at the head of growth at Spotify and he talks about committing surgery on yourself, which is essentially examining yourself in that core moment of intersection and realizing that you might have to kill the golden goose that's got you to stage two to get to stage three.

21:44How do you think about sometimes needing to really examine the core to get to the next level? Amen. Amen. You know you're doing it wrong when the company gets to your religious about its own culture and ultimately it gets too introspective. We are successful because we've always done it this way. We have whatever special t -shirts on Fridays that we spend an exquisite amount of time building, GitHub and Haroku. This is so core to our culture, clearly this has to be the reason for our success and almost in like this religious way where you don't even know where the growth comes from, you're just afraid of upsetting the growth gods.

22:24You romanticize or elevate these kind of semi -arbitrary aspects of your internal culture that have served you very well in the past, but are not what's going to get you to where you go when you need to go in the future. That's part of you asked before, what's growth, growth mindset? That's growth mindset. Being so religiously customer -focused that you're willing to challenge the core values that you genuinely believe have contributed to your success because they may not be the values or the strategies that will deliver that next frontier of growth. Speaking of next frontier of growth, often at that kind of intersection where you do need to switch chapters, sometimes name changes happen Adam and I hear you're the master of name changes.

23:07This sheet, like everyone I spoke to about you was like Adam comes in and he's like let's do a name change and he masters it and he does a brilliant job with it. But why do you like name changes? And how do you think about strategy here? It gets to what I was saying before about capturing that strategic and emotive position. Customers want to love your products. They want to be excited about them and they want to understand and inhabit the vision that they represent. And the positioning, and ultimately the naming, is the invitation to do that. two examples. When I was doing some work with GitHub, the team there came up with this great product that let you build Workflows and you know there are a bunch of names being kicked around like flows and workflows or stuff like that and Now and I'm happy to take credit for this.

24:00It's of course called GitHub actions. Think about like workflow versus actions Which product do you want to use which kind of captures the essence of what this product was about? One way of thinking about what was behind that product naming was GitHub was this kind of inert set of nouns, right? It's just a database. It's just you know, you're just interacting with these files versus a thing that actually does something What a powerful concept what a big change in evolution for the company and for how you want people to conceive of that What's the simplest way you can kind of capture and communicate and get people excited about that for me?

24:35It was actions. I think that was a pretty good name You know, at its core, it's just getting to the essence of why people should care about your product and how they should relate to it Just trying to be as customer -centric as possible and Appreciate that somebody's gonna have microseconds to contemplate what this thing is and so you wanted to have as great as impact as possible Going back to the element of PLG and moving into enterprise I'm thinking about kind of naming and what kind of enterprise names resonate best But the thing that I was really thinking was the hard thing that I often see is often an honesty sales teams feel like second -class citizens when growth is largely product enabled.

25:10How do you think about not having second -class sales teams when it is such a PLG motion? What tends to go south and this happens all the time is when you cross the streams, is when you don't have the clarity in how you run the business of this is our self -serve product and this is our self -serve business and this is how it works and this is our sales -led business. This is its value proposition and this is how it works. The most common failure mode is that those intermingle in ways that they're not differentiated by motion, by customer, by product and value proposition, by message. And then you just have teams that are stopping on each other, all over each other, and then you have acrolonia.