Product-Driven Growth and Profitability: What's Happening?
Among public technology companies, "Product-Led Growth (PLG) companies - those that educate and convert buyers with products rather than sales and marketing (SLG) - operate at about 5% to 10% less profitability than sell-driven moves,” venture capitalist Tomasz Tunguz pointed out in a blog post.
This data point may be specific to where we are: first, because public tech companies are less profitable overall than just a year ago. Second, because not so long ago, PLG companies had a higher net margin than their sales-focused counterparts. But just because this inversion is temporary doesn't mean it's not worth looking into.
"The PLG playbook is still being written - and what happens today will be an important chapter in that playbook." Kyle Poyar of OpenView Partners
Product-driven growth is no longer an exception: like Atlassian, Zoom, and Snowflake, many private startups have embraced this model. If it's inherently less profitable, founders will want to know, especially now that investors are once again paying attention to a company's path to profitability and no longer rewarding growth at all costs.
As usual, things are unclear. There are some reasons why PLG companies would be less profitable now that could turn into reasons why they might be more profitable in the near future. To put what's going on into perspective, we reached out to Kyle Poyar at OpenView Partners.
OpenView is a Boston-based venture capital firm known for advocating for product-driven growth. So she certainly has several horses in the race. But it also means he's invested in making sure PLG is the recipe for success, and he's keen to look at what can happen there. Here's what Poyar had to say on the matter:
Among public technology companies, "Product-Led Growth (PLG) companies - those that educate and convert buyers with products rather than sales and marketing (SLG) - operate at about 5% to 10% less profitability than sell-driven moves,” venture capitalist Tomasz Tunguz pointed out in a blog post.
This data point may be specific to where we are: first, because public tech companies are less profitable overall than just a year ago. Second, because not so long ago, PLG companies had a higher net margin than their sales-focused counterparts. But just because this inversion is temporary doesn't mean it's not worth looking into.
"The PLG playbook is still being written - and what happens today will be an important chapter in that playbook." Kyle Poyar of OpenView Partners
Product-driven growth is no longer an exception: like Atlassian, Zoom, and Snowflake, many private startups have embraced this model. If it's inherently less profitable, founders will want to know, especially now that investors are once again paying attention to a company's path to profitability and no longer rewarding growth at all costs.
As usual, things are unclear. There are some reasons why PLG companies would be less profitable now that could turn into reasons why they might be more profitable in the near future. To put what's going on into perspective, we reached out to Kyle Poyar at OpenView Partners.
OpenView is a Boston-based venture capital firm known for advocating for product-driven growth. So she certainly has several horses in the race. But it also means he's invested in making sure PLG is the recipe for success, and he's keen to look at what can happen there. Here's what Poyar had to say on the matter:
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