“Your top-of-funnel is probably not growing as much because you’re not focused as much on driving new users, new use cases to come in. And that’s why I think a lot of people always get stuck” – Mark Roberge & Oliver Jay in today’s Tip 1605
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The Science of Scaling Podcast
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Transcript
Scott Ingram: You’re listening to the Daily Sales Tips podcast and I’m your host, Scott Ingram. Today’s tip comes from a new podcast called The Science of Scaling. It’s hosted by Mark Roberge – who you might know as the founding CRO at HubSpot, co-founder of Stage 2 Capital, or as a Senior Lecturer at Harvard Business School. Each episode of The Science of Scaling gets super tactical on how to scale your sales and revenue. And episodes feature this really unique, “stop the tape” feature where Mark literally pauses the interview to jump in with a deeper breakdown of the different points being made by the guest. You’ll hear that happen here as he talks with Oliver Jay, the former CRO at Asana:
Oliver Jay: A lot of PLG companies get confused on what it takes to be an enterprise company. And the confusion comes in step one, founder-management team realized, well, we got so many users, we got so many businesses. Wow, there’s a couple of big enterprises that want to pay us a lot of money. And all we need to do is… There’s a lot we need to do, but it’s really around the security, permissions, data residency, all that stuff. It’s going to be a multi-year process, but it’s worthwhile to take because, gosh, we already have these enterprises that are validating that as long as we build the security stuff, they’re going to come.
So what happens in the next couple of years is they spend so much time building permissions and audit logs, stuff like that. Super interesting. And guess what? You convert. You convert those enterprises that are already using a lot of your free product, and they’re like, Yeah, great. And so now you have a couple of 500K deals, maybe even over a million dollars. And that’s awesome. And then they get into something I call the PLG trap. One day they wake up and they realize, Well, I got all the security stuff and I’ve converted all these enterprises onto my security at my enterprise product, which charges a lot more. But why is my pipeline suddenly dry? And what happened? What you realize is you can build all these security features, but you’re actually only appealing to the few enterprises that already have a lot of organic usage of your product. What about all those other companies that haven’t even gotten your product hasn’t gone viral internally yet.
Your security features don’t appeal to them because you’re irrelevant in the organization. And this is what happens a lot. And I think a lot of companies, you can leverage the security play for a very long time to get to a couple hundred million and you go public. And then suddenly you really decelerate because you focus so much on security. Now, your top-of-funnel is probably not growing as much because you’re not focused as much on driving new users, new use cases to come in. And that’s why I think a lot of people always get stuck, I call it in this PLG trap.
Mark Roberge: Kind of blow on my mind, to be honest with you. I’ll be frank. OJ sent me a 15-page paper they wrote about this before this interview, and I thought it was brilliant. I didn’t see this before. I knew that that was the typical playbook, was the best PLG companies, PLG 1.0 was get that down-mile ratio great and get those free users cook in and get the auto monetization humming and get to five million and then build the security features and you get to IPO. But what about after that? What about, is IPO success, or is historic company 20, $50 billion valuation success. That’s how OJ is thinking here. Five billion stuck market cap is not good enough for him. It’s surfaced in this new strategic consideration, which is like, Yeah, fine. You can win a deal when you have users at a company. But at some point that runs out. And so how do you win if there’s no users? That hasn’t been in the PLG playbook. And I think OJ is saying it should, and I agree.
Scott Ingram: You can listen and subscribe to The Science of Scaling now on Apple Podcasts, Spotify, and everywhere else you listen to podcasts and of course, we’ve got those links for you at DailySales.Tips/1605. Once you’ve been over there, be sure to come right back here for another great sales tip. Thanks for listening!