Product-led growth (PLG) is a high-leverage aspect of the SaaS business model and perhaps one of the most significant departures from the legacy software world. PLG focuses on automated buyer journey orchestration, beginning with freemium offerings and culminating with self-service product onboarding. Through usage and value realization, initial users ultimately become paid customers thus increasing subscription levels. Hybrid models have evolved, incorporating some elements of PLG for companies focused on larger annual contract value (ACV) offerings and the enterprise market, where a sales team is brought into the self-service motion.
Some say PLG is only for SaaS products with low AVCs and the SOHO and SMB markets. Not so fast. Let’s take a look at five leading SaaS companies with a strong PLG motion and revenues all exceeding $100Ms in ARR. They are not “pure” PLG companies, but they have successfully built aspects of PLG into their models.
- Asana (distributed team collaboration software) boasts $400M in ARR, yet 60% of its customers come from self-service. For bigger deals that may begin with self-service, sales reps are brought into the motion.
- Datadog’s (cloud app monitoring platform) $1.2B of revenue comes predominately from its enterprise customers (> $100k of ACV), but Datadog’s freemium offering is still a core element of its lead generation machine.
- Vimeo (video hosting/sharing platform) is running at $330M ARR with 75% self-service offerings. Vimeo also includes a sales-driven motion for larger deals and this sales motion is common among SaaS companies serving larger enterprises with larger ACVs.
- MongoDB (document-oriented database) with $750M+ in ARR had ~90% of its 25,000+ customers as self-service with only 10% going through the sales team!
- Cloudflare (web infrastructure/security platform) with $500M+ ARR has a whopping 3M+ free users and only 100,000+ paid customers. Proof positive that a company does not need high freemium to paid conversation rates to create a $500M+ ARR company.
The bottom line … if you are a SaaS company, regardless of your ACV or your target market, PLG should be part of your sales motion. For some SaaS startups, starting with a freemium model and then adding premium value-added offerings has proven to be a great retention and growth strategy.