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NPLG 11.20.23: How to Master Product-Led Sales (Recapped)
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NPLG Startup of The Week: Recapped
Buying and selling B2B has changed. Gone are the days of “growth at all costs” where companies dumped money into top-of-funnel leads and hoped things would convert. Every deal is a battle now. Sales cycles have increased, the number of stakeholders has increased (CFOs are in every deal), and budgets have shrunk.
Success in this market requires sellers to execute the perfect sales process on every deal, reduce friction in their buyer journey, and have visibility into the status of their pipeline. Creating alignment between stakeholders and project managing next steps is table stakes.
Enter Recapped. Recapped is a purpose-built platform that lets B2B sales teams create collaborative deal rooms with their prospects, customers, and partners. By sitting on top of your CRM, Recapped allows collaboration between internal and external parties to ensure nothing falls through the cracks. This accelerates sales cycles, increases close rates, and lets leaders accurately forecast their revenue.
Recapped has raised ~$8M from top VCs including CRV, Zoom Ventures, ERA, Cofound capital, and various angels.
For this edition of Notorious PLG, Recapped CEO Mark Fershteyn shares his lessons over the years of transitioning from top-down to PLG, back to top-down, and back to PLG.
COVID-19, PLG, and DSRs (gotta love acronyms**)
** Coronavirus Disease 2019, Product-Led Growth, and Digital Sales Rooms
“Like most startups, our GTM was built on what we knew best. Before Recapped, I spent a decade building outbound sales teams with a top-down motion, so it was the obvious path for our beta in 2020.
Soon after our launch, COVID-19 rattled businesses and people around the world. As we were all quarantined, every business was forced to have digital sales teams overnight.
Companies, reps, and people were struggling, and we felt that we could help. We wanted to get in front of as many people as possible.
Knowing almost nothing about PLG, we released our first freemium offering. We always had hopes that self-service and PLG would unlock mass reach and adoption. After all, Jira, Asana, and Zoom made it look so easy.
Not surprisingly - we failed. Badly.
As the first Digital Sales Rooms (aka Mutual Action Plan) platform on the market at the time, we had similar challenges to every category creating start-up:
A new platform that ~85% of users didn’t understand. The idea of collaborating with clients and internal teammates in a joint space wasn’t common and required education.
Our initial release required a lot of effort to get up and running leading to many users never creating their first collaborative workspace or sharing it with a client.
We hadn’t achieved product-market fit and many early users did not fit our ICP or were looking for something completely different.
We were being pulled in a lot of different directions with varying use cases, personas, and industries.
Do what you know
After coming to terms with where we were as a company, we killed freemium and free trials completely. We reverted our focus to demo requests for the next 2 years.
And it worked.
We scaled from almost no revenue to nearly a million in ARR. We raised our $800k Pre-Seed led by a customer (holy sh** what a humbling experience) and a $7m Seed led by CRV, Zoom Ventures, and others.
The market was booming again and we were growing fast. The team grew to 26 in less than a year and a half.
We were untouchable… or so we thought.
Sh** hits the fan… again
Like most companies, Q3 of 2022 caught us completely off guard. As a founder, one of the hardest things was having to reduce the size of our team and shift our focus towards profitability.
Every sales team felt the same struggles - sales cycles grew, the number of stakeholders increased, and budgets shrank.
Suddenly the message we’ve been preaching around sales process and buyer enablement was being echoed by the market. Since companies could no longer throw money into expensive top-of-funnel acquisitions, the bottom-of-funnel execution mattered.
Buyers were also changing how they wanted to buy - they wanted immediate access to the platform. There had to be a clear ROI before committing time for a demo or trial.
Return of the PLG
Through the chaos of the market, there was a glimmer of hope for us. Mutual Action Plans and Digital Sales Rooms were the “hot new item” that everyone was talking about.
Suddenly, everyone seemed to care about “buyer enablement”, a topic we’ve been trying to educate the industry about for years.
With a product that was suddenly being pulled by the market and a lean team, we mapped out the pros and cons of a potential PLG GTM.
PLG principles would force us to create a more intentional and intuitive product.
Implementing PLG initiatives would benefit the adoption and engagement rates of every user, not just freemium.
Enable our small team to scale their efforts and be more efficient.
Unlock users to get access to the platform without sales assistance.
Competitors could get access to our product
Recapped still requires some knowledge and effort for users to see the value
Potential to lose high-quality leads that could have a sub-par experience
Most importantly, we believed that giving unfiltered access to Recapped could help the sales community. We saw the effects of tight sales execution: faster sales cycles, higher close rates, better buyer experiences, and more accurate forecasting.
In this market, closing another deal could mean the difference between keeping or losing your job. Being a “by sales for sales” company, we felt compelled to do something.
Transitioning into Product-Led Sales (PLS)
We took the best parts of PLG (self-service, intuitive product) and combined it with sales-led guidance.
We could focus on executing the GTM because the market was doing the education for us. We started experimenting with our new GTM by manually unlocking freemium and free trials for larger enterprise accounts. And we made our prices more approachable.
Using our previous learnings, we laid the foundation:
Invested heavily in the “first-mile” experience and product virality
Created community templates that allowed our users to get up and running quickly
Improved visibility by integrating our database, Intercom, and Salesforce to have a direct view of all usage metrics, and the ability to effectively manage trials
Drafted email cadences in HubSpot to educate and enable new users
Created a lead scoring model in HubSpot that sent different CTA’s based on personas (help articles for account executives, demo requests for leadership, etc)
Automated outreach to “high quality” leads to drive demos with decision-makers
Released unlimited View-Only licenses to help drive internal collaboration and visibility, especially for leadership
After re-launching our new freemium and free trials, nothing happened… at first.
Slowly, things changed. Because of the rampant budget freezes and layoffs, sales teams were desperately looking for ways to streamline sales processes. Winning a deal suddenly required guiding their buyers with mutual action plans and providing an outstanding buyer experience.
We knew we were onto something when we closed one of our largest customers completely through a rep-driven approach with minimal sales assistance.
We also had natural virality baked into our product - every time a seller invited their buyer into the platform, it was a potential lead for us. We focused heavily on improving this flywheel, taking inspiration from the Calendly’s and Loom’s of the world.
Hundreds of reps were paying out-of-pocket to use Recapped across multiple accounts. CROs and VPs of Sales, who had never seen their reps paying out-of-pocket before, were taking notice.
Today, we’re glad to say that 65% of our qualified pipeline has been generated from a bottoms-up PLS motion and Q3 ‘23 was one of our best quarters ever.
Summary and next steps
PLG and/or PLS is not a magic bullet. Success does not happen overnight, and it’s certainly not right for every business.
Without advancements in market maturity and product market fit, I believe it would have failed for us again.
It requires work, infrastructure, and focus on making your product and messaging as intuitive as possible.
Regardless of your GTM motion, I deeply believe that even top-down companies should follow the principles of PLG.”
I would love feedback. Please hit me up on twitter @zacharydewitt or email me at firstname.lastname@example.org. If you were forwarded this email and are interested in getting a weekly update on the best PLG companies, please join our growing community by subscribing.
PLG Benchmarking (Startups):
I will continue to update these metrics and add new metrics. I would love your feedback on what else I should track (email@example.com).
Organic Traffic (as % of all website traffic):
Conversion rate (website → free user):
Activation rate (free user → activated user):
Paid conversion rate (free user → paid user):
Enterprise conversion rate (free user → enterprise plan):
3-month user retention (% of all users still using product after 3 months):
Conversion from waitlist to free user:
<1 month on waitlist: ~50%
>3 months on waitlist: 20%
For more detail on acqusition rates by channel (Organic, SEM, Social etc), please refer to this prior NPLG.
PLG Financial Benchmarking (Public PLG Companies):
Financial data as of previous business day market close.
Best-in-Class PLG Benchmarking:
15 Highest PLG EV / NTM Multiples:
15 Biggest PLG Stock Gainers (1 month):
Complete Notorious PLG Dataset (click to zoom):
Note: TTM = Trailing Twelve Months; NTM = Next Twelve Months. Rule of 40 = TTM Revenue Growth % + FCF Margin %. GM-Adjusted CAC Payback = Change in Quarterly Revenue / (Gross Margin % * Prior Quarter Sales & Marketing Expense) * 12. Recent IPOs will have temporary “N/A”s as Wall Street Research has to wait to initiate converge.
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Keychain, a company that uses AI to help brands find manufacturing partners, has raised $18M. The round was led by Lightspeed Venture Partners, with participation from BoxGroup, Afore Capital and SV Angel.
Langfuse, an open source analytics platform intended for large language model applications, has raised $4M. The round was funded by La Famiglia, Lightspeed Venture Partners and Y Combinator.
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