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The Anatomy of PLG SaaS
PLG Report

The Anatomy of PLG SaaS

Explore the elements that make up the 300 best product-led growth SaaS companies

16 minutes

Introduction

In 2020, OpenView Partners identified nearly 300 companies that exemplify a product-led growth (PLG) strategy. We wanted to understand these PLG stars better, so we enriched OpenView’s list with Clearbit's firmographic data and looked for trends.

This report shares insights related to:

  • The role of website traffic in PLG
  • Revenue trends
  • Sales & marketing tools

... with more upcoming.

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Analysis

We examined the nearly 300 SaaS companies on OpenView's latest Product Led Growth Market Map.

This spans publicly traded and private companies, small to large teams, B2B and B2C, and many product categories. Companies include Dropbox, Slack, Shopify, Zoom, Trello, Canva, MongoDB, Evernote, Figma, Stripe, Typeform, Auth0, Okta, Gusto, Box, Loom, Appcues, Basecamp, and Zendesk. Check out the market map for the rest.

In April 2021, we turned to our enrichment data, which is pulled from over 250 public and private data sources, to analyze the firmographic profiles of these companies. Throughout the report, we also refer to data from Crunchbase, Alexa, Semrush, and internal research.

Why product led growth?

This strategy is linked to many of today’s most successful SaaS companies. According to OpenView:

  • There are 21 large public companies with a PLG model, including all of the top IPOs in 2019. The median enterprise value (EV) of PLG companies is 2X higher than the public SaaS index.
  • PLG companies grow with a lower-than-average CAC payback.
  • PLG has created more than $208B of market value to date.
Wait, what is Product Led Growth?

Very simply put, product-led growth (PLG) is a go-to-market motion that relies on a product (and its excellent user experience) to drive a company’s growth and all its funnel stages. The app itself, rather than ad dollars or sales outreach, is the engine.

The heart of product led growth is the end user, who can get into the product right away, experience real value, and not have to jump through any hoops or sales calls to kick the tires. This is why PLG needs great user experiences: it’s about helping the everyday human try a product, love it, and share it.

Organic discovery, viral loops, and network effects play an important role. This makes PLG a relatively cost-effective growth strategy, not having to rely on hiring more sales reps and spending a bigger marketing budget. PLG might require more R&D money early on to create a great product, but then it can scale with fewer team resource costs.

That said, PLG can be used in tandem with sales and marketing motions. Companies relying on product led growth are selective about where and when to deploy their toolbox of go-to-market motions — combining these in different ways for different journeys, including:

  • Start with a popular free product, then layer on a sales-assisted track for enterprise leads.
  • Begin as a sales-led company, then add a freemium or free trial product track a few years in.
  • Use product to drive all net new revenue; only use sales and customer success teams to drive expansion revenue.

Okay, let’s see what these stars are made of...

Website traffic

When we look at the top 300 companies using a PLG strategy, can we find support for the idea that they attract a large volume of inbound traffic and use it to their advantage?

Alexa rank (and, what is Alexa rank anyway?)

Over half of the companies on the list have an Alexa Rank of 1-25k, meaning they are popular sites that get a lot of traffic.

Alexa Rank is a measure of a website's popularity. According to the folks at Alexa, they calculate this rank with a proprietary methodology combining a site's traffic and site visitor engagement over the previous 3 months.

The lower the Alexa rank, the more traffic a site is likely to get; a company with an Alexa rank of 3,000 is more popular than one with a rank of 25,000.

Estimated monthly traffic

Just how many website visitors are we talking when we say 25k Alexa rank?

We used Semrush data to cross-reference each company’s monthly website visit numbers. This, of course, is a very inexact method — as Alexa Traffic Rank is a relative measurement and we only looked at the domains on the PLG Market Map — but the exercise gives us a general sense of the scale companies in each cohort sees.

We estimate that the sites with a rank of 20k-25k get around 500,000 visitors per month, and increasing to 2.5 million for websites in the 5k-10k rank group.

Since so many companies on our list sit in the 1-25k band, we've added more granularity to the table below within that range. In the most popular tier, (1-5k rank), the average is a staggering 800 million visitors each month. (We're talking company domains like Amazon, Google, Zoom to give you an idea.)

Alexa Rank (global) Estimated average monthly traffic # of Market Map companies
1-5k 810,311,838 94
5k-10k 2,651,365 41
10k-15k 1,620,588 18
15k-20k 949,945 17
20k-25k 562,509 13
25k-50k 476,916 38
50k-100k 229,266 31
100k-150k 131,197 7
150k-250k 118,270 17
250k+ 29,704 24

This supports the idea that PLG is all about that strong top of the funnel: building a wide base of site visitors and then mastering the art of converting them.

OpenView's 2020 SaaS Product Benchmarks reports that the higher-growth PLG companies do a better job of converting that website traffic into free product users, than the lower-growth companies do. And for SaaS businesses with a freemium product or trial, getting users into that product is the single biggest source of leads.

Inbound traffic can come through product, content, community, network effects, and viral loops. The Product Benchmark report found that free leads coming from organic channels (like word of mouth, content, and social shares) tend to convert to paid accounts better than leads that come from paid marketing (SEM, paid social, retargeting, etc.). This is how small teams and small marketing budgets can drive outsize revenue.

Here's how Cypress leaned on community and product to gain their initial momentum, with a small team:

Callout
≈50 EEsFounded 2015Developer & Product Tool

'One of the beautiful things about Cypress's go-to-market strategy is how naturally open source fuels our growth: our open source end-to-end test runner receives tens of thousands of monthly installs, which creates a steady flow of organic interest in our freemium Cypress Dashboard.

The evolution from open source user to Dashboard customer is very organic. Developers and QA engineers learn about our OSS product, learn the ropes through our documentation, and eventually adopt the Cypress Dashboard after learning, through our docs, about the advantages it provides.

This creates an amazing growth engine that doesn't require us to rely so heavily on traditional (and costly) SaaS sales and demand generation techniques.

The fact that our freemium product's success is inextricably linked to the success of our open source product creates an enormous incentive for our team to prioritize developer happiness with our open source product — which is obviously a huge win for all Cypress users!

Additionally, we love that developers and QA engineers talk so much about the tools and frameworks they're using. Word-of-mouth has been a huge, continuous boon to our business as more and more developers learn about Cypress.'

Jordan WoodsJordan WoodsDirector of Marketing, Cypress

Team size and website traffic

Higher-traffic companies tend to have more employees.

Alexa Rank by Company Size

However, there are a few standouts of small, scrappy teams in the highest-traffic Alexa rank bands — like Retool (recently closing in on unicorn status with a near-$1 billion valuation):

Callout
50+ EEsFounded 2017Back Office & Operations

'Early on, we saw strong word-of-mouth growth from the core Y Combinator network, but knew we needed to expand our network to really grow. We thought about the phrases we wanted developers to say when they referred friends to Retool — settling on 'Retool is for developers' and 'Retool just works'.

Then, we focused on driving traffic to the site with content that conveyed those phrases. The two main types of content were:

1. Longform content about software we personally found interesting and thought could go viral on Hacker News. This drove ‘Retool is for developers’ awareness (along with lots of Hacker News comments and conversations).

2. Landing pages and docs that address specific technical pain points and showed how Retool has a good solution for common use cases like a Firebase or SQL admin panel. This targeted the message that 'Retool just works.''

Jane KellyJane KellyHead of Growth, Retool

OpenView considers $10M ARR to be the point when the power of PLG kicks in — growth speeds up, and companies see the payoff of product development.

$10Mthe magic inflection point

We found that the companies on the list have mostly surpassed the $10M revenue mark. If they haven’t, they tend to have small teams, averaging 23 people.

Annual revenue and team size

Broadly speaking, revenue is positively correlated with web traffic and team size. It looks as though no companies on the list with fewer than 250 employees have surpassed the $50M mark yet.

More or fewer than 250 employees — by estimated annual revenue

Let's look more closely at the company size make-up per revenue band:

Company size, by estimated annual revenue
Psst — there's more on the way!

The second part of this report drops soon. Get notified to be the first to read up on funding, company types, rising PLG stars, and more.





Small teams can still pack a punch; there are companies with 60 employees generating $10-50M in revenue per year.

Annual revenue for smaller teams (up to 250 employees)

Lastly, zooming in on that $10M - $50M annual revenue band, team size ranges from 60 to 300+ employees — with nearly 30% of this segment at the 150-employee mark.

Team sizes of companies that generate $10M-$50M annual revenue

Revenue and website traffic

Higher website traffic correlates with higher revenue. At the time of analysis, none of the companies with lower website traffic (Alexa rank <250k) have broken the $50M annual revenue mark.

Estimated annual revenue by Alexa rank

There are a small handful of companies that are in the very highest bands of website traffic (1k-25k Alexa Rank and 25k-50k Alexa Rank), but only make $1M to $10M annual revenue. We see this as great potential and are excited to see how they make use of their large top of funnel.

Sales and marketing tools

Yes, there's sales in PLG companies

We looked at the companies’ technology tags and found that as revenue goes up, it's more likely that a company uses sales productivity tools at all.

Companies using sales productivity tools, by annual revenue

The tools we've categorized as "sales productivity tools" in this analysis are ones we believe support data-driven sales for team efficiency (analytics, automation, etc.):

The number of tools used increases as well, based on the average number of sales productivity tools for companies using at least 1 tool in that category:

Average number of sales productivity tools, by annual revenue


Of all of these companies, 80% use Salesforce. One can imagine that companies begin with a CRM — a streamlined tool like Pipedrive or a stalwart like Salesforce — as they start having to keep track of deals. (Recall the lack of sales productivity tools in the $0-1M segment.)

80%of companies use Salesforce

Then, they add tools as the sales organization grows, and there’s more need for sales management and efficiency.


Sales productivity tools used (for companies with at least one tool)

These tools seem to kick in at $10-50M — coinciding with that magic $10M annual revenue mark!

So, when is it time to add sales to your product-led strategy?

Ted Ammon, a sales leader at Klaviyo, weighs in:

'Customer Support is often there before Sales arrives in today's PLG companies. You will notice in support tickets, users begin asking 'sales-related' questions around inspirational use cases, competitive differentiation, plans and pricing, etc. When you start getting more and more of these questions from companies that fit your ICP and would qualify for paid plans — that's usually an early indicator that it's time to start thinking about layering sales into your org.

Sales, in a product-led business, is really an extension of your product. It's all about providing that next level of human guidance and support — meeting your customers where they are in their journey and unlocking paths for them to connect with your team when they need it. Sales just often happens to be on the front end of that journey.'

Ted AmmonTed AmmonDirector of SMS Sales, Klaviyo

Marketing automation platform

Around 62% of companies have tech tags for marketing automation platform (with an email focus). Marketo and HubSpot are the two biggest players. The notable underdog in third place is Customer.io.

Larger PLG companies on the map are more likely to use Marketo over HubSpot.

Marketing automation tools used by team size

Chat tools

Around 40% of the Market Map companies use chat tools. Smaller companies are more likely to have Intercom tags while the larger ones are more likely to have Drift.

Chat tools used by team size

In a high-traffic environment, chat tools can help convert visitors and help the sales team efficiently fast-track the best leads to AEs. Lower-value website visitors can chat with SDRs, interact with a chatbot, or just don’t see a chat box at all.

Video

About half of the companies on the list have a video tag on their site. YouTube, which is free, is the most commonly used tool. Wistia is nearly tied and is the #1 paid tool.

Companies using video tools

Around 40% of the companies with video tags use Wistia, also a member of PLG Market Map. It makes sense — Wistia is a marketing tool, not just a video hosting platform, with features for PLG marketers including email capture, analytics like heatmaps, and integrations with marketing automation platforms like HubSpot. This makes the tool useful for content marketing, amplifying event content, brand marketing, and product marketing to show off what the product can do.

'PLG is all about marketing with your product, so you need the insights and control to get out of the way or drive action when necessary.

We give customers full control over their video experience. They get a player that can easily be integrated and made on brand, customizations that allow them to drive action, and analytics so they can figure out how to make the most impactful videos.'

Chris SavageChris SavageCEO, Wistia

Part 2 (coming soon)

Part 2 is on the way ...

The second part of this report drops soon. Get notified to be the first to read up on funding, company types, rising PLG stars, and more.



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