PLG Trends in Forbes 2022 Cloud 100
Learnings from the 7th annual world’s top private cloud companies list
I was super inspired by this 2021 Toplyne article which said “65–70% of Forbes Cloud 100 2021 are PLG companies” and I intended to create a report along same lines for this year “2022”. I believed this could reduce the buzz surrounding PLG and teach VCs and startups about real market trend. This article is about How PLG companies are doing its stats in Cloud-100, 2022.
However, since there are many ifs and buts, it is impossible to judge a product lead company quickly. In order to clarify the murky areas and draw a distinct line between non-PLG and PLG companies, I decided to revisit the definition.
Companies which have an approach of providing 100 % value to their customer through their product as main channel, other words PLG companies , acquires , converts, support & retains through product.
I used five overarching themes and twenty sub-themes to organize the data; I regarded a company as PLG even if it consistently applied any one of the sub-themes to its business practices.
A total of 62 businesses are actively experimenting with at least one PLG strategy.
Some of the non PLG companies include real-estate software Yardi , Security Platform Lacework, Cyberason. The reason for not adopting PLG could vary form
1 Sector constrain
2 too many people involved in purchasing decision.
3 Process Limitation
4 Limitation in openness of the end user
5 Process Constrain
We will discuss these further in detailed articles as forth-coming days
US is the top spot HQ for most PLG companies
Having said about US, I love PLG cultures emerging spread across the map like you have Celonis, Contentful from Germany, Messagebird from Netherland other places, Razorpay & Postman from India, Aiven from from Finland, Airwallex form China. Listing Indian businesses can be challenging because the majority of PLG cultures have their primary engineering, marketing, and support teams in India but their headquarters in the US for a variety of reasons. One example of public company is Freshworks where the growth was driven from Chennai, India but the HQ is in US.
Top PLG Industries
Like it or not PLG is an evolution of previous companies’ achievement & mistakes, I believe that it is extremely important for first-time SaaS founders and VCs to consider density of solutions across a given sector when making investment or strategy decisions.
Together, Fintech, Dev Infrastructure, Martech, and Data Infrastructure contributed 58%, and the other choices are highly dispersed.
Fintech is leading the pack because every business aspires to be a fintech or finance-aided business, and also because end users or developers are willing to modify infrastructure, Fintech is already being consumerized for micro small business as well as end-users. This has taken a decade but you have players like Stripe, Razorpay form India, Airwallex form china, Plaid who had done a amazing job on all fronts to push the limits.
Next to Fintech is Dev infrastructure companies like Postman, Harness, Outsystems etc leading the way .
Developers as a primary target user persona is a clear winning pattern, this is might due to of openness to explore , less sales and adoption cycles.
I was not surprised to see it at №3 on the list. Since marketing technology has a 15+ PLG year history and there are public firms that have mastered the PLG strategy, I also found Mar-tech and sales tech to be overcrowded with fragmented solution owing to each Geo and also many emerging micro-SaaS solutions eating their own niche.
Companies like Pendo , DBT , Thoughtspot etc are leading analytics infrastructure space and you have tone other emerging companies to join the list next year.
3 Sectors accounts for 48% of Non PLG companies
Security-tech and Sales tech sectors had few companies with PLG approach too but most of these sectors including HR-tech were focusing much on top enterprise segments, 5000+ size companies where multiple stakeholders are involved in decision-making and not just end users. Most of these companies don’t have Free trial or Community lead approaches or Freemium model.
BTW all these are good to great fastest growing companies, it just they don’t adopt any major PLG approach because of the nature of business, process with users. For example, in the enterprise HR tech business, the Customer onboarding is not possible without any human interference. Security tech has a Huge IP around the product, which they are not upfront about the pricing and the solution workflows.
Difference in Company size
Though its a myth that most PLG companies are like a Zapier max 500 employee completely remote, Completely self serve, completely autonomous, one cannot deny the fact a growing Non PLG company spends at least 20–30% more on its employees when compared to a PLG company.
Note: Though that the revenue range and COGS differs, PLG approach certainly save the opex burn, which can be explored in further articles.
PLG Companies are 1.85X more in valuation when compared to non-PLG ones
In private valuation are always subjective depends on investors who agree to what multiples of ARR, but on an early-stage what is that key factors which influences the subjectivity from an investor’s perspective? It may be the size of the market, ability to do disruption, Team, MOTE, ability to scale of the company?
But the above statement clearly says that having PLG as a core approach in your strategy gives you an upper hand in valuation.
Conclusion
1 PLG Companies are leading race of the growing companies
2 US is the favorite spot for PLG companies, we can expect to see more in other part of the globe in forthcoming year
3 Right now Fintech, Dev & analytics infrastructure, Martech are leading the race in PLG
4 Security tech, entries sale tech, HR tech are yet to join the PLG Party
5 Non PLG company spend at least 20–30% more on employee PLG company
6 PLG Companies are 1.85X more in valuation when compared to non PLG ones
All being what’s important for your SaaS business is Customer’s success, MRR, NRR, Less churn, if approach from PLG is aiding the growth go for it and it’s advised not to start with PLG and put business and back foot. All the best to your SaaS journey ahead.
Hi I am Gokul Rangarajan, Scouting for Google Ventures, Ex- Freshworks, Ex-Bigbasket, Keka KR. I am Senior Product Manager in SaaS for around 12+ years, Have built & scaled business from scratch to $50M revenue, worked with 50+ Founders on their Product & fundraising journey.
I trying to put out content about PLG & Community lead growth on a regular basis, follow me on Medium
Linkedin : https://www.linkedin.com/in/gokulrangarajan/
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