Zebeth Media Solutions

product-led growth

MadKudu lands $18M led by Felicis for its lead scoring platform • ZebethMedia

It’s hard to get ahead when you’re just trying to stay afloat. But startups weathering the downturn with fewer employees and a smaller budget are finding ways to survive and move forward by relying on a 15-year-old twist on software adoption called “bottoms-up” SaaS. The idea, dating back to the enterprise social network Yammer, is that new software tools can find their way into a company by landing first in the hands of employees. In a financial downturn especially, the model is attractive because it doesn’t rely on a massive (expensive) salesforce but rather a groundswell of interest. Yammer, a kind of social network for enterprises, kicked off the wave when it was founded in 2008. Something similar is happening now, though the wave has been renamed “product-led growth” or PLG, and one startup that fits the mold is MadKudu, an eight-year-old, Paris- and New York-based company behind a customer data  platform product. Founded by Sam Levan and Francis Brero, who met at a since-acquired predictive marketing platform, they realized more data science was needed to help sales reps sift through thousands of product users to identify who is ready to buy. According to the company, Levan was able to show soon after that growth teams could double their free-to-paid conversion rate within weeks and got to work on developing tech that would give other organizations “data science superpowers” to discover revenue opportunities, including those with severely limited engineering resources, which, these days, is a lot of startups. Asked for metrics in an interview with ZebethMedia last week, Levan declined to share anything concrete but said that MadKudu has been growing its numbers by “5x over the last 12 months.” He also mentioned a lot of customers whose brands readers will recognize, including Dropbox, Cloudera, Amplitude, Plain, Unity, and Miro. Levan also said the traction the company is seeing led to a flurry of term sheets recently that resulted in a new $18 million Series A round that the early-stage firm Felicis led, joined by BGV, Alven, Techstars, and numerous individual investors. (The company has now raised $27 million altogether.) Niki Pezeshki, a general partner at Felicis who led the deal, meanwhile suggested that he would have been remiss not to notice MadKudu. “I think in the span of a week or two, we had two separate board meetings where the go-to-market head or the CRO said that they had just implemented MadKudu and that it was making a really, really positive change for their go-to-market strategy, especially around PLG. And when you hear that from two different members of high-performing companies, you definitely take notice.” Indeed, for now, MadKudu remains very focused on lead scoring that helps salespeople understand which leads are valuable and which would be a waste of time to chase. Levan claims that by analyzing the product usage data of its customers to find patterns in their users’ activity, MadKudu now has the “largest PLG data set in the world.” Going forward, Levan said last week, the idea is to use its fresh capital to triple its 35-person team by next year — including to beef up on customer success and support staff —  and to invest more time and attention into improving the user experience. That includes spending time on creating educational programs that can help market leaders better understand what PLG is all about and how to fully realize the potential of MadKudu’s product specifically. “We already have the best technology out there,” said Levan, without sounding completely obnoxious. Now he just wants more people to use it. Pictured above, from left to right, MadKudu founders Sam Levan and Francis Brero.

As product-led growth expands, Loops digs into the data to track key metrics • ZebethMedia

Companies are increasingly looking at product led growth, where the product helps drive market expansion. If you’re giving the people what they want, they will spend more money, or so the theory goes, but how do you actually measure progress? That’s where an early stage startup called Loops comes in. It announced a $14 million seed, a hefty amount by today’s standards, to help companies look at a variety of data sources and answer specific questions about how they are measuring up. Company co-founder and CEO Tom Laufer says that he led a similar operation at Google before starting his company, and he saw smaller companies without Google’s resources, struggling to pull the data together to understand how well they were doing against their product goals. “So many [product-led growth] enterprises today struggle to make data-driven decisions because they face torrents of data [and struggle to turn that into] real insights and real opportunities,” Laufer told ZebethMedia. He says this isn’t a dashboard with lines going up and down. Instead it’s a solution that offers very specific suggestions designed to answer individual questions and improve things like conversion, retention, engagement and monetization. Loops providing a specific insight in how to improve conversion to paying customers. Image Credits: Loops Loops connects to various data sources, and using machine learning models, bring back answers to the product team about how to improve their metrics based on the data that Loops finds — and importantly they are able to do this without a team of data scientists to pull the data together. And this was a key reason that Ariel Tseitlin, partner at lead investor Scale Venture Partners was attracted to the company. “Loops gives you the ability to essentially package up those insights in a way that is repeatable and automated without actually having to incur the expense of [building a data science team]. So there’s a real powerful cost savings element there as well,” he said. The startup currently has around 20 people with plans to add more with the new funding, which closed recently. As he grows his workforce, Laufer says building a diverse company is a key factor for him. “We are literally doubling down on diversity including minorities and not just because it’s the right thing to do, it protects the future of the company by creating better brainstorming, better collaboration,” he said. Today’s round was led by Scale Venture Partners with participation from Cardumen Capital and a host of industry angels.

Why not both? • ZebethMedia

Welcome to The ZebethMedia Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily ZebethMedia+ column where it gets its name. Want it in your inbox every Saturday? Sign up here. The recent OpenView-Chargebee 2022 report had SaaS benchmarks as its focus, but also touched in passing on a topic I’ve been curious about: reverse trials, a pricing model that offers SaaS companies a middle ground between freemium and free trials. Let’s explore. — Anna A binary choice? As more SaaS companies adopt product-led growth (PLG), a sales method in which user conversions are driven by the product itself rather than a sales team, founders are often faced with a pricing model dilemma. If their startup opts for a freemium model, most users will never get a taste of the premium features reserved for paying users. But if the company offers a time-limited free trial, users who don’t become customers at the end of that period might be gone forever. There are many other pros and cons to freemium and free trials. As OpenView partner Kyle Poyar told me, “freemium models tend to drive more acquisition and more signups to your product, for example, while free trials have fewer signups but have a higher conversion rate from free to paid.” As a result, founders often think they are facing a binary choice, Poyar said. In an interview, Airtable head of growth Lauryn Isford told him that these two choices are often thought of as prioritizing user growth (with freemium) or revenue growth (with free trials.) Poyar, however, doesn’t think freemium versus free trials is the only alternative. For companies to “get the best of both worlds,” he and OpenView advocate for the reverse trial model, exemplified by Airtable. But what are reverse trials all about, and are they for everyone? Psychology 101

Where cloud management is going next • ZebethMedia

“There’s a big wave of innovation in managing cloud costs,” Team8 co-founder and managing partner Liran Grinberg told ZebethMedia as part of our latest cloud investor survey. Having noticed tailwinds for the wave of B2B startups that offer cloud cost-optimization solutions, and cloud management more broadly, we were curious to know where VCs thought the space was headed — and the answers we heard show promise. Indeed, the tailwinds we are referring to aren’t limited to the current macroeconomic climate. The need to better manage cloud spend is undoubtedly fueled by the downturn, which makes everyone more cost-conscious. But, as we will explore, innovation in this field is also a corollary to broader trends, such as the rise of product-led growth among B2B SaaS companies, which have become both practitioners and consumers of usage-based pricing. There are also reasons to think that we haven’t seen all of it yet. “We continue to see tremendous opportunity in the cloud management space given how early we are in the cloud adoption journey,” Battery Ventures venture investor Danel Dayan said. So what might be next? Let’s dive in. Beyond cost optimization The first wave of cloud optimization solutions did the obvious: help companies track and lower their cloud spend. Per Team8’s Grinberg: “The first generation of cloud cost management (represented by Cloudability, CloudHealth) helped provide visibility and clarity on the spend on AWS, Azure and GCP. Meanwhile, cloud cost-optimization tools (represented by Spot, Granulate) allowed for tactical changes to lower costs.” Consolidation followed, ZebethMedia’s Kyle Wiggers noted, “as incumbents in adjacent sectors saw the opportunities presented by cloud cost optimization. Microsoft in 2017 acquired Cloudyn [ … ]. Then, in 2019, Apptio snatched up [ … ] Cloudability, while VMware and NetApp bought CloudHealth and Spot (formerly Spotinst), respectively, within the span of a few years.” And this April, Intel bought Granulate for $650 million. As time and mergers went by, it became clear that there was more than startups in this space could do for their customers. First and foremost, cloud teams required more than cost optimization — they needed cloud management.

How to combine PLG and enterprise sales to improve your funnel • ZebethMedia

Kate Ahlering Contributor Kate Ahlering is the chief revenue officer at Calendly, where she leads sales, sales enablement, revenue operations and partnerships functions. Between the changing tides of the economy and digital buying preferences, SaaS companies are under tremendous pressure. Many of these companies understand that 80% of their interactions with buyers occur on digital channels. At the same time, they need to drive profitability to meet investor expectations. The question is: How do they appease customers who want self-service while accelerating profitable growth? While product-led growth (PLG) is a successful strategy, many companies will complement these efforts with sales-led growth (SLG), or an enterprise sales motion, to move upmarket or into a specific customer segment. With the right go-to-market (GTM) architecture in place and effective use of data, companies can make the most of both strategies to accelerate revenue growth. When does it make sense to complement PLG with SLG? Typically, companies follow three patterns when it comes to their GTM approach: It’s important to make sure your pricing and packaging is differentiated between your individual, team and enterprise plans. Product-led: Focusing on the user and their experience with the product as the primary path to revenue. Sales-led: Leveraging traditional marketing and sales methods to reach the buyer or economic decision-maker. This approach may be supported by selected PLG techniques to drive user advocacy. Hybrid: Combining the best of both worlds, with PLG techniques generating awareness and making inroads into prospect accounts, and sales activities driving most of the revenue. With PLG, the product needs to make an impact on the user — and do it quickly. After all, the product is the primary vehicle for user acquisition, retention and expansion. While PLG works best for products with some level of virality, in many cases, you do not have to choose between SLG and PLG. As an example, Calendly’s sales team often talks to customers about how we can help scale the platform to create an even deeper impact within their organizations. We follow a hybrid GTM approach, where PLG provides a critical access point into prospect accounts, and sales drives enterprise expansion and revenue. While PLG feeds the funnel, sales targets end users with influential titles inside the core use case we serve (e.g. VP of sales), where we can drive the most value and business outcomes.

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