Almost every leader I speak with (or a job post I go over) mentions ‘Empowered Teams.’ Yet, only a handful can truly articulate what that really means. And, more importantly, how to build and nurture an empowered culture. Maybe Marty Cagan (the one and only) did too good of a job popularizing the term empowered. 🤣

From my experience, there’s no one-size-fits-all approach to building empowered teams. It’s about finding what works for you and your team. But what really matters are a few core principles that I observed over and over again, which are the DNA 🧬 building blocks of any empowered team.

I am aware that there’s so much AMAZING literature on how to lead down and drive empowerment. Hence, in this write-up, I will do my best to share my personal take on those principles based on my own experience. So no, this write-up is definitely not the Empowered book or other literature recap❗

I will share my story and focus on the approach I developed after years of trial and error and (embarrassing) mistakes. I am not a leadership guru, and I am still only a few-plus years into my leadership journey. Nevertheless, I hope this article helps you ‘un-suck’ at leading down, even if just a little. 😉

Chapter 2: My leadership journey.

The early days

I started leading product teams in 2017 when I did the unthinkable and relocated to Vietnam 🇻🇳 to join Sentifi, a Swiss fintech startup. I led a team of two PMs, and oh boy, did I suck.

In hindsight, it makes sense. The only thing I really knew how to do well was being an individual contributor. Plus, I had no mentors to guide me. And back then, the product community was almost nonexistent (Lenny’s newsletter wasn’t even a thing yet). 😓 To top it off, I didn’t have the self-awareness to know what I needed to improve.

To be honest, my first taste of ‘Leadership’ wasn’t great. Vickie King (my Sentifi manager), I’ll be forever grateful for the Sentifi opportunity, but seriously, what were you thinking? 🤣

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Watching and learning.

Everything changed when I joined Ansarada, an Australian startup (now publicly listed). Ansarada embraced the Atlassian way, and I had a front-row seat to observe and learn firsthand. For some of you, working in an empowered culture might seem obvious, but for me, it was a revelation and a breath of fresh air. It made me feel safe, motivated, inspired, and genuinely happy. ❤️

Looking back, here are a few Ansarada culture takeaways I want to celebrate:

1. Leadership Development.
   Managers mentored their IC reports (Individual contributors) using ‘The 5 Levels of Leadership’ (by John C. Maxwell) frameworks, helping non-managers groom their leadership skills.

2. Radical Candor.
   Managers helped nurture feedback culture through ‘Radical Candor’ (by Kim Scott) principles, helping everyone in the company on all levels to give and receive feedback effectively.

3. Career Growth.
   Managers actively invested in the career development of their ICs, guiding them to uncover what they genuinely care about and integrate that passion into their day-to-day work.

4. Personal Growth.
   Managers promoted personal development through cross-company challenges, such as reading ten books in ten months and fostering continuous learning.

5. Collaboration & Values.
   Managers built cross-functional teams across Engineering, Product, and Design (EPD), facilitated hackathons and design sprints, and ensured Ansarada’s values - Care, Curiosity, Courage, and Change - were genuinely embodied, not just slogans on the wall.

Making an impact.

Fueled by the Ansarada way, I joined Miro’s Growth Product (PLG) team. At Miro, I led a team of four senior and lead PMs. This time, I had the battle scars and an internal compass guiding me on my mission: building empowered teams that could consistently and sustainably deliver outsized impact. And it worked. 😎

Before we dive into my ten principles for building empowered teams, here is a moment of vulnerability.

Even (and especially) at Miro, I made mistakes. However, thanks to Miro’s fast feedback loop culture, I was able to turn those mistakes into valuable lessons. ☝️

Here are a few leadership mistakes I made along the way: 🙃

1. I tried to be too nice and avoided giving timely, tough feedback.

2. I set non-ambitious goals because I was worried about being disliked by the team.

3. I didn’t take full responsibility for the team’s negative outcomes.

4. I struggled to find the right balance between letting go and taking control.

5. I didn’t lead by example on the back-to-office policy I was enforcing.

Chapter 3: The Blueprint

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After leaving Miro, I took time to reflect on my journey and the lessons I had learned. As part of this self-awareness exercise, I crafted a list of principles that helped me build a winning team throughout my journey. I believe these principles form the DNA building blocks of any empowered team.

1. End-to-end ownership. ➡️
   I trust and expect the team to do whatever it takes to get the job done. This trust means the team will make decisions, raise flags, and ask for feedback when needed. As a manager, your role is to support them but not to become a bottleneck!

2. Clarity on what impact is (and isn’t). 💪
   If the team doesn’t understand what impact truly means, how can they succeed? Not everything qualifies as impact. For example, delivery isn’t impact, and effort alone isn’t impact. But moving a key metric or simplifying and improving a process - now that is impact.

3. Speed is everything. 🏃
   Speed in decision-making, execution, and learning is the most powerful enabler for reducing ambiguity, cutting losses early, and doubling down on winners. It’s how you outpace the competition and win the market. As a manager, it’s your responsibility to ensure that speed isn’t just acknowledged by your team but fully embraced and embedded in their day-to-day work. Remember, the biggest enemy of speed is perfection. If you chase perfection, you’ll lose. Speed and perfection simply don’t coexist. My own unhealthy perfectionism has been one of my biggest struggles throughout my entire career.

4. Tailor your communication to the audience. 📢
   I tailor communication expectations to each team member because everyone is different, and so are their communication preferences: F2F vs. online, sync vs. async, weekly vs. daily, or pull (asking) vs. push (sending summaries). For communication to be effective, it must be adapted to fit the audience.

5. Feedback is your API to communicate with empowered teams. 🗣️
   This one is crucial, and there are a few prerequisites to ensuring the feedback loop works:

   1. You won’t achieve frequent and meaningful feedback if you haven’t built trust - no trust, no feedback.

   2. Trust won’t happen if you haven’t built a relationship with your team members - no relationship, no trust.

   Think about it, feedback is a two-way street. As a manager, you must encourage your direct reports to provide feedback to you. But they won’t share their honest feedback unless you trust each other.

6. Humility and vulnerability will take you far. ❤️
   When you’re winning, give credit to your team. If you don’t know something, admit it. And if you’re wrong (which happens often), just own it. Empowered teams don’t follow psychopathic leaders. Simply put, don’t be an asshole - whether in the good times or the bad.

7. Define the managers’ accountability. 🧐
   Any team outcome, for better or worse, is the manager’s accountability. Understanding this helps the team recognize why it’s crucial to never let the manager be surprised and align on the problems the team is solving. The manager’s role is to provide feedback, stress-test hypotheses, and risks, and ask the right questions. Additionally, it’s the manager’s accountability to nurture a safe environment where learnings are celebrated, and teams aren’t afraid of failure.

8. Invest in your team’s career development. 💼
   Without actively investing in career development, retaining top performers and helping them do their best work is impossible. As a manager, it’s crucial to understand what motivates your direct reports, their interests, and career aspirations, then tailor their career paths within the company accordingly. This often requires thinking outside the box, as many organizations lack flexibility and resist change. Simply put, you want your team to work on what they’re truly passionate about; it’s one of the prerequisites to achieving a 10X impact.

9. Mentoring is an ongoing engagement. 🌱
   Mentoring focuses on turning your direct report’s strengths into superpowers, improving their weaknesses, and equipping them with the tools to observe and adjust their behaviors. It’s not a task reserved for quarterly performance reviews but an ongoing engagement. Additionally, you may not always be the best fit to mentor your direct report on specific hard or soft skills; in such cases, you can still support them by connecting them with another mentor, either within the company or externally.

10. Keep the motivation high. 🔥
    Dopamine-fueled teams, driven by the pursuit of ambitious achievements, are the ones that deliver 10X results. As a manager, your mission is to cultivate this dopamine-driven motivation (something that can’t be faked). You do this by setting bold, moonshot goals and pushing the team beyond comfortable, optimizations thinking. However, these ambitious goals won’t be achieved unless you first reduce execution friction (by applying principles 1 to 6) and create a safe environment (by implementing principles 7 to 9).

Chapter 4: The Afterthought

As I mentioned earlier, the manager’s job is to ensure teams can consistently and sustainably achieve outsized impact, and everything we’ve discussed so far leads to this goal. 🚀

1. If you find the principles I’ve outlined valuable, use them to build empowering relationships with your team. The first step? Share these principles with your team and ask for their feedback.

2. Additionally, you can apply these principles to improve your leading-up game; by simply reversing them. Leading up and leading down are mirror practices. 🪞

3. And one last thing. While this post is based on my experience leading product teams, I’m confident that many of these insights can also be applied to leading non-product teams, such as engineering and design.

As product leaders, our primary goal is to build and grow businesses, which ultimately means maximizing their dollar value.

However, simply driving ARR isn’t enough. It’s not only about the absolute ARR ($) generated but also how effectively your startup generates that ARR. This is just as critical in determining the business dollar value.

Hence, to truly call yourself the ‘CEO of the product,’ you need to think like one. This involves approaching ARR through the lens of Product and wearing the VC/CFO hat to ensure we spin the revenue flywheel effectively and sustainably. 

In this blog post, I’ll explore why Monday.com’s market value per $1 in ARR is 5.13 times that of SimilarWeb’. The insights from this exploration are applicable to any B2B SaaS startup.

2. Before we start

Monday.com helps teams organize and track their work, making it easy to manage projects, tasks, and team collaboration all in one place.

Similarweb provides data about website and app traffic so businesses can understand their online performance and stay competitive in their industry.

Both Monday.com and SimilarWeb are:

1. Public

2. B2B SaaS

3. Growing

4. Profitable!

5. Market Leaders

6. Rocking an amazing culture

To analyze the 5X gap in market value per $1 ARR, I will explore the following metrics and benchmarks using public investor relations data from Q2FY24 :

1. Gross Margin (Non-GAAP)

2. Operating Margin (Non-GAAP)

3. Free Cash Flow (FCF)

4. CAC Payback

5. Net Revenue Retention (NRR)

6. ARR Growth (%)

7. Rule of 40 (Ro40)

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3. Margins

Gross Margin (Non-GAAP):

What is that?

After covering the Cost of Goods Sold (COGS) - infrastructure costs, third-party licensing, etc. the company keeps X cents for every dollar of revenue.

Yes, Monday.com’s margins (91%) tend to be higher compared to SimilarWeb (81%) primarily because SimilarWeb operates as both a SaaS (Software as a Service) and a DaaS (Data as a Service) company.

The DaaS model relies heavily on data acquisition, which involves substantial ongoing costs for purchasing, processing, and maintaining extensive data sets. These data-related expenses directly impact the Cost of Goods Sold (COGS), making them a recurring cost that lowers SimilarWeb’s gross margin relative to companies with purely software-based models.

Operating Margin (Non-GAAP):

What is that?

After covering COGS and operating expenses - R&D, marketing, sales, etc. the company keeps X cents for every dollar of revenue.

Monday.com’s operating margin stands at 16%, while SimilarWeb has reached 9% -both having transformed their once-negative margins into positive territory.

SimilarWeb, by default, had a tougher journey to positive operating margins due to the higher COGS inherent in their data-cost-intensive model. Yet they still achieved profitability despite allocating a similar percentage of revenue to R&D as Monday.com (the low 20’s) and overspending by 10% on Sales and Marketing.

However, to fully change the sentiment around its market cap, SimilarWeb will need to sustain double-digit margins over at least a few quarters two quarters.

4. Free Cash Flow (FCF).

What is it?

Free Cash Flow (FCF) is the available chunk of cash (as a % of revenue) that a company can use to invest in growth.

Monday.com’s free cash flow (FCF) margin of 21.5% translates to over $200M annually, while SimilarWeb’s lower FCF margin of 7% totals around $17M annualy. Thanks to Monday’s higher ARR and FCF, there’s a 12X difference in absolute annualized free cash flow. In other words, Monday has 12 times more cash to invest in growth. It’s impressive.

5. CAC Payback

What is it?

CAC Payback is the time required to recover customer acquisition costs. A shorter payback period indicates quicker returns and enables faster reinvestment.

Monday.com’s CAC payback period averages 12 months across all ACV segments, while SimilarWeb’s ranges between 18 and 24 months.

SimilarWeb’s ACV composition is heavily skewed toward Enterprise, with 60% of its ARR coming from customers with $100k+ ACV. This leads to longer sales cycles and higher upfront investments in acquisition and onboarding. In contrast, Monday.com generates only 30% of its revenue from $50k+ mid-market/enterprise customers, layering an efficient Product-Led Growth (PLG) strategy for SMB acquisition and expansion with a high-touch approach for larger, high-ACV accounts. As a result, Monday.com’s payback cycles are nearly twice as fast as SimilarWeb’s.

Think about it: if you have 12X more free cash flow (FCF) to invest and can recoup your investment twice as fast through CAC payback, you’re operating at supersonic speed.

6. Net Revenue Retention (NRR)

What is it?

Net Revenue Retention (NRR) is the percentage of recurring revenue retained and expanded from existing customers over time.

Monday.com boasts an NRR of 110% across all ACV segments, reflecting strong expansion within its existing customer base.

SimilarWeb, while also achieving 110% NRR, only reaches this level with customers whose ACV is over $100K—who, as mentioned, contribute 60% of their revenue. For customers with ACVs under $100K, however, SimilarWeb’s NRR drops to between 80% and 90%, pulling their overall NRR down to 99%.

This means a significant churn issue within SimilarWeb’s sub-$100K segment, forcing them to rely heavily on new customer acquisition to drive growth.

7. ARR Growth (%)

What is it?

ARR Growth is the percentage increase in recurring revenue from new and existing customers over time.

Compared to SimilarWeb, Monday retains more of every dollar earned, has more free cash for growth, recoups investments faster, and sees expansion across all ACV segments—all driving higher ARR growth.

To put this in perspective, Monday.com’s 34% year-over-year revenue growth is 2.5 times SimilarWeb’s 13%, a 19% delta that compounds significantly. Over ten cycles, compounding 34% growth results in an 18.6X multiplier, while 13% growth reaches only 3.4X.

Finally, let’s apply the Rule of 40 (Ro40) which balances between growth and profitability and provides another benchmark for how effective and sustainable is the ARR machine. If the Ro40 is 40% or higher, it indicates a healthy and sustainable ARR engine.

Monday.com:

34% (ARR Growth) + 16% (Operating Margin) = 50%

// Above the 40% benchmark.

SimilarWeb:

13% (ARR Growth) + 9% (Operating Margin) = 22%

// Below the 40% benchmark.

8. Final Words.

1. I will re-iterate. How effectively a startup generates ARR is just as important as how much ARR it generates.

2. Although Monday.com is an overperformer, this doesn’t mean SimilarWeb is underperforming. SimilarWeb has a strong team, and their ARR effectiveness improves with each quarter—I’m personally bullish on their success. SimilarWeb has the potential to double its market cap in the next 12 months by:

   1. Elevating operating margins to double digits and maintaining this level quarter over quarter.

   2. Reducing the payback period to an average of 18 months.

   3. Increasing the NRR for ACV <$100k (currently impacted by churn) from the mid-80s to the high 90s while keeping the NRR for ACV >$100k steady at 110%.

3. Beyond the ARR effectiveness, there are, of course, other considerations impacting startups’ market cap, such as TAM, Defensibility Moats, and the proven ability to execute Horizontal and Vertical Expansion. But this is out of the scope of this blog post.

You don’t think about it in your 20s or even 30s, but by default, your cushy Tech career has a shelf life or, in other words, an expiration date. While you can extend it, doing so requires being very intentional and strategic.

Here’s how it typically unfolds (using a PM example):

1. The Mid-20s: You’re landing your first PM role, focused on learning the craft, building your skills, and establishing a reputation.
   - The hungry newborn phase.
   

2. The Mid-30s: You’re cruising through various PM roles, using your experience to secure better opportunities, feeling invincible and confident in your journey.
   - The false euphoria phase.
   

3. The Mid-40s: Job opportunities start to dwindle, and the 20 years of experience “Competitive Advantage” you thought you could rely on, no longer set you apart in the market.
   - The dissolution phase
   

4. The Mid-50s: You find yourself settling for any product-related role, as the market increasingly favors younger professionals with newer skill sets. Though you’re grateful to stay employed, feelings of frustration, anxiety, and insecurity surface.
   - The regret phase

As a society, we should all work together to extend professionals’ career longevity. However, in reality, building career defensibility falls on each of us individually. Moreover, It doesn’t come naturally, as most of us are hard-wired to focus on short-term (1 to 5 year) wins, often at the expense or a complete lack of a longer-term defensible career vision.

Here is what you can do about it today:

1. First, Become Aware of The Problem: It’s the simple yet painful realization that your career has an expiration date. But hey, before tackling the problem, you first need to become aware of it. Many choose to ignore the alarm bells in their brain, but ignoring the problem won’t solve it - it will only make it worse.
   

2. Groom Your Expertise: Pick a niche within your professional domain - something you love and excel at - and make sure you own it! For example, Product management is too broad; it’s not a niche, but focusing on ‘Monetization for B2B SaaS’ or Core Product for Cybersecurity’ will make you stand out. Your niche may evolve, but starting narrow and staying focused is key to building career defensibility. You must be patient and methodic; becoming an expert takes years, not months.
   

3. Make Intentional Career Bets: Where you work, what you do, and who you surround yourself with shape your entire career journey. The people and environment you choose will mold your skills, expertise, and mindset. Be deliberate with your career moves, and think twice before chasing the next shiny thing. Focus on maximizing impact within your niche of expertise.

   

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4. Always Keep Learning: Make learning a priority and a habit. The moment you stop investing in it, you risk becoming obsolete. Up-to-date knowledge, combined with relevant hands-on experience, is the key to building career defensibility and pushing back your career’s expiration date. Personally, I feel fortunate to live in a time where accessing any knowledge is easier and more affordable than ever.
   

5. Playing the Long Game: Let’s approach our careers as a 40- to 50-year marathon. Shifting to a long-term mindset forces us to address questions that often go unnoticed when we only think 4 or 5 years ahead. What will make me happy in the long run? How do I envision my professional self in 20 or 30 years? What risks threaten that vision, and how can I start positioning and enabling myself today to have a defensible career in 20 or 30 years? Moreover, thinking long-term helps reduce anxiety over short-term career hurdles, such as losing a job or facing interview rejections.

P.S. I’m 38 years old, and this topic sometimes keeps me awake at night. If you feel the same way, you’re not alone. The topic of a career expiration date in Tech doesn’t get nearly enough attention. ❤️

Before we dive into the nitty-gritty, let’s take a 60-second detour to understand why activation is the secret sauce for startup success, what activation’s ultimate goal is, and some epic blunders I’ve seen startups make along the way.

Ready, set, go!

“If Retention is the king, Activation is the king’s beating heart.” Eugene Segal 😂

Activated users are like gold! Simply put, those users who build a habit using your product have 3X to 6X better mid-term retention (think 180-day retention). And if you’re rocking a Free Trial or Freemium model, activated users will have unmatched conversion rates to Paid plans compared to those who aren’t activated.

When working on activation, you’ve got two big goals.

First, you want to build a habit fast (that’s all about Speed).

Second, you must spread this habit to as many ICP users and teams as possible (hello, Impact!).

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But sometimes things go wrong…

Mistake 1: A Low-Fit Metric.

You copy-pasted the Activation metric from others. Ignoring that what worked for Canva won’t work for Monday.

➜ You should align the metric with your business model and value proposition.

#FIT

Mistake 2: Too Many Metrics.

You defined a bunch of Activation metrics.

➜ It's better to use one Activation metric for one value or activity. Less is more. Otherwise, your Activation strategy will be all over the place.

#FOCUS

Mistake 3: It’s an Impossible to Move Metric.

You defined a metric that now you can’t move.

➜ Break it down and simplify. Otherwise, it’s useless. If you can’t move it and rapidly experiment with it, what’s the point?!

#ACTIONABILITY

Now, let’s move to the main event and break down the two archetypes of Activation metrics in B2B SaaS.

1. The Action-Based Activation Metric

Consider this activation metric when there is a shared value prop denominator throughout all your ICP segments.

Here are a few examples of the value prop actions:

• Canva - Design exported

• Amplitude - Chart shared

• Intercom - Message sent

• Zoom - Meeting hosted

Please note that 90% plus of the ICP dances around the same value prop in the above examples.

Moving on!

There are two formats for the action-based activation metric.

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Format 1: The Time-Bounded Repetitive Value Prop Action

X [Value Prop Actions] in T [Time].

And in Canva’s case: || An illustrative example

➜ 3 [desings exported] in 2 [weeks].

This format is the best fit when:

1. Reaching the setup moment is easy (< 20% drop).

2. The natural frequency is high (> a few times a week).

Format 2: Signup Time-Bounded One-Time Value Prop Action

[Value Prop Action] in T [Time] after the Signup.

And in Amplitude’s case: || An illustrative example

➜ [Chart shared] within 7 [days] after signup.

This format is the best fit when:

1. Reaching the setup moment is hard (> 40% drop)

2. The natural frequency is low (< once a week)

2. The Activity-Based Activation Metric

Consider this activation metric when different value props cater to different ICP segments without one clear common value denominator.

Think Atlassian, Monday, Deel, etc.

It’s those B2B SaaS products that expanded horizontally, transforming into Hubs by bundling multiple products.

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The Format: Signup Time-Bounded Active Days

X Active Days within Y Days after the Signup

And in Atlassian’s case: || An illustrative example

➜ 2 active days within 7 days after the signup.

Important! To score an ‘Active Day,’ users don’t have to perform the core value prop actions. Lighter, more basic actions, such as viewing notifications, are sufficient. This is how the Action-Based and the Activity-Based activation metrics differ.

One last tip before you go!

Consider layering on Action-Based with Activity-Based activation metrics in case of a HUB (Horizontal Expansion).

If you liked this write-up.

I am open to:

• Product leadership FTE gigs at B2B SaaS PLG DNA scaleups.

• Short-term Advising engagements.

Open for work!

Once upon a time, in the pre-COVID days, I was working at Ansarada, an Australian Sales-Led startup with a mission to make M&A, IPO, Acquisition, and Audit events as simple and smooth as changing a lightbulb.

To win, we decided to go PLG.

This required a mindset change and a product change, and it wasn’t easy. It was a long journey, and Amplitude was part of it.

Amplitude’s office was 500 meters from ours. I remember their team spending days in our office, setting us up for success in our PLG adventure.

Eventually, Ansarada went IPO on 2020. And Amplitude had a part in it.

(The amazing view from Ansarada Sydney office - sometimes between 2017 and 2019)

Why should you care?

Amplitude’s strategy is simple.

If you know how to do PLG. You will need Amplitude.

Hence, Amplitude empowers product leaders to create actionable and slick guides. And not just any Product Leaders but the crème de la crème.

Moreover, if we talk about PLG, who is better to listen to than those who paved their own way from sales-led to product-led?

Amplitude layered on the PLG motion on top of their SLG one in late 2023.

They walk the talk.

Who is this writeup for?

1. CEOs, Founders, and CPOs at early-stage and scaleups.
   So, you get your PLG game up before you spend $15,000 on a PLG advisor.

2. Growth and Core PM.
   So, you save $1000+ on a PLG cohort.

3. Marketing and Tech Leaders.
   Because PLG is a team sport.

What do you get?

20 PLG insights about:

1. Evaluating PLG Fit

2. Building an A-List PLG Team

3. Nurturing a Winning PLG Culture

4. The Unpleasant PLG Facts

5. Pulling (a) Acquisition, (b) Retention, and (c) Monetization Levers

6. 🎁 [Bonus] My Top 10 Free Amplitude Playbooks! Your mini-PLG MBA

Let’s start.

➜ (1) Evaluating the PLG Fit

1 - No Marketing OR Sales predictability, No PLG!

PLG is about your Product generating and capturing demand.

So, if you are struggling to close the gap between what the company thinks users want from the Product and what users really want.

This means that you still can't generate and capture demand with marketing and sales.

PLG won’t fix that for you.

It will just make everything more complex.

2 - Low use-case frequency. No PLG!

You can’t monetize customers if they are not retained, and you can’t retain customers if they are not activated.

To create a habit (= activate), you need your customer to experience value frequently.

No frequency, no habit, no PLG.

3 - High complexity. No PLG!

If the product friction is too high, and the pain the product solves is not 11 out of 10, the self-serve experience will fail.

And no fancy product-led onboarding will solve it.

Reduce complexity first. Otherwise, no PLG!

4 - The farther the user is from the buyer, the harder the PLG!

You are unable to get the first in the door before someone OKs it.

For example, if a user can’t experience freemium / trial before some form of a buying decision is made by someone else.

This happens in heavily regulated industries, such as Legal, Defense, Healthcare, Constuctions, etc.

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➜ (2) Building an A-List PLG Team

5 - It’s not only the onboarding!

The PLG team's mission is to uncover, validate, and pull all the growth levers across the user journey.

The entire user journey is fair play.

Avoid limiting the scope of the PLG team to only the first session, or just the AHA moment.

6 - Report to the CPO, not the CMO!

You are product-led, not marketing-led.

Reporting to Marketing will overfocus the team on the Acquisition goals. It’s a bad practice.

You will likely layer on the marketing motion, but the PLG team remains a Product team.

7 - There are only three levers to pull!

Acquisition, Retention, and Monetization.

Start with one, as each lever is a different ball game.

And here is a cheat code.

In 90% of cases, you start with Retention (the hardest one).

Because, no Retention, no PMF!

Closing deals != Retention

8 - PLG is as much about Psychology as about Quant!

Having a product designer and a data person on your PLG team is non-negotiable.

It might sound obvious, but 50% of Series A or B startups that run “PLG” miss either or both functions.

Aspire to create data stories and delightful experiences, NOT dashboards and mockups.

➜ (3) Nurturing a Winning PLG Culture

9 - Sales teams will hate you (at first)

PLG does not cannibalize sales teams' revenue.

Yes, the ACV will dip. It's true.

But pipeline quality and volume will go up.

More advocates, more usage data and a better win rate.

Remember, Product Qualified Accounts (PQA) convert for up to x5 better than PQLs. Love restored!

10 - No data, no PLG!

PLG is crafted through experimentation.

Running experiments requires you to fully understand your business and product fundamentals, such as CAC Payback, Activation Rate, 90-day Retention, etc.

Without data, there are only HiPPO (Highest Paid Person's Opinion), and PLG can’t survive HiPPO.

11 - Self-serve analytics rocks!

Self-serve analytics won’t entirely replace your need to go deep with SQL.

But! It will make your experince of writing and telling a data story much more delightful and accessible for all.

It’s not either SQL (Non-SS Analytics) or SS Analytics.

It’s both.

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➜ (4) The Unpleasant PLG Facts

12 - PLG takes time!

Going from Sales-Led to Product Led?

Align expectations on WSLL (What Success Looks Like).

The chances that your PLG pipeline will account for more than 5% ARR in 12 months are slim.

PLG is a long-term play that pays back with dividends.

However, don’t start PLG if you are in for a 12-month ARR fling!

13 - You will fail a lot...

Get used to a 50% to 80% PLG experiment "failure" rate ( = not proving your experiment hypothesis with stat sig).

It’s about deep and actionable learnings and building on top of those learnings.

If you do that, you win.

➜ (5a) The Acquisition Lever

14 - You can’t fake network effects (NE)!

If the value for a single user is not amplified by inviting other users to the product, a shiny invite/share button won’t spark virality.

Your product simply lacks the NE DNA (Network Effects DNA).

So, if no NE DNA (Network Effects DNA) is the case, and unless you are revolutionizing your niche with a 100X WoW experience, you better focus on other acquisition tactics.

15 - Treat content as a product!

Content is how you package and transmit value through marketing channels to generate demand.

It can be pure product-led content, such as templates and pre-products, or mixed plays, such as lifecycle or even programmatic SEO content and UGC.

Content is how you tell your product-led story. Master it.

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➜ (5b) The Retention Lever

16 - Building a habit takes time!

If you want to kill your activation ( = the heart of Retention), focus your PLG team only on the first session.

Why? Because activation takes weeks in most cases, even for “simple” products such as Canva and Figma. It’s a multiple sessions game!

The PLG team must own the journey until the Habit to Win Activation.

17 - Activation goes beyond tactics!

Activation is about knowing, every single time a user lands in the product, who this user is (ICP-fit, Role, Pains), what they want to achieve (goals), and crafting a personalized experience that will help them to accomplish the job faster and more delightful than they expected, so they come back.

Activation isn’t about pop-up X or tooltip Y!

➜ (5c) The Monetization Lever

18 - Reverse trial rocks!

But what about freemium?

Assuming your product fits freemium, reverse trial still offers the best of all worlds.

An opportunity to experience the full product capabilities (the trial period), a conversion to a paid decision point (when the trial ends), and a freemium experience for those who don’t convert. Try beating that!

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19 - Hybrid pricing rocks!

Your PLG team should experiment with adding additional monetization layers, such as one-time add-ons and usage-based pricing.

Relying solely on seat-based pricing is too risky and too light on expansion.

We all learned this the hard way in the last 24 months.

20 - You win by NRR! (Yes, it’s still the case)

A common mistake of a PLG team is to focus on new revenue while not giving enough love to expansion revenue.

NRR is where most of your ARR growth comes from (at least for scaleups). If you lose the NRR game, you go belly up.

Driving NRR requires you to experiment and plan your way ahead!

➜ (6) 🎁 My Top 10 Free Amplitude Playbooks!

1. Product-Led Growth Guide Volume 1: What Is PLG?

2. Product-Led Growth Guide Volume 2: How to Get Started with PLG

3. Building a Culture of Experimentation

4. The Amplitude Guide to Product Metrics

5. Acquisition Playbook: Mastering Customer Acquisition Strategy

6. Mastering User Retention Playbook

7. The Amplitude Guide to Personalization at Scale

8. Optimize Your First-party Data for Personalized Experiences

9. Mastering Monetization Strategy

10. The B2B Guide to Upselling and Cross-selling

His energy and the depth of his insights were astonishing.

The episode turned out to be a mini-advising session.

A clear win for you, dear readers and listeners!

My top 10 learnings from the chat:

1 - Don’t rush taking VC Money!

You can bootstrap! It might take 3 to 5 years, growing 30 to 50% YoY, but you can bootstrap to $10M+ ARR. Grammarly bootstrapped to $50M ARR. Moreover, financially healthy growth, proving your unit economics, and Monetization early will turn your startup into a VC hot candy. VCs love that, and you will be able to raise $ at much better terms because your business model will be perceived as less risky.

2 - VCs are a gateway to a talent pool!

No VC money = being locked out of the talent bubble. Why? Candidates don’t value equity in bootstrapped startups simply because there is no pressure to exit. VCs can help threefold. First, add credibility to your startup (think Sequoia or a16z). Second, it makes the liquidity event pressure a real thing. Third, VCs help you access a rockstar talent pool through partners, advisors, etc.

3 - Don’t rush hiring a Growth team!

If you can’t paint a world you want to see for which you think the answer is hiring a growth team, don’t hire a growth team. Don’t hire a growth team if you don’t have a strong hypothesis of where the growth should come from (Channels, PLG, Virality, etc.) or you can’t answer questions with data, or don’t have easily accessible data analytics. And lastly, don’t hire a growth team if you don’t demonstrate a strong PMF.

4 - Growth is a dance!

At early-stage, Series A, you should grow by 20% MoM. You start your Growth journey by focusing on your Activation (= Retention) through your ICP lens and gradually moving away from WoM users. And the more you grow (Acquisition), the more lower-intent users you onboard, so your growth metric drops. At this point, you invest in additional Growth (Retention + Monetization), and PMF works to push the metrics back up. It’s a dance.

5 - SEO is not dead!

Do SEO yourself and save money. See what your competitors are ranking for, and do the same with a twist; don’t go with an agency. It’s a lousy ROI (at least early on). I have 30M+ ARR clients doing SEO in-house, while SEO is the primary acquisition channel, growing it 2X YoY.

6 - Monetize early!

The earlier you monetize, the sooner you will have money to invest in performance marketing. This is why more startups nowadays are going with Trial rather than Freemium. So, once you have PMF and balanced your Activation (Retention), it’s time to invest in Monetization to unblock Paid Acquisition. Don’t wait with Monetization work until your Series B; start early.

7 - Healthy unit economics before Paid!

Doing Performance Marketing at scale before you have the unit economics in place will bankrupt you. You need to make your money at least back. Hence, ensure healthy free-to-paid conversions, renewals, and strong projected LTVs. This is precisely why you need to figure out Retention and Monetization before you scale Performance Marketing.

8 -  Paid is so much simpler nowadays!

Managing Performance Marketing required at least a $1M headcount investment a few years back. Today, I see generalists running $500K paid media on their own across 4 to 5 channels. Ad platforms have become so much easier to use, from automation to AI targeting and creative generation. It’s more of just telling who the users are (by uploading the lookalike), setting the CPA, and the ad platform does the rest. 

9 - Be aware of the 2021 valuation!

Candidates, be aware of bad players pitching their 2024 equity packages based on 2021 valuations. We are at 2024, and the 2021 valuations are anchored in illusion.  It’s a red flag. Those companies will be lucky to grow to those valuations in 5 to 10 years (if at all…). Dear bad player, take the example of Canva, which proactively and publicly lowered its 2021 $50B+ valuation to $26B back in 2023.

10 - Hard skills to groom in 2024!

First, AI, no AI, interpreting data and drawing insights from data by knowing what questions to ask and connecting to business events impacting the underlying metrics is not going anywhere. Second, prompt writing is a thing; generally, it optimizes how we communicate with AI. Lastly, and the most important one, don’t be an asshole. 

Links:

1. 🟢 Yuriy Timen:

   1. Linkedin: https://www.linkedin.com/in/yuriytimen/

   2. Official Website: https://www.yuriytimen.com/

2. https://www.recraft.ai/ - Generative AI design tool

3. https://10web.io/ - Generative AI website builder

4. https://www.grammarly.com/ - AI writing assistant

After five years of leading PMs, I can say that mastering managing high-performers yields the highest ROI. Nevertheless, taking high performers for granted will shutter your product team ‘house of cards’ in no time.

Moreover, the higher the percentage of top performers on your team, the more accute it becomes to develop the skill set for keeping high performers for the long run.

In this article, I will dive into the topic of ‘Promotions,’ the ‘Sacred cow’ leaders consciously try to keep vague.

The reality:

Top performers expect to get promoted.

And can you blame them? Promotion is the ultimate recognition.

It’s financial, as it comes with a new compensation level, it’s social, as you are getting recognized by the company leadership, and it’s brand building, as it adds credibility to the employee's brand in the job market.

Hence, misalignment around promotion expectations can kill performance and break trust. In most cases, this misalignment involves some dangling the promotion carrot quarter after quarter.

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The product leader’s priority is company success.

You hire top talent for a specific job ( = job X).

Moreover, you want to ensure (after hiring and onboarding) that your rockstar PM does the job they were hired to do for a long time.

Otherwise, what is the point?

Promotions, as great as they are, will, in most cases, stop your rockstar PM from doing the job they were hired to do. Requiring you to onboard other PM to do job X.

Now, I am definitely not saying that promotions are bad. But they do add complexity and overhead, which you must be mindful of.

Do this:

Performance peak != performance trend

Reward for performance peaks, generously.

I mean one-time bonuses, equity grants, and cross-company praising. Show gratitude and take care of your team. Don’t take high performance for granted. Be creative!

Promote a long-term performance upward trend.

The long-term performance upward trend is the promotion north start you build expectations towards. It's also how you help build your team members’ long-term defensible careers.

How long of a trend? 18 - 24 months long.

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Lead with transparency (early on) to bridge the expectation gap

Communicating your promotion ‘How? and When?’ early on, even before hiring. Starting as early as the hiring manager interview rounds.

You want to ensure your hire only those PMs who genuinely excited to join and do ‘job X’ for at least three years.

This is why you never use empty promotion promises as a hiring tactic as those will backfire.

In addition, re-iterate on the promotion expectations every quarter and review together with your team the long-performance trend.

Comparing only the perfomrernce of the ongoing quarter with the performance of the preceding one is not sufficent.

🟢 Three bonus tips for PMs:

1. Ensuring that your work materializes in building a successful company has a higher long-term impact than a premature promotion with no meat behind it.

2. The statement ‘Join at level Y to do job X and you will get promoted in no time’ Indicates a questionable/toxic culture. Don’t’take the job.

3. Avoid taking roles you don’t see yourself doing with a huge smile on your face for at least three years.

In this episode, JM shares lessons on how to build an algorithmic (AI-driven) growth engine to align between Product-Led Growth and Product-Led Sales, his approach to building rockstar Growth teams, and his journey to becoming an influential Growth Product leader.

My 15 learnings 🎓 from this episode:

1. At Google Ads (a $100B+ ARR business), Growth Teams operate by pulling the levers of Core Product and GTM. Growth Teams guide Core Product on what to build and GTM on which products to sell and to whom.

2. Google’s approach to ‘Growth work’ is algorithmic rather than manual. It’s 80% ML-based. 😎 Reaping the fruits of Google’s 20-year investment in its Ads ML model for 20 years.

3. The Growth guidelines of what to sell and to whom (per customer/segment) to GTM are packaged in a three-layer cake:

   1. Products that drive short-term success.

   2. Products that drive long-term success. [The highest priority 🟢]

   3. Foundational products.

4. GTM’s mission is to make customers successful by ensuring the adoption of the Ads products packaged in Growth guidelines (see above). GTM does so ( = driving Adoption) through PLG (in-product) and SLG (frontal sales). And, of course, GTM Incentives ($) are aligned accordingly!

5. The Google Ads Growth Flywheel:

   1. Driving ad products adoption →

   2. Campaign performance increases ( = customer is more successful) →

   3. Customers allocate additional budget to Google Ads, which leads to Adopting additional Ad Products. 💸

6. Customers want to spend (when there is an ROI-positive investment), and the Google Ads Growth team’s job is to provide them with enough ways to do so. Hence, if done correctly, Google Ads growth has no limits.

7. Google knows much better than any Performance Marketing agency how to create repeatable, high-performing campaigns at scale. Hence, Google is taking (and will keep taking) the campaign ‘Controls.’ One-click automation is how all of us will roll. 🤖

8. Only the best ideas win at Google. As a product leader, getting your opinion through the Google filter (all the way to execution) is an Art and Science. You have to learn how to do so to make it at Google. Otherwise, your impact will be limited. 😨

9. At Google, you are expected to have high GC abilities ( = Crystallized Intelligence). To do so, you have to continue working on self-improvement. Google will give you all the tools necessary, but it’s your responsibility.

10. Databricks follows the Google Ads approach to Growth Teams, meaning that Growth Teams pull the Core Product and GTM levers. Moreover, Databricks invests in building an algorithmic (rather than manual) growth engine, although it is quite early in its journey.

11. Databricks uses a ‘Propensity score’ to allocate customers the right support based on their propensity to spend money with Darabricks. The support level can vary from email to an in-product banner to a solution architect or senior seller.

12. At Databricks, PLG and SLG work together in sync. It’s hybrid all the way. Databricks thinks value first. ”We used to be commit-first, but this is not the case anymore. Our GTM has become much more efficient once we layered in PLG on SLG”.

13. I repeat myself, but this point comes a lot in this episode. Growth should be long-term, not short-term play: the next quarter ( = short-term), the next year (= long-term). 🤓

14. Leading Down principles:

    1. Allocate time with your team, think through problems together, and do it weekly.

    2. Genuinely support your team in achieving personal growth. 💡

    3. Place a high-quality level and operate transparently ( = we are all in the same boat).

15. Leading Up principles:

    1. You build credibility and trust by consistently delivering high-quality output. There is no other way.

    2. Leverage cross-functional leadership to strive for mutual wins and share those up.

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In this episode, chapters 👀:

01:10 Jean-Mathieu Chabas background

04:45 The role of ‘Growth Product’ teams at Google Ads

23:15 The secret recipe for making it at Google

28:30 What Databricks is all about?

33:40 Shaping ‘Growth Product’ at Databricks

58:44 Leadership philosophy: Lead Up and Down

01:08:22 The quick questions round

Where to find Jean-Mathieu Chabas?

• LinkedIn: https://www.linkedin.com/in/tomscottt/

Where to find Eugene Segal?

• LinkedIn: https://www.linkedin.com/in/ekaterina-syuma/

• Newsletter:

  The Growth Loop

  Product is my PASSION, PLG (Product-Led Growth) is my KICK, B2B / B2B2C SaaS is my PLAYGROUND, and thegrowthloop.io is where I share my learnings and insights. Join me for the ride.

  By Eugene Segal

I recorded a podcast episode with Jean-Mathieu Chabas (JM) a few weeks ago.

JM previously headed Growth at Google Ads (a $100B+ per annum beast) and is currently the Head of Growth Products at Databricks.

The podcast episode (which is coming later in a week) was packed with pearls, and I had quite a few aha moments.

Moreover, I believe many so-called best-in-class B2B SaaS startups have much to learn from Google's approach to Growth Product.

I predict that in 3 to 5 years, Google Ads's approach to Growth and structuring Growth Teams will become the predominant approach (the benchmark) throughout the startup industry. ❤️

At the moment, almost none of the fancy B2B SaaS startups and scaleups parading the Forbes 100 cloud list follow any of the Google Ads growth principles I share in this blog post.

The scale

1. Google Ads is a $100B+ a year Revenue machine, and it's only the SMB part. The scale is crazy. It’s like 50 Hubspots, 40 Dropboxes, or 25 Zooms. 🤣

2. This also means that 1% in revenue growth is a plus BILLION $ to the revenue bottom line. It is quite a motivation booster for the growth teams.

3. Moreover, there are only a few 1000s of sellers, which puts the average revenue generated per seller at $10M+.

The Growth Teams

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The role of Growth teams at Google Ads is to improve customer campaign performance and they do so by:

1. Guiding the Core Product teams on ‘what to build?’
   ( = Product Roadmaps Aligment) | This part is quite commond in B2B SaaS startups.

2. Guiding the GTM teams on ‘which products to surface and to whom?’.
   ( = $ Incentives Aligment) | This almost never happens in B2B SaaS startups.

Just think about it! If Ad campaigns deliver a repeatable positive ROI, customers will never stop spending, resulting in a neverending $ loop! Hence, it’s the Growth team’s role to learn what drives the performance of an ad product (there are hundreds of existing products within Google Ads) and align those learnings through the Roadmaps with Core and Incentives with GTM.

Let’s reiterate, because this one is important.

Customers want to spend when it’s an ROI-positive investment; all they need is for Google Ads to provide them with enough ways to do so. Hence, if done correctly, Google Ads growth has no limits. This makes the Google Ads model so much more scaleable than, for example, business models of productivity tools.

The secret ingredients

1. It’s 80% Machine Learning work. 🤖

Google iterated on its Ads ML model for 20 years. The algorithmic approach to experimentation (rather manual) is Google’s Growth team superpower. So, you know, even Google’s Gemini was built on top of the Google Ads ML model.

Question: Is algorithmic experimentation the future of Growth? In which cases and scale is algorithmic experimentation applicable?

2. The Google Ads Growth team optimizes both for short-term and mainly for long-term success.

The Growth guidelines of what to sell and to whom per customer/segment to GTM are packaged in a three-layer cake, with the main weight being long-term.

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Question: Why is the dominant paradigm in traditional B2B SaaS startups for Growth teams is to focus on short-term gains? Is Google’s long-term focus approach applicable to early-stage startups and scaleups?

3. GTM is much more than Sales.

GTM teams are customer advisors and serve as the customer frontline from product, operations, and technical perspectives. Their mission is to make customers successful by ensuring the adoption of the products packaged in Growth guidelines. They do so through PLG (in-product) and SLG (frontal sales). And, of course, GTM Incentives ($) are aligned accordingly!

Question: What value can we extract from Growth and GTM / Sales Collaboration (beyond PLS - Product Led Sales) in traditional B2B SaaS? How should this relationship be structured and incentivized?

The future (or present) of Google Ads

Google knows much better than any ‘Performance Marketing’ agency how to create large-scale, repeatable, high-performing campaigns simply because Google owns all of the campaign data (all of them). Moreover, Google's goals and Customers are aligned, which means that Campaign Success = Customer Success = Google Ads Success.

Google is taking (and will keep taking) campaign ‘controls’ from the customers and managing those campaigns all through (one-click) automation.

It’s the same reason that humans will not be allowed to drive in the distant future simply because autonomous cars drive better. Google Ads is on the way to becoming a one-click-go platform.

“...Here is my product (shoes). I want to spend $10 the most, so go!..”

Google will build the campaign, the ads, and the creatives based on best practices, the customer, and the product context, place the bids, and close the loop.

This means lower to no learning budgets, lower entry barriers, and faster cycles.

And what about the performance marketing agencies?

They must adapt by abstracting their focus from tactical ( = running a campaign) activities and going multi-channel.

Takeaways (for B2B SaaS Startups and Scaleups)

1. If you dream of reaching a multi-billion ARR, your business model must support such a scale within its DNA. Google’s Ad model does. It’s a money-printing machine.

2. Growth experimentation will shift toward algorithmic experimentation. ML will become the Growth team’s core competency.

3. Best startups empower Growth teams to focus on long-term Success. Chasing monthly targets should not be the only growth play.

4. In 99% of startups, the Growth - GTM (Sales) relationship does not exist. This must be fixed. Aligning incentives can help bridge this gap.

5. Are you paying the hefty $ to performance marketing agencies? Don’t. Do it in-house. 

Disclaimer: Any numbers mentioned in this write-up are made up or available in public sources; any strategy pieces in this write-up are based on outcomes of my deep thinking or publicly available frameworks. Enjoy!

FigJam was born as Figma’s Horizontal expansion move, scaling its visual collaboration offering to the entire cross-functional team, not only designers. Leveraging ‘Content Growth Loops’ at scale has been a key driver of its success. This is why I believe it’s a great of great value to explore this strategy in depth by breaking down 6 actual FigJam content loops.

But first, let’s align on terminology. 😉

What are ‘Content Loops‘ and why do we need them?

1. Content loops drive both PLG Acquisition and PLG Retention.

2. Content loops generate and distribute content, hence, ‘Content Loops.’ 😂

3. Moreover, Content loops also supply sales with leads, out of scope for this write-up.

What types of Content Loops are there?

We differentiate Content loops by looking at the following:

1. Who generates the content? (and ‘How?’)

2. Who distributes the content? (and ‘How?’)

   1. → UGUD - User Generated User Distributed

   2. → UGCD - User Generated Company Distributed

   3. → CGUD - Company Generated User Distributed

   4. → CGCD - Company Generated Company Distributed

3. What type of content is distributed? (Boards, Templates, etc.)

FYI - The above abbrevations were coined by Reforge! Those guys rock! ❤️

How do we know which Content Loop is best?

Some of the factors that impact the strength of each content loop are:

1. Development, content generation, and distribution costs.

2. Operational scalability potential.

3. Relevancy, Reach, and Performance of a content piece and the distribution channels dynamics.

Let’s start! 💪

Now, let’s see all that in action by breaking down six FigJam content loops:

1. Share Boards (UGUD Loop)

2. Embed Boards (UGUD Loop)

3. Activity Summary (UGCD Loop)

4. Community Templates (UGCD Loop)

5. FigJam Templates (CGCD Loop)

6. FigJam Social (CGUD Loop)

1. Share FigJam Boards (UGUD Loop)

Cost: Users do both content generation and distribution. Seat back and enjoy. Some investment in initial and continuous work is required to enable and optimize the sharing experience (from sharing to landing).

Impact: Ultra high-intent, high-relevant content shared one-to-one or one-to-few manner (not one-to-many). It’s FigJam’s core direct network effect around collaboration.

2. FigJam Live Embeds (UGUD Loop)

Cost: Again, users do both content generation and distribution. However, integration (and continuous maintenance) work per platform (Slack, Atlassian, etc.) is required for the embed to work.

Impact: High-intent content is shared in mostly a one-to-few, one-to-many manner. There are more eyeballs per share than the ‘Share Boards’ loop. However, the relevancy per eyeball is lower.

3. Activity Summary (UGCD Loop)

Cost: Initial dev investment to build and optimize the lifecycle notifications. Focusing on increasing its relevancy and usefulness. In addition, there is minimal distribution cost per delivery channel (i.e., Email).

Impact: Low-intent content is shared one-to-one every T time (Day, Week, etc.) per every active user. Sounds good; however, it tends to get high spam / low open rates.

4. Public Community Templates (UGCD Loop)

Cost: It is a high investment, especially in the beginning, to spin up the community motion and provide the tools to create, submit, review (by FigJam), and rate the Templates. Once it runs, the cost is low because the community does the content generation.

Impact: Low to high-intent content is shared in a one-to-many manner. FigJam doesn't control the Template's topics (= it's the community's topic choice). The impact increases as more use cases are covered, and Public Templates bubble up in Google search (takes time...).

5. FigJam Templates (CGCD Loop)

Cost: A high investment in creating high-intent content in a non-scalable way (one by one by FigJam’s team); the distribution part is cheap but takes time. Search engines... You know.

Impact: High-intent content is shared in a one-to-many manner. The impact increases as those Templates bubble up in the search results. At some point, we get diminishing returns after covering all the core FigJam’s use cases. This is why layering Public Templates on top of FigJam Templates makes sense (lower content generation cost).

6. Figma (FigJam) Social (CGUD Loop)

Cost: It's a medium investment in generating frequent social content. This is why leveraging guest writers makes sense. The cost per content goes down with time as the reach increases (the audience size).

Impact: Low to Medium-intent content is shared in a one-to-many manner. However, the impact of each published content goes down fast (if it’s Linkedin, not the case on YouTube). Social requires a high publishing frequency. You stop, you die.

1. ‘The 5 Levels of Leadership’ is my go-to leadership framework.

2. Jason Taylor, my direct manager at Ansarada, first introduced it to me, and I am grateful for it. ❤️

3. It helps me to simplify, demystify, and structure my thinking around ‘Leadership.’

4. As a direct report and a manager, I was on both sides of the framework. It works.

Expand Leadership → Expand Influence → Expand Effectiveness

“When you expand your leadership ( = climbing the leadership levels), you expand your influence. When you expand your influence, you expand your effectiveness. Great leaders are effective.”

John C. Maxwell, Leadership Author and Speaker

Let’s Start.

Level 1: I have the title, so you follow me.

If people follow you just because they must, they will give you the least of their effort, time, and mind. They simply want to get paid. And I don’t blame them...

Getting a leadership job doesn’t make you a leader.

Level 2: You like me, so you follow me.

People start to like you. You are helpful; you listen to them, observe, and learn. You are getting along with people and building relationships.

You must be likable and not antagonizing to build real influence.

The statement: “... You don’t need people to like you as long as they do what you say...” is a total BS and an example of a lazy leadership style and a toxic mindset. 💩

Level 3: I produce results, so you follow me.

You produce outcomes and gain credibility. You start attracting other productive people (the law of magnetism) because you build momentum and solve problems. You are effective, and it’s visible.

We attract who we are, not who we want.

Level 4: I coach you to be me, so you follow me.

You grow others. You grow a company by growing people. When you increase their capacity, they increase the capacity of what you can accomplish.

Effectiveness at scale is achieved through the people you grow.

Level 5: I gained your respect, so you follow me.

You did so much for so many and for so long that people follow you because of who you are.

Getting to Level 5 is a lifelong journey.

What’s Next?

Identify your leadership level with each of your direct reports. The level is subjective per person.

Disclaimer: Any numbers mentioned in this write-up are made up or available in public sources; any strategy pieces in this write-up are based on outcomes of my deep thinking or publicly available frameworks. Enjoy!

There are two types of Growth (PLG) work:

1. Generate and capture demand through Growth Pillars.

2. Compound the growth output through Growth Loops.

→ Both types of work reinforce each other!

This means that:

1. PLG Work that focuses only on Growth Pillars and ignores Growth Loops is just fancy Funnel Work.

2. PLG Work that ignores Growth Pillars and focuses only on Growth Loops means leaving money on the table by not compounding growth efficiently.

To deliver on the real example promise. Let’s explore how Activation (= Growth Pillar) reinforces Monday.com's viral loop to drive a killer product-led acquisition.

Loops Rules! 😎

1. Every cycle, we run compounds at 40%.

2. And, we got an extra 6640 users on top of the initial 10000.

But still, where does Activation come into play? How does Activation reinforce Monday.com’s Viral Loop? 😕

The answer is simple. Optimizing Activation impacts one of the Loops conversion variables, ‘Projects Created per User.’

• The better ‘Activation’

• The more Projects are created per user

• The higher the loop cycle compound %

• The more new users, the Loop yields

By increasing Activation by an absolute 5%, we reinforced the Viral Loop.

1. Every cycle, we run compounds now at 46% (+6%).

2. We got an extra 8501 users (+1861) on top of the initial 10000.

Case in point! 🤣

1. 𝐍𝐨𝐭 𝐬𝐭𝐚𝐫𝐭𝐢𝐧𝐠 𝐟𝐫𝐨𝐦 𝐑𝐞𝐭𝐞𝐧𝐭𝐢𝐨𝐧

To ensure Activation predicts Retention, you start with Retention and go backward. Not the other way around. If you don’t have the Retention defined, you can’t define Activation. As simple as that.

2. 𝐁𝐮𝐢𝐥𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐡𝐚𝐛𝐢𝐭 𝐚𝐫𝐨𝐮𝐧𝐝 𝐭𝐡𝐞 𝐰𝐫𝐨𝐧𝐠 𝐚𝐜𝐭𝐢𝐯𝐢𝐭𝐲

The core activity around which you want to create a habit around, should not only correlate with retention. It should also be aligned with users' natural behavior and the business model and be simple enough for you to impact.

3. 𝐄𝐱𝐚𝐠𝐠𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐧𝐚𝐭𝐮𝐫𝐚𝐥 𝐟𝐫𝐞𝐪𝐮𝐞𝐧𝐜𝐲

Driving a habit requires a repetitive action. The repetition frequency must be aligned to the natural frequency of using your product. Be careful; don’t exaggerate; it’s not what you want the natural frequency to be, but what it naturally is. Most products, including Miro, don’t have a daily frequency (X times per day, every day).

4. 𝐏𝐥𝐚𝐲𝐢𝐧𝐠 𝐭𝐡𝐞 𝐟𝐢𝐫𝐬𝐭 𝐬𝐞𝐬𝐬𝐢𝐨𝐧 𝐠𝐚𝐦𝐞

Activation happens when the habit is established; in most cases, it doesn’t happen during the first session. The onboarding experience should be looked at in the context of habits rather than sessions. Capping the onboarding thinking at the first session kills your Activation. It can take weeks and more.

5. 𝐏𝐞𝐫𝐬𝐨𝐧𝐚𝐥𝐢𝐳𝐢𝐧𝐠 𝐟𝐨𝐫 𝐧𝐨𝐧𝐞 𝐨𝐫 𝐚𝐥𝐥

Personalizing Activation works; don’t skip it. However, personalize only for your ICP segments. If it’s not your ICP, generic experience is sufficient. If you are unsure during the onboarding if it’s your ICP, ask. The statement 'the fewer questions during the onboarding, the higher the conversion' is BS.

6. 𝐈𝐠𝐧𝐨𝐫𝐢𝐧𝐠 ‘𝐓𝐞𝐚𝐦’ 𝐚𝐜𝐭𝐢𝐯𝐚𝐭𝐢𝐨𝐧

SaaS B2B products that serve teams ( = scale value beyond individual users) must play both the individual user and team activation game. It’s insufficient to activate individual users while disregarding team activation. Why? Because you sell to teams now, you better ensure your Product’s team experience delivers the promise.

7. 𝐒𝐤𝐢𝐩𝐩𝐢𝐧𝐠 𝐭𝐡𝐞 ‘𝐄𝐧𝐠𝐚𝐠𝐞𝐝’ 𝐛𝐮𝐜𝐤𝐞𝐭

All Activation does is predict Retention. But for a user to actually be ‘Retained,’ they must engage with the Product beyond Activation. Hence, the ‘Activated’ user is Retained only if, as we predict, they will continue engaging with the Product following Activation.

❌ Activation → Retention

✅ Activation → Engagement → Retention

8. 𝐏𝐨𝐥𝐥𝐮𝐭𝐢𝐧𝐠 𝐑𝐞𝐭𝐞𝐧𝐭𝐢𝐨𝐧 𝐰𝐢𝐭𝐡 𝐧𝐨𝐧-𝐚𝐜𝐭𝐢𝐯𝐚𝐭𝐞𝐝 𝐈𝐂𝐏𝐬

This one is straightforward. When you measure Retention, make sure that you look at only your ‘Activated ICP’ segment. Why ICP? Because non-ICP is not your business or priority. Why Activated? Because if the segment is not activated, those users are too early for the Retention game.

9. 𝐓𝐫𝐞𝐚𝐭𝐢𝐧𝐠 𝐀𝐜𝐭𝐢𝐯𝐚𝐭𝐢𝐨𝐧 𝐚𝐬 𝐞𝐢𝐭𝐡𝐞𝐫 𝐆𝐫𝐨𝐰𝐭𝐡 𝐖𝐨𝐫𝐤 𝐨𝐫 𝐏𝐫𝐨𝐝𝐮𝐜𝐭 𝐖𝐨𝐫𝐤

You need both. Growth work validates and unlocks opportunities, while Core work scales those opportunities and ensures its PMF. Let’s take Miro Templates as an example. At Miro, the Growth Activation team validated Templates as a set of experiments; nevertheless, at a certain point, to scale the Template experience and build it as a strong PMF offering, Core teams joined the party. 🥳

10. 𝐏𝐮𝐬𝐡𝐢𝐧𝐠 𝐟𝐨𝐫 𝐒𝐞𝐥𝐟-𝐒𝐞𝐫𝐯𝐞 𝐀𝐜𝐭𝐢𝐯𝐚𝐭𝐢𝐨𝐧 𝐚𝐭 𝐚𝐧𝐲 𝐜𝐨𝐬𝐭

Great Activation doesn’t necessarily mean Self-Serve Activation. There is no one-size-fits-all. Your Product might not have the high frequency or simplicity required to create a habit. Or maybe your potential customers expect a high touch, especially if those are high ACV Enterprise customers. For example, Pleo ($100M+ ARR B2B SaaS) is doing a kick-ass job with a hybrid product-led / high-touch activation experience. Hence, do what suits your business, Product, and customers. Not what’s buzzing on Linkedin.

I hope you enjoyed this write-up.

Some of those startups don’t understand the ‘Growth Product’ role. Others simply jump on the ‘Growth’ buzzword trend, trying to sound fancy or blindly copying competitors’ job posts.

This results in labeling roles as ‘Growth Product’ while those roles are actually:

1. Core Product roles but not Growth Product roles.

2. Not Product roles whatsoever.

3. Or Frankenstein roles in which success can’t be achieved. 🧟

It’s ultimately your responsibility to recognize the warning signs, avoid a career bet flop preemptively, and save yourself precious time, emotional turmoil, and potential psychological scars. 🚨

Please remember:

1. Your career =  The accumulation of the career bets you take.

2. Your career bets are built on top of each other.

3. Your career bets are not infinite.

I am talking from experience, both as one who took the wrong bets myself and one who designed ‘Growth Product’ roles as an Advisor for startups and as a Hiring Manager at Miro.

In this article, I will share my blueprint on how to bypass 'Growth Product' career bet landmines and make your next Growth Product career bet a success story.

Who is this article for?

1. Growth PMs who are planning their next career bet.

2. Non-Growth PMs looking to break into Growth Product.

3. Founders and Growth Hiring Managers.

   

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1. You are asked to build and own 0 to 1 features

0 to 1 ‘PMF adventures’ are the domain of Core / Platform PMs, not Growth PMs. Growth PMs uncover and validate opportunities through rapid ‘Research - Hypothesis - Experiments - Learning’ cycles and move on.

Building (0 to 1) bets and owning core features are not the Growth PM job, even if those features are intended to drive Growth.

❌ “You will be responsible for designing and building the notifications system to drive our users engagement and a referal system to drive users acquistion”

2. You are asked to drive feature usage (adoption)

Driving feature adoption is a valid tactic to increase engagement. Nevertheless, when thinking about Growth, we must think more broadly. We optimize for recurring usage of the Product to generate and expand revenue. It’s rarely only about the usage of feature X or Y.

From my experience, the feature adoption goals hint that the job post has a much stronger Core PM narrative than a Growth PM one.

3. You will not be reporting to the Product stream

A Product that doesn’t report to Product is not a Product, isn’t it…

I would go out on a limb and say that if you report to Marketing (or other departments besides Product), you should expect your role to take a non-product shift regarding goals, priorities, mindset, team structure, etc.

4. You are asked to build and scale acquisition channels

I don’t mean the product acquisition channels (Templates, Virality, etc.) but those performance marketing ones; think SEO, Paid Acquisition, Social, etc.

If building non-acquisition channels is the main focus, then it means you are taking a Growth Marketing gig. It’s not a bad thing, of course, if Growth Marketing is what you are aiming for.

A side note: As a Growth PM, you are 100% expected to contribute to the Growth Marketing domain, but it shouldn’t be the main and only focus. 

5. The company is looking for a ‘Growth Hacker’

I talked about this quite a lot, but yet again, Growth is not about hacking but systems. Looking for a ‘Hacker’ means not understanding the Growth DNA. And yes, even big super duper companies still go the hacker route.

Here is a quote from Group Growth PM at UBER (the job post is live on Linkedin at the moment of publishing this article. Disappointing. 😔

❌ “Demonstrated ability in growth hacking and growth initiatives. ”

6. There is no explicit reference to PLG

This one may be too simplistic, but I expect a company that hires a Growth PM, which in 99% of cases should be expected to drive Product-Led thinking, to reference PLG in the job description or the initial interview. The same goes for ‘Experimentation’…

Unfortunately, lacking either or both is more common than you think.

7. The job’s WSLL is unrealistic

For those who ask what WSLL means, WSLL = ‘What Sucess Lools Like?’

Betting on the right company is just one ingredient in your Growth Product career success equation. An additional ingredient is to ensure you can turn the career bet into a success story.

If the job’s WSLL expectations do not meet with reality, you will unlikely make this job opportunity a joyous, pivotal career moment.

For example:

1. You can’t be expected to build PLG on scale in 6 or even 12 months (especially in a sales-led company).

2. You can’t X10 ARR by going freemium in a matter of months.

3. You can’t merge the responsibilities of growth marketing, brand marketing, growth product, partnership, etc., in one role and expect it to work.

The ‘Right Now!, 10X, and Everything!’ mentality is a symptom of either growth incompetency or/and a toxic culture. Avoid.

8. You are not set for success in the role (no data)

The most common land mine for Growth Products is the lack of Data. Data is your oxygen; you can’t do your job without it. As simple as that. If the company doesn’t have the data infrastructure set or doesn’t recognize the need to have one, you can’t do your job.

This one is harder to detect by looking at the job post. It requires asking the right questions during the interviews or signing an NDA and asking to see it for yourself. A multi-tab EXCEL with tables and charts is not a data infrastructure.

I encountered the lack of data infrastructure phenomenon not only in early-stage startups but in scaleups as well.

Setting up the data infrastructure requires a company-wide cultural shift (starting from the leadership), a significant $ investment, and time (a long time).

Hence, it’s not an ideal starting point for a Growth PM, to say the least…

By the way, not having a data culture also likely means that the Company Forecast is based on wishful thinking rather than the Growth Model (data).

9. You foresee a negative friction

Warren Buffet once said, “An ounce of prevention is worth a pound of cure.”

Taking this to our ‘career bets’ world, it’s better to swipe left for an opportunity for which you can foresee significant No-Go collision points.

Some examples are:

1. A direct manager with no Growth experience (especially relevant for junior to mid-seniority candidates).

2. Lack of dedicated Design or Data people to support your journey.

3. And, a peculiar one I encountered last week, relevant to Growth Product leadership gigs, was the hard requirement to manage 12 growth PMs as direct reports with no mid-management layer. Apparently, the company believes in lean hierarchy… Good luck with this structure.

10. Business Model Experience gap (i.e., B2B SaaS Vs. B2C Marketplace)

This one is more on you. 😉

If you jump into an unfamiliar business model, it will be hard to bank on your previous growth product experience. For example, Going from B2B SaaS to B2C Marketplace is hard. Those models have different dynamics.

Even if you are willing to go through the steep learning curve, please be mindful of the risk you are running of being a half-baked expert across a few growth model segments rather than a superstar one in a single segment.

Being a half-baked expert in multiple growth model segments is not a competitive advantage.

—

Take control of your career, be smart with your bets, and remember that your career is important, but your family and your well-being come first.

Stay cool. ❤️

PLG = Self-Serve = Growth

In reality:

PLG ≠ Self-Serve ≠ Growth

Let me explain. 😉

After talking to 50+ B2B startup founders and product leaders in the last six months, I noticed that the terms Growth, Self-Serve, and PLG are used interchangeably. However, those are very much different! It’s actually PLG → Self-Serve → Growth

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And here is why.👇

What is PLG (Product Led Growth)?

PLG is one of the motions to drive Growth. In its pure form, PLG enables the PRODUCT to acquire, activate, engage, retain, monetize, and expand customers (= pulling all those Growth levers). For example, the product can drive acquisition by virality and content loops, activation by self-serve onboarding, monetization by self-serve monetization, and embedded usage-based expansion mechanisms.

What is Self-Serve?

In the Growth context, Self-Serve is an experience in which your ICP goes through the entire customer journey. This means all lifecycle stages (awareness to retention), without needing a human touch (sales, success, support, etc.). Achieving the ultimate Self-Serve experince requires layering PLG with Marketing. For example, Marketing is acquiring customers through performance marketing, PLG is Activating customers, Marketing is Engaging customers through Lifecycle campaigns, and PLG is Monetizing and expanding customers.

What is Growth?

Growth is about building the distribution for your Product to increase its market share within your product’s TAM (Total Addressable Market). Pulling the Growth levers (acquire, activate, engage, retain, monetize, and expand customers) by using both PLG, Marketing, and Human Touch (Sales, Marketing, and support). It's the whole thing.

To sum it up!

1. Growth topics are only complex if you try to sound fancy. 😉
2. The above applies to SaaS, No-SaaS, B2B, and B2C.
3. The ‘Head of Growth’ responsibility domain is much greater than acquisition channels, contrary to many job posts…

1. Why do growth teams exist?

2. What do Growth teams exactly do?

3. How do Growth teams differ from Product teams?

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Growth Teams 💚

1. Why?
Increase the Total Market Share (TMS).
This means more customers (from the TAM) are using your product and paying you $.
2. How?
Optimize existing loops/channels and set up new loops/channels through fast hypothesis, experimentation, and learning cycles to acquire, retain, and mobilize customers. We do all that through Product (PLG) and Marketing.
3. Metrics
Acquisition, Activation, Engagement, Retention, New Revenue, Expansion Revenue, etc.
4. Visibility
‘Learn as you go’ experiments plan (up to 3 months).

Product Teams 💛

1. Why?
Strengthen Total Addressable Market (TAM) to PMF fit and Expand TAM.
This means our product solves customer problems and provides a 10X delightful experience and new potential customers joining our product’s TAM.
2. How?
Increase product’s perceived value through PMF optimization feature work and 0 to 1 PMF expansion work.
3. Metrics
Feature Adoption, Retention, Satisfaction, NSM, etc.
4. Visibility
12-month roadmaps. We all love those…

1. SaaS Founders

2. SaaS Founders

3. SaaS Growth Leaders

4. SaaS Product Leaders

5. SaaS Cross-Functional Leaders

6. Anyone running a SaaS product

Why should you care?

Openview’s SaaS benchmark report is an X-Ray into the SaaS market. It cuts through the rumors by analyzing 3,500 verified data points. So, study the full report and make sure to read between the lines and numbers. This is what we did at Miro last year.

Let's dive in. 😎

1. Only a third of startups who launched AI capabilities during the last 12 months could monetize those AI candies. Monetizing AI is not a straightforward business. This topic deserves attention.

2. A drop in women’s representation in leadership roles. It seems like the ‘War Time CEO’ wave prefers male counterparts. This unfortunate trend will surely change the moment Generation Z hits the decision-making positions. Or better. Do something now...

3. Do you want to learn to estimate the size of a Product team (Product Design included) in any startup? Easy. It’s 8% to 11% of the total headcount.

4. Comparing PLG public companies with non-PLG ones. PLG public companies’ multipliers (EV/LTM) are about 25% higher than non-PLG ones. Moreover, PLG public companies grow faster and have healthier RO40 than their non-PLG counterparts. Go PLG!

5. Neither AI (11%) nor the next financing round (20%) is burning worries on top of ‘executives' minds. The top challenges are around the product (50%) and GTM (73%). As PLG seats at the heart of both Product and GTM, the PLG topic remains as relevant as ever.

6. About 45 to 50% of Seed and Series A startups raised a round in the last 12 months. However, only 14% of Series B startups and 22% of Series C startups raised funds last year. There is plenty of $ for the early stage! Not for others.

7. Compared to the last year, the median headcount drop in startups with ARR above $50M is almost 50%. For those startups with ARR between $5M and $50M ARR, the drop is about 25% to 35%. Wow! Where do all those people go?

8. The median ARR to FTE (revenue per employee) ratio for startups above $5M ARR went up from 25% to 50%. This means that best-performing startups with above $5M ARR are rocking around $300k per employee. It makes sense due to the headcount cuts and the focus on productivity,

9. Forget the 2X - 3X YoY ARR growth of 2021 or even the 50% one of 2022.

   Last year, the median YoY ARR growth of startups with more than $20M ARR was less than 25%. No hyper-growth signs are on the horizon...

10. This one is crazy! For companies with ARR above $20M, the monthly burn rate went down almost X10! What?! The staggering drop aligns with the headcount/budget cut craze, after all... It doesn’t apply to early-stage $1M to $5M ARR startups in which the burn rate remained pretty much the same as last year.
    

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11. For early-stage $1M to $5M ARR startups, the median R&D spend remains a significant % of the ARR, 40%, and 60% for early-stage top performers. It makes sense; you need to build the product, after all.

12. For Startups with ARR above $50M, the median spend on Marketing and Sales went up while the spend on R&D went down. So for every 1$ a $50M+ ARR startup spends on R&D, it spends almost 2$ on Marketing and Sales.

13. The median CAC payback went up significantly! It’s an extra 5 to 6 months for Startups with ARR above $20M. The enterprise deals became much harder to close (and expand...).

14. Across all ARR segments, we see a negative Gross and Net Dollar Retention trend. Customers churn and downgrade more than before. For startups with above $5M ARR, the median Net Dollar Retention dropped from a healthy 110% to a questionable 102% - 104%. Lower NDR, Higher CAC, not great…

15. I also noticed that the median Net Dollar Retention for early-stage $1M to $5M ARR startups is less than 100%! It means REVERSE GROWTH!

You can also check out the slick PDF version of this write-up. 👇

2023 Saas Trends (my 15 Learnings)

1.41MB ∙ PDF file

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1. Some think Growth Marketing = Growth Product.
2. Others think that Growth Marketing ≠ Growth Product optimizes only one and ignores the other.

In practice, Growth at Scale requires Growth Marketing + Growth Product. And both on a rockstar level. 🎸

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Growth Marketing

Owns the marketing-led motion. Focuses on generating demand through non-product channels (SEO, Paid Channels, etc.) and amplifies the products-led and human touch motions (Sales, Success, Account) through lifecycle marketing.

Growth Product

Owns the product-led motion end to end. Shares accountability with growth marketing to scale the self-serve business. Supports human touch teams through product-assisted experience. PLS (Product Led Sales) falls here.

The Ground Rules

1. Growth Product people are Product people. 😉

2. PLG without Growth Marketing is incomplete.

3. Growth at Scale = Growth Marketing + Growth Product.

4. Growth Marketing's responsibility is beyond acquisition.

5. Both Growth Marketing and Product supporting Human Touch

It's wild that 9 out of 10 'Head of Growth' job posts still don't recognize the subtleties of growth roles. Let's change it.

It happens to me once in a while.

Most times, those “doomed from day 1“ missions are about promising myself to stop snacking after 10:00 p.m., capping my wine to a single glass, or other BS.

But this time, it was different.

It was a nerd-first 🤓 mission to ‘Visualize the complexity of Growth org at scale.

Why? (there is a reason!)

So whenever anyone says:

I won’t need to argue but calmly pull this write-up. 🧘

So, my mission is actually not about you (my dear readers).

But about me.

I want to simplify my life. 😉

Here it goes!

You can break down the Growth org into three Tiers and each tier into three types of teams.

Each team within those tiers contributes to building the Distribution System for your product ( = Generating and Capturing Demand)

🔵 Tier 1: Growth PLG teams

It’s the heart of the PLG motion.

This is where you start when kicking off Growth.

1. Product Acquisition Teams

Acquiring users through product channels. Think Virality, Content (UGC), etc. Anything you can do to generate demand using the Product.

2. Product Retention Teams

Activating and Engaging users. Activation is the key Retention driver, so the main focus is on Activation. Think of both user-level Activation and team-level Activation (if you are a B2B startup). 

3. Product Monetization Teams

It is all about converting Free to Paid and expanding those accounts (Capturing the demand and getting this Self Serve ARR and NDR going)

🟡 Tier 2: Growth Scale teams

Growth Scale teams (layering on top of Tier 1).

4. Persona Focus Teams

Experimenting with strategic sub-segments of growth drivers. Not the entire ICP. The entire ICP is what all the rest of the growth teams focus on!

5. Channel Focus Teams

Experimenting with scaling both Performance Marketing acquisition channels (SEO, Paid, etc.), pre-products acquisition channels, and more horizontal plays that are not necessarily pure acquisition plays but can also impact your retention and monetization. Think community-led channels.

6. Motion Focus Teams

A big one! Layering new Growth motions on top of PLG. Think Marketing-Led Growth (i.e., LifeCycle) and Product-Led Sales (the PLS teams 90% of B2B startups are buzzing about in this year’s annual planning).

🔴 Tier 3: Growth Enablers teams

Growth Enablers teams (enabling Tier 1 & Tier 2 bets)

7. Technology Enabler Teams

Building the infrastructure to support Growth teams’ fast “hypothesis - experiment - learning” loops. Both horizontal (i.e., experimentation, segmentation, etc.) and vertical (i.e., payments). For example, if you can’t set multiple experiments running simultaneously or segment those users who reached ‘AHA!’ but didn’t reach habit! You are in trouble.

8. Content Enabler Teams

Enabling those big bets that rely heavily on content generation, moderation (and even localization) at scale. Think Company or Community generated content at scale.

9. Operation Enabler Teams

Not your traditional team! It’s about removing Growth teams’ operation friction, upholding high operation standards, and running professional growth programs. Growth org can benefit significantly from the operations love touch, especially when the org is at scale.

It’s all from my end.

And this time, I will stop snacking post 10:00 p.m 😆

Eugene Segal

1. Founders / CEOs

2. Product Leaders

3. Growth Product Leaders

❤️ Why should you care?

The 2024 Planning is here!

I promise you, it’s gonna be a mess, as always.

There is no way around it.

You know, no battle plan ever survives contact with the enemy.

And in our case, our ‘brilliant’ annual planning contact with reality.

This time, let’s try to make the plan survive at least until Q3. 😆

How?

By wearing our VC hats and thinking broader, VC broader.

Thinking beyond the ‘core’ product metrics.

Product metrics are only part of the game.

It’s not the entire game.

Let’s think about how to build a profitable, economically sustainable business.

And no, focusing on ARR is not enough. ARR is a vanity metric when looked at in Silo.

Don’t get me wrong, ARR is crucial. But it must be examined in the context of

1. The source of the revenue

2. The cost of the revenue

3. The health of this Revenue.

High YoY ARR growth alone does not ensure business sustainability.

✅ What do you get?

Breaking down for you:

1. CAC Payback

2. NDR (Net Dollar Retention)

3. Gross Margins

4. Burn Rate

5. Rule of Forty (RO40)

6. 🎁 Bonus Metric

🏁 Let's start!

1.’CAC Payback’

CAC Payback measures how quickly you can recover the upfront cost of acquiring a customer.

If you invest $1000 to acquire a customer and get $50 back monthly, the CAC Payback is 20. It’s the time (in months) to break even.

Having low CAC Payback means:

1. A low risk that customers will churn before you recoup the upfront investment.

2. Fast $ reinvestment cycles to fuel further growth.

This is why SaaS companies offer significant discounts for annual subs; it’s money upfront and no risks (unless a refund happens). 🤣

Getting to Low CAC Payback requires running a tight ship across:

1. Product

2. Marketing

3. Sales

Through both Acquisition, Activation, and Monetization levers. It’s a big one!

Calculation

Don’t stress; we'll talk about Gross Margin in a bit. 😉

Benchmarks:

Although CAC Payback has to be looked at per acquisition loop, the general benchmarks for SaaS:

👶 Early Stage: Less than 8

👨 Growth Stage: Less than 12

👴 Late Stage: Less than 15

The benchmarks depend on the composition of SMBs, mid-market, and Enterprise customers. The higher upmarket you go, the higher CAC Payback you can afford.

Why?

Because of Enterprise logos’ high NDR and low Retention nature.

Simply, they expand and stay.

More on NDR in a second.

2.’NDR (Net Dollar Retention)’

NDR measures the changes in recurring revenue from existing customers, considering revenue expansion, contraction, and churn.

If you started with $1M and expanded the revenue from those accounts by $200K but lost to contraction and churn $100K, your NDR is 110%.

Healthy revenue EXPANDS.

It’s what NDR is all about. As simple as that.  

NDR = 105% means that a company retained and expanded the revenue from its existing customer base by 5% over what it had at the beginning of that period after accounting for losses from churn ( = the ‘Bye-Bye’) and contractions ( = the Downgrades).

NDR < 100% means that a company is losing more revenue from churn and contractions than it is gaining from revenue expansion.

A ‘Leaky Bucket’ at its best requires you to get new customers to overcome the loss of existing ones rather than grow.

Getting to High NDR requires running a tight ship across:

1. Retention (usage)

2. The Monetization Model (pricing and packaging)

3. The Core Product (providing more value and better experience with new features, products, and add-ons).

Not too shabby!

Calculation:

Benchmarks:

👶 Early Stage: More than 105%

👨 Growth Stage: More than 115%

👴 Late Stage: More than 125%

3.’Gross Margin’

Growth and Product teams ignore Gross Margin as it excludes direct R&D, Sales, and Marketing costs.

However, Operational Efficiency (which sits in the heart of the Gross Margin) must be on top of your mind.

Why?

Because the higher the Gross Margin, the more $ you can reinvest in Growth and Product. 😎

A great product that costs a shit load to serve ( = COGS) does not form a good base for a sustainable business.

Expand your thinking beyond product metrics!

Calculation:

COGS includes only the costs to serve.

Think support, DevOps, maintenance, enterprise customer onboarding, etc.

This means PLG = Low COGS, High Gross Margin. 😉

Benchmarks:

👶 Early Stage: More than 70%

👨 Growth Stage: More than 80%

👴 Late Stage: More than 80%

4.’Cash Runway’

Most SaaS startups spend cash faster than it’s coming in. Cash Runway helps you decide how much you can spend on growth and stay alive.

So you get why it’s important.

If you have $1M in the bank and are burning through $200K monthly, your Cash Runway is 5 months. I would stress. You are spending way too much and need more capital. 😰

However!

No spending = No growth

Which also makes it hard to stay alive... 😅

Product and Growth teams approaching the annual planning without understanding the ins and outs of their company’s financial and value metrics limit themselves to thinking tactically (not strategically) and optimizing locally (not globally).

Calculation:

Benchmarks:

For any growth stage, get at least 18, please.

5.’RO40 (The Rule of 40)’

Finally, we are tying it all together!

It’s not growth at all costs but a gentle balance between Growth and Profitability.

RO40 holds you in check, focusing you on Economically Sustainable Growth.

In simple language, it takes your

1. ARR Growth %

2. Profit Margin % (Don’t mix up with Growth Margin!)

And ensures both together are above 40.

Meaning that if you are growing like crazy, you can afford to lose $.

And vice versa.

For example, if you’re growing at 80% YoY and have a (-30%) Profit Margin over the last 12 months, your RO40 is (80 - 30 = 50).

This means that YOU ROCK because your RO40 is above 40.

You balanced your profit loss (-30%) with ARR growth (80%).

Getting to RO40 > 40 usually means that you are:

1. Rocking a low CAC Payback

2. High NDR

3. High Gross Margin

4. Have enough Cash Runway to make your strategy a reality.

VCs do track your RO40, and it heavily impacts your startup valuation!

Calculation:

Benchmarks:

Well, it’s 40, quite self-explanatory, I say.

However, RO40 best fits non early stage startups.

6.🎁 ‘ARR per FTE’

Planning your headcount (I hate this word) and have no idea how much ARR each employee generates?

You better know it before onboarding anyone else.

Calculation:

Benchmarks:

🍼 Very Early Stage: Less than $50k

👶 Early Stage: $50k - $100K

👨 Growth Stage: $100k - $200K

👴 Late Stage: More than $200K

Wishing you all a fruitful planning season.

Let’s unscrew ourselves one OKR at a time. 😆

Eugene Segal

🔗 References:

1. Openview, 2022 SaaS Benchmarks Report

2. Chargebee, What is CAC Payback Period?

3. Elena Verna, Cost of Acquisition (CAC) trap

4. Elena Verna, The four types of Expansion B2B SaaS can leverage