One component we look for in the companies we invest in is product-led growth. But what is product-led growth, and why are we targeting those companies? In this blog post, we will answer these questions.
What is product-led growth?
Product-led growth is a business model and go-to-market strategy in which a company’s product is the primary driver of customer acquisition, expansion, and retention. This approach is particularly relevant for startups looking to scale quickly and effectively, as it allows for sustainable and predictable growth without the need for heavy sales and marketing efforts.
The traditional sales-led model focuses on acquiring customers through outbound sales and marketing tactics, such as cold calling and advertising. This approach can be effective, but it can also be costly and time-consuming. In contrast, product-led growth relies on the product to drive customer acquisition, expansion, and retention.
For example, a product-led startup might offer a free trial or a freemium model to attract customers. Once customers use the product, the startup can focus on providing a great user experience and continually improving the product to drive growth. In addition, this approach allows for virality, as happy customers are likely to tell their friends and colleagues about the product, leading to more organic growth.
“One thing to keep in mind is the “led” in “product-led”. It means that the product contains elements that drive the growth. Unfortunately, now and then, we see startups describing the growth model as “product-led” even when these elements are missing. In these cases, it often refers to having no growth model, just hoping that someone would find a buy the product.”
Reima Linnanvirta, Partner at Trind
Product-led growth and scalability
One of the key benefits of product-led growth is that it allows startups to scale quickly and efficiently. By relying on the product itself to drive growth, startups can avoid the need for large sales and marketing teams, which can be expensive and time-consuming to build and maintain. This allows startups to focus on creating a great product and improving the user experience rather than spending resources on sales and marketing efforts.
Additionally, product-led growth can provide a more predictable and sustainable growth trajectory. In the traditional sales-led model, growth is often unpredictable and can be challenging to sustain over the long term. In contrast, product-led growth allows startups to focus on providing a great user experience and continually improving the product, which can lead to more predictable and sustainable growth.
Product-led growth from the investor’s point of view
Venture capital investors are increasingly looking for startups that use product-led growth as a go-to-market strategy, as it can provide a more predictable and sustainable path to growth. Startups that demonstrate a solid product-market fit and a scalable business model are more likely to attract the attention of venture capitalists and secure funding for their seed rounds.
Summary
In conclusion, product-led growth is a business model and go-to-market strategy that allows startups to scale quickly and sustainably by relying on the product to drive customer acquisition, expansion, and retention. By providing a great user experience and continually improving the product, startups can avoid the need for expensive sales and marketing efforts and achieve more predictable and sustainable growth. Venture capitalists are increasingly looking for startups that use product-led growth as a go-to-market strategy, making it an attractive option for startups looking to raise venture capital and grow their businesses.
We are constantly looking for startups with a product-led growth business model. If your company has demonstrated its product-led growth model and is looking for seed funding, feel free to reach out to us.