Do SaaS Companies spend differently for PLG-dominant vs. SLG-dominant GTM motions?
Do SaaS Companies spend differently for PLG-dominant vs. SLG-dominant GTM motions?
We compared R&D vs GTM spend across Startup growth stages (Seed..Series-B) and here's what we learnt.
In the last two weeks, I met with 5 CEOs of Seed to Series-B startups and the oft-repeated question was
Traditional sales & marketing are not yielding great results, PLG is too R&D intensive to get started. Is there a faster, cheaper way to get to Hybrid GTM?
Although ThriveStack.ai is being built to reduce the R&D efforts of a PLG self-serve initiative, it does not (yet) have the answers to fast-track Hybrid GTM. With no handy answer, I kicked off some research, and this is what my team and I learned.
1). R&D spend starts higher and remains higher for PLG-dominant GTM companies.
For PLG-dominant companies, R&D starts high and continues to be high over some time. (Our data is limited to the first 4-yrs of Operations)
For Sales-led dominant companies, R&D spending drops like a rock after the first 3 years. To maintain growth, the leadership shifts its focus to increased S&M spending, hoping for larger results. This phenomenon now has a name GAAC (Growth-at-all-costs) as was interesting to experience firsthand.
2). Revenue split by GTM motions gets interesting as startups attempt a Hybrid GTM approach
Over a 6-8 year time window, the revenue split for a PLG-first company usually gets diversified. Most companies we talked to, started as a Founder-led motion almost until they hit $1M of ARR.
During this time, they built their underlying product for self-serve and used it to (mostly) iterate on easier onboarding, leaning more towards better UX, simplified pricing, and more.
These initial R&D investments gave them a boost in the next phase propelling them to go from $1-10M in a record time. PLG became their foundation.
Of course, we found that most of them got trapped in the $5-10M range, and adding Sales kicked off their next rung of growth.
3). Adding product capabilities incrementally is the biggest culprit in high R&D costs for PLG-First companies.
The illustration below is a summarized version of the learnings from the PLG journeys of StoryLane, CommonPaper, Narrato, and many 80+ others we talked to.
Refer to the PLG Self-Serve Implementation considerations here
and here
4). Using a signal-based selling approach takes a toll on the Product and a lean/non-existent SalesOps teams.
There are lots of non-verbal signals Buyers give to sellers - all of these are based on some actions buyers do across your marketing assets. These touchpoints, become important indicators for your personalized outreach campaigns.
Traditional Sales & Marketing teams struggle to cope with this. here’s an example of the signal strength corelative to conversion rates
Refer: How to run a signal-based go-to-market motion
References:
This is excellent, team! Thank you for doing this research and sharing it!
For the first charts that split out founder-led, product-led, and sales-led… would PLS and signal-based selling fall into sales led? I’m imagining so…