Avoiding the PLG Trap: Strategies for Scaling to Enterprise

Michael Grinich  (00:02):

Welcome to Crossing the Enterprise Chasm, a podcast about software startups and their journey moving up market to serving enterprise customers. I'm your host, Michael Grinich. I'm the founder of WorkOS, which is a platform that helps developers quickly ship common enterprise features, like single sign-on.

On this podcast, you'll hear directly from founders, product leaders, and early stage operators who have navigated building great products for enterprise customers. In every episode, you'll find strategies, tactics, and real-world advice for ways to make your app enterprise-ready and take your business to the next level.

Today I'm joined by Oliver Jay, the former CRO of Asana. Oliver joined Asana back in 2016 as their CRO where he first grew that go-to-market team from I think 20 to over 450 people in the span of just five years. Before Asana, Oliver was the head of PLG sales at a little company you might know called Dropbox, where he built that Dropbox for business sales team. At both of these companies, he's led international expansion of each product, and in Dropbox's case tripled their international ARR.

Super, super excited to dig into this and more with Oliver on the podcast today. Welcome.

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Oliver Jay (01:13):

Hey. Hey Michael. Great to be here.

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Michael Grinich  (01:16):

All right, so let's go back in time a little bit. You can put on your time machine hat. Let's go back to that experience at Dropbox. So walk us through when you joined Dropbox, what was the state of the business, maybe what was the state of the focus on enterprise, or actually even before that, that Dropbox for business product.

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Oliver Jay (01:33):

I joined in 2012. It was a time when Dropbox had a lot of momentum on the consumer side and had just dabbled into business. I will not even use the word enterprise. The big E word did not come in until a bit later.

It was really this opportunity when Dropbox saw that a lot of people brought the application to work and started using it, it had just started to commercialize a product, it was actually called Dropbox for teams back then, which was really just the idea that you can pay for multiple people at a time. That really was what it was at that start. And, of course, over time, we built bigger businesses and eventually went to the enterprise, but that's really where it started.

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Michael Grinich  (02:14):

You had this title Head of PLG Sales, which I haven't seen before this and I haven't seen that much of actually after. What did that mean? What did Head of PLG Sales mean within the context of Dropbox?

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Oliver Jay (02:27):

So the caveat is this is a little retroactive title amending because no one actually knew what that was at that point. PLG as a term didn't even exist. I think it is, however, in retrospect, the best descriptor.

There were a few sales motions. The first selling motion was the most PLG I would think is inbound. We had built out a few inbound channels, and the volume was pretty astonishing from the start. And so there was an inbound sales channel. And then eventually we started building what I call expansion sales, which is taking cues from different product usage behaviors and also the quantum of product usage as signals to then identify the more, I call it ‘healthy’ accounts with potential to expand.

Those were the first two selling motions that we resourced and built teams around.

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Michael Grinich  (03:28):

What did it look like to do those sales? Maybe walk us through one or two deals, the bigger side, right when you joined. It sounds like it was going out and fishing for those bigger fish that happened to be in the pond, but what did the actual sales process look like?

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Oliver Jay (03:41):

The inbound is pretty straightforward. People are coming to us. Back then, we actually had a phone number. Companies don't today anymore because nobody knows how to use a phone. That's usually someone already fairly technically satisfied with the product, and they're just looking for last-minute guidance on how to buy really.

The next one, expansion sales, is very data driven. It's very much looking at, okay, of all the accounts that we have, which ones demonstrate the highest likelihood and the highest propensity to either expand seats or eventually go for a bigger SKU? This is one where we looked at lots of different signals. At first, it was the most simple, which is are people actually using their storage? That's one. But then, over time, we got a little bit better, which is actually looking at how are people using it? Are people using Dropbox on multiple devices? That's a much, much stronger signal actually on monetization than just is someone using up all their storage for their birthday party photos.

I think that that sales is very data-driven and very quantitative.

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Michael Grinich  (04:56):

What were you selling in those first few deals in terms of the product for Dropbox for business or teams or early enterprise? What were the customers getting as you were saying? Is it a contract? Is it discounted pricing? Were there some features?

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Oliver Jay (05:10):

There's a few things that I think about. If I had to rank, what did people value most in the early days for B2B product, I think centralized billing was a major one because now people didn't have to expense there of individual Dropbox usage, and that ended up being a pretty nice bonus. Well, okay, I'll take it back. First was back then if you get a terabyte of data, that's virtually unlimited, especially if you use it for work. So I would say obviously just pretty much unlimited storage. That's one. Then centralized billing.

The third thing is actually CS. I think we're saying you get access to working with someone. Today I think it's a bit of a throwaway, but you have to remember back in 2012, the smartphone was pretty new still. Blackberry was still around. And so this idea of being able to get files across multiple devices and how you actually interact with that content on multiple different devices, including at that point in the cloud, just getting content in the cloud was a new thing for many companies. And so being able to have someone to talk to, to help walk you through maybe moving some of your content and workflows into the cloud, maybe on mobile, was a pretty big thing back then.

I think those were, I would say the main things that people cared about.

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Michael Grinich  (06:40):

When did that step into the sales process, that portion of CS. Was it pre-sales or was it enablement that the sales team was getting to talk about use cases? Was it post-sales for expansion or renewals? You hear about that a lot in terms of SaaS businesses. Talk about where it sat within the buyer journey.

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Oliver Jay (06:57):

Yeah, I can tell you what we did. I can tell you after 10 years of doing this, my latest thinking as well.

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Michael Grinich  (07:03):

Yeah, please. Give us an updated Oliver 3.0.

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Oliver Jay (07:06):

We set it up the same way any SaaS company did because that was our only comp at that point. So we looked at Salesforce, LinkedIn, Workday. We're like, "All right, how did they set it up?" And it was like, "All right, pre-sales is AEs, post-sales is CSMs, and then in between you have solution engineers that sometimes do pre, sometimes they post, sometimes they do both." We set it up the same way. We had CSMs work with clients after they converted, and it worked fine. It worked fine.

I think in the world of PLG though, I think the very first interaction you have with a potential customer is already a CS conversation. Folks, especially now, they've done their research. They've read through the threads. They might have even played around with your product if you have a freemium product or certainly if you have a trial. And so they're fairly educated already. I really think today, if I had to redesign the customer journey, I'd lead with CS. That first conversation is already the CS conversation. I wouldn't have called it PLG sales. I would define it as that's the start of their customer success journey. And it's probably the most important one.

I remember, our conversion rates were much higher for accounts that went through at that moment we called sales. There's certainly some self-selection bias there, but when you actually look at and listen to the conversations, you can tell it's because people are off to the right start.

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Michael Grinich  (08:43):

Because they're set up for success based on that effective CS conversation?

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Oliver Jay (08:47):

Yeah, exactly. You don't need to play around with first, and then swipe your credit card, and then, oh, let me introduce you to CSM. I don't think you should probably need that anymore.

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Michael Grinich  (09:00):

I talked to a lot of founders... talking about inbound, dealing with that... founders where they want to supercharge their inbound motion with outbound stuff. Did that happen at Dropbox? Did you start doing outbound when you guys were there or was it just still such a strong inbound machine you didn't have to do it?

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Oliver Jay (09:12):

Yeah, we did. To answer your question specifically using outbound to drive inbound I think is really hard. I think it's really hard. It's a very, very long cycle. Hypothetically, there is a virtuous cycle here. You go outbound, eventually get some big deals, get some big logos, make some case studies, market those case studies that drives more awareness, but that cycle takes a long time. And so where we had success with outbound was outbounding to our existing base.

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Michael Grinich  (09:48):

Existing base, meaning people who signed up specifically?

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Oliver Jay (09:51):

Say WorkOS had 20 people using Dropbox already, but you had 100 people in the company. Those 80 people who don't use Dropbox may not have any clue what those 20 people are using Dropbox for and the value they're getting. So you're basically using the existing install base as a case study, and really your marketing message is like, "Hey, XYZ and your company are already getting great value from this product. Don't you want to get in on it too?" That kind of motion was very, very successful. It's very successful because you're already acknowledged, and in some cases IT may have already approved the use of your product.

Now, at Dropbox... we can talk about sign-on later... but at Dropbox going outbound for outbound sake, like a cold account, don't really have bottoms up action in that account, really hard, and I would say really makes success. And I think for many PLG companies it really makes success.

And the reason is because I think for true outbound to work... Outbound by definition, you're going to have lower conversion rates. Lower conversion rates means to make the economics work, you need bigger deals. To get bigger deals, you need to appeal and outbound to C level, VP level, if it's a Fortune 500, then maybe the director level, but you're going after leadership. And most PLG companies, the value they provide is to the end users or to small teams or to the line managers. And so what happens is your persona is not aligned to the value that your product at that point is actually providing.

That's why outbound doesn't work. It either works in terms of getting small deals where the economics doesn't work, or you can't even get any deals because you're going after the wrong people given where you have product market fit.

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Michael Grinich  (11:56):

But it sounds like you're saying this outbound, I guess it's outbound to your inbound, allows you to convert those folks and drive maybe expansion from that 20 seats to the 100 within the organization. That's the magic bit.

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Oliver Jay (12:08):

There's a lot of action there. I would say that probably got Dropbox to become a $10 billion company is that dynamic.

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Michael Grinich  (12:18):

Let's talk about Asana, another company you joined early on, which became a multi-billion dollar company. You joined and the go-to-market team was 20 people. Is that right?

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Oliver Jay (12:28):

Yep.

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Michael Grinich  (12:29):

Early on when you left, it was over 400 people. Bring us back to those early days. As you were thinking about... maybe we'll switch gears here... building the team, folks that you're looking to hire as you were now scaling out the organization for sales. What did you look for? What type of people did you hire?

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Oliver Jay (12:45):

Based on my experience at Dropbox, I had pretty strong opinions on how I would set up the team. Early on, it was really important what I learned at Dropbox is to harness that self-serve business. A lot of companies take it for granted. They spend so much time after YC, they launch, they get all those people coming in, and then they move really, really quickly into sales, and they forget just how much opportunity there is to just build a self-serve business. That was the first thing I looked for is someone to run that business. I was really fortunate because there was someone already at Asana who was really plugged in and understood both the product side and the business side. And so I asked for different growth and that was really helpful. What we call PLG sales, really quickly, that was an obvious one to hire someone to build out that practice.

And then at the same time, I thought we knew that we had good product market fit, and so it was a big bet to sort of time the market readiness. But I did feel that Asana will be ready to have enterprise conversations two years later, but we need to start developing the muscle. At that point, WorkOS didn't exist, so we didn't have... I think we had SSO, but maybe not, I forgot, but it was at that phase, right?

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Michael Grinich  (14:11):

Yeah. Yeah.

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Oliver Jay (14:14):

Nothing else. Forget anything on admin, none of that. But I could tell from the customer conversations and where the product feature roadmap was going that it would be.

I feel like it takes two years to really build your enterprise selling go-to-market muscles on the sales and marketing side. So early on, even though we only had 20 people, probably $20 million in revenue, we hired our first enterprise leader, and we carved out a small enterprise sales team for the purpose of basically building the organization muscles to sell to enterprise. Second thing was solutions, super important, probably the most undervalued role in the go-to-market side. And then we started looking at international.

One of the benefits of PLG is if you do your launch right, you should have users from around the world because of the open web. We started investing in international really early, so that international was always growing alongside the US. So it never felt like we needed to expand internationally. We just built an international apparatus early so that we could grow together.

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Michael Grinich  (15:28):

What did that look like, hiring international? Translating the product? Were you trying to hire people to run growth experiments in Germany? More tactically, what does that look like?

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Oliver Jay (15:37):

The first step is sizing the three functions; product, sales revenue and marketing. I think at first is you get aligning with product and marketing on the actual localization strategy. Which of the markets that we're doing full translations with localization, which ones are we only doing translations on the top 30% of assets and stuff like that? Building that roadmap is important and getting that alignment is important because that ends up being the backbone of when you'd actually launch in the region. It doesn't make sense if you launch in Germany, if you don't have German.

So aligning on that roadmap, and then adding in the customer-facing pieces. For us, because Asana at that point was very much PLG-driven, it's a really much more of an inside sales motion as opposed to field sales. And so we were looking for hubs. Where are we going to build hubs to give us that local knowledge as well as language expertise that allows us to cover a broad market? Many companies follow what Google and Facebook did by going to Dublin to cover Europe because it's the one place where you can hire great talent from other tech companies, they get how this tech thing works, and you can get every single European language covered in one place. That's how we thought about it.

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Michael Grinich  (17:10):

I want to ask about this enterprise sales leader. You said it takes about two years to kind of build that muscle and start getting it going. What were the initial signs that it was the right time to start investing in this? Was it intuition from what you had seen at Dropbox? Did you have some proto enterprise customers or some bites at these features? Maybe thinking through the lens of a founder today listening to this, what signs might they look for in their business that it's the right time to start investing in enterprise?

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Oliver Jay (17:35):

I think it comes down to your intuition on the scale of the problem you're solving.

You can use Asana as an example. Most teams use Asana for five to 10 people, and they're getting a lot of value out of it for those 10 people, not really on an enterprise scale. Then we started seeing tens and tens of teams, and teams starting working together. And then you dive into what are people using the product for? And you're like, "Oh, wow, this global athletics company is using Asana to plan their creative marketing campaigns. This luxury goods company in London is using us to launch new products and coordinate across all these different teams, also around the world." Once you start realizing that you're solving the enterprise scale problems, I think that's a good sign.

Now, I also... later on we can talk about this... I think it can sometimes get companies in trouble when they over index on those few use cases. But to me, to answer your question, when's the trigger to start going? I think that would be my trigger is when you're solving problems. A caveat note that my answer is not, "Oh, when you start selling five, six-figure deals." That to me is probably correlated, but that might mean that you've put in WorkOS and now you're secure, and now people want to buy you. That's an amazing first step, but you also need to drive actual enterprise level problem-solving.

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Michael Grinich  (19:25):

I should say too, for this podcast as you're selling WorkOS, Oliver is a small investor, angel investor in WorkOS. Years and years ago, I think when you were still at Asana, I pitched the company idea to you, and you were like, "Oh my God, everybody needs this." Because you had dealt with it there and seen it at Dropbox as well. That's how we first got connected.

You have written about something you call the PLG trap, which I love. It's reminiscent of the name of this podcast, Crossing the Enterprise Chasm. You fall into the chasm, and you're trapped, I guess. What is your PLG trap? Maybe walk us through that.

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Oliver Jay (19:57):

Yeah. It started with an observation that PLG companies start with this amazing engine that is highly, highly efficient in terms of unit economics, because you're driving a lot of word-of-mouth, bottoms-up usage. And so hypothetically, and I actually see this in many companies, the unit economics look really good. A lot of PLG companies are profitable. When they get to the $10 or $20 million mark, it's amazing. But then when you look at all the PLG companies at scale, they're actually even less efficient than the non-PLG sales-driven, top-down driven software companies.

I thought that the economy was really interesting and made me think a lot about my experiences. What typically happens is PLG companies get great success in the beginning, then they have a few enterprise companies come to them and say, "Look, if all I need is I need you to give me SCIM integration and managed access controls, and I will go from 100K to 500K in annual spend, guaranteed." Well, it makes a lot of sense. You're not going to turn that down because that's always part of a roadmap anyways.

Here's the trap. The trap is, a lot of PLG companies are lured in by these enterprise feature requests that is really purely only on the security and admin perspective. They put a lot of effort... Because as you know, for sure, especially for companies who want to do it alone, it sucks up a third of your resources, if not more.

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Michael Grinich  (21:45):

Yeah, we've heard this a lot. Tens of millions of dollars in R&D, literally. Yeah.

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Oliver Jay (21:49):

It's huge. A lot of companies then spend all their effort into building these things, and they think that that is what it takes. Because indeed what happens is you build all this stuff, now you have access controls. And access controls, by the way, is like the Santa Claus list. It just never ends. But you start building these access controls, everything you land opens up 1, 2, 3 more big deals, and so you think, "Oh, this is my enterprise in play."

Well, it gets to a point in time where you actually don't even have enough accounts where this security and admin alone provides sufficient value to drive an enterprise deal. And this is the trap, because when you're in this trap, you're like, "Whoa, I was doing really, really well, but suddenly I just don't have enough accounts where my security admin stuff satisfies and is sufficient to drive bigger deals." Because back to what we said earlier, at the end of the day, you need to be solving enterprise scale value. So on top of, yeah, you need the security piece. You want really the minimum, but what you really want is you want to take most of your resources and build enterprise scale features.

For Asana, for example, when we're selling enterprise deals, in the beginning, it's project management stuff, but over time, we're selling OKRs. How do you use Asana and use built goals company-wide? That's enterprise scale value. But if you didn't have that, if you're only selling project management, try selling that to a CEO that doesn't already have half their company using Asana, it's not going to resonate.

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Michael Grinich  (23:33):

Last question for you before we wrap up. Thinking back to those early stages and early stage founders going through this transition, what advice would you give them, maybe advice to help them think about navigating the beginnings of this transition or maybe trying to start thinking in ways to avoid that PLG trap if they get to that point later on, what would you say?

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Oliver Jay (23:53):

I really think that it's important to understand there are multiple, multiple, multiple personas in a company. So if you want to go after enterprise, you have to be really clear about which level. Is it executive? Is it mid-level? Which function? I think a good test is are you solving one of the top three pain points? If you're not, especially in this day when everyone's really, really cost-conscious, you have to think about a different persona. And don't think of a target company as some monolith, but really think about the individual who will sponsor you, and what problem are you solving for them. If you're solving a top three problem, then you've found product market fit.

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Michael Grinich  (24:42):

Oliver, thanks so much again for joining us. It's really great to see you.

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Oliver Jay (24:45):

It was great. Great to see you.

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Michael Grinich  (24:52):

You just listened to Crossing the Enterprise Chasm, a podcast about software startups and their journey moving upmarket to serving enterprise customers.

Want to learn more about becoming enterprise ready? The WorkOS blog is full of tons of articles and guides outlining best practices for adding features like single sign-on, SCIM provisioning, and more to your app. Also, make sure to subscribe to this podcast so you're first to hear about new episodes with more founders and product leads of fast-growing startups.

I'm Michael Grinich, founder of WorkOS. Thanks so much for listening, and see you next time.