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An interview with OpenView operational partner Kyle Poyar
Between public technology companies, “product-driven growth (PLG) companies — those that educate and convert buyers with product rather than sales and marketing (SLG) — operate at about 5% to 10% less profitability than sales-driven moves,” venture capitalist Tomasz Tunguz marked in a blog post.
This data point may be specific to the moment we’re in: First, because public tech companies are generally less profitable than they were a year ago. Second, because not too long ago, PLG companies had a higher net profit margin than their sales-led peers. But just because this reversal may be temporary doesn’t mean it’s not worth looking into.
“The PLG roadmap is still being written – and what is happening today will be an important chapter in that roadmap.” Kyle Poyar of OpenView Partners
Today, product-driven growth is no longer the exception to the rule: following in the footsteps of Atlassian, Zoom and Snowflake, many private startups have adopted this model. If it’s inherently less profitable, founders will want to know, especially now that investors are once again paying attention to a company’s path to profitability and are no longer rewarding growth at all costs.
As usual, things are not clear. There are some reasons why PLG companies might be less profitable now, which could turn into reasons why they might be more profitable in the near future. To add perspective to what’s going on, we reached out to Kyle Poyar at OpenView Partners.
OpenView is a Boston-based VC firm known for advocating product-driven growth, so it certainly has several horses in the race. But this also means it has invested to ensure PLG is a recipe for success and is eager to explore what it can achieve. Here’s what Poyar had to say on the subject: