It’s not all about bottoms-up
David Peterson

For the past few years, almost every founder I met would pitch their business as “product-led,” whether or not bottoms-up adoption made sense for their product or target market.

I don’t blame the founders for this, mind you. They were responding to the market. Public markets loved a bottoms-up story. And investors were pouring dollars into product-led darlings like Figma, Airtable, Notion, countless open source projects, and many others.

The presumed implication of all this was that bottoms-up growth was the only “fundable” business model in startup land. Of course, the reality was much different. Airtable had enterprise sales early in the game, as did Figma. We may not have talked about it. But the ability to marry the two models was critical to our growth and our “fundability.”

Mercifully, two trends from the past year make me think that we may finally be past this mistaken belief that bottoms-up is the only “fundable” business model in town.

First, bottoms-up and top-down are no longer binary. In fact, the layering of top-down over bottoms-up is becoming the de facto playbook. I’ve lost count of the number of “product-led” companies that had stagnated, but bit the bullet, built an enterprise sales organization, and have since found their second wind. (By the way, my take: by publicly eschewing the need for sales reps, Atlassian and Slack really messed with the heads of a generation of entrepreneurs.)

And over the past 18 months or so, an explosion of so-called “product-led sales” companies have been founded to help PLG companies do just this. These products generally fit into two categories: PLG CRMs (Pocus, Endgame, Calixa) and lead/PQL scoring platforms (too many to count). But from my conversations, even horizontal products like internal tool builders Retool, Budibase and Superblocks, predictive analytics platforms like Forwrd, and messaging platforms like Intercom are being pulled into the “product-led sales” game, powering homegrown product-qualified lead systems and upsell campaigns.

Second, direct sales is sexy again. Wiz announced last week that they’d reached $100M ARR just 18 months after launch, making them the fastest growing software company of all time. Yes, faster than Slack. Faster than Twilio. Faster than all their product-led compatriots. Wiz is a prime example (and a good reminder to us all) of how enterprise sales, when executed to perfection, can lead to explosive growth.

So I’m going to call it. We’re no longer living in a world where bottoms-up growth is the only “fundable” go-to-market strategy. Let’s hope investors (and public markets) respond to these trends in kind.

Of course, Angular has been investing in businesses with complex, top-down sales motions since the very beginning. Because what’s important isn’t that you execute on any one particular go-to-market strategy, but that you find go-to-market-product fit. And we don’t care whether it’s top-down, bottoms-up or a flavor of the two (maybe even the PLG mullet!), as long as you’ve solved a problem that customers are willing to pay for.

Until next time,
David

EVENTS

Sep 7 / The Evolution of Collibra’s Product Positioning & How They Created a Category
Stan Christiaens, Co-Founder & Chief Data Citizen, Collibra

Sep 21 / Lessons Learned From Investing Early in Over a Dozen SaaS Unicorns Including Salesforce, SuccessFactors, Box, Gusto, SalesLoft, ServiceMax, Veeva, Bill.com, Doximity, Yammer and Zoom Among Others
Jason Green, Founder & General Partner, Emergence Capital

FROM THE BLOG

Don’t be Fooled by the PLG Mullet
How to know if you should be building a PLG Now, PLG Later or PLG Never company.

PLG Now, PLG Later, or PLG Never
Why there is no helicopter shortcut to the summit of Mount PLG.

For Early-Stage Venture, It’s Go Time
Don’t tell anyone, but this is the best venture market in years.

The Right Stuff
How to build a commercial team.

EUROPE & ISRAEL FUNDING NEWS

Israel/IT Infrastructure. DriveNets raised $262M for its cloud-based software-defined routing infrastructure software.
Israel/Data Tooling. Pliops closed $100M for its platform offering an HPC storage accelerator for enterprises.
UK/Industrial Systems. Flusso was acquired $33M for its digital flow solution suite, including the world’s smallest air velocity sensor.
Germany/Electronics Software. Luminovo closed $11M to help electronics leaders bring automation and a collaborative approach to enable seamless communication throughout the entire value chain.

WORTH READING

ENTERPRISE/TECH NEWS

Flow-ing into the future? The big news this week was, of course, WeWork’s Adam Neumann’s new residential real estate company, Flow, and the $350M investment at a $1B valuation it received from a16z. While there have been many critics since the story broke, there’s no doubt that the residential rental market is ripe with opportunity for transformation. The rental market, especially in the US, is largely inefficient. Renting a place is often cumbersome, stressful and expensive for both landlords and tenants. Despite WeWork’s “botched public offering and tales of mismanagement”, the company did help usher in a new era for commercial real estate, one which was more tenant-friendly and flexible. If the same could truly be achieved in residential real estate, the market size and demand would likely be astronomical. While investing in Adam Neumann may be controversial and WeWork’s valuation is a fraction of what it used to be, investing in a founder who previously founded a publicly traded company with a $4B exit is quite appealing for many first check investors.

NYC enterprise tech. Work-Bench recently released their terrific State of Enterprise Tech in NYC — 1H 2022 Funding Report. While the entire report is worth reading, the highlights are:

• “$3.2B was raised across 90 deals (pacing beat 2020’s COVID-bump supported stats)

• Seed activity flourished (comprising 27.8% of all raises), while late stage rounds experienced the greatest pullback

• Median raise amounts increased across Seed, Series A, and Series B, likely due to more due diligence and conviction in today’s macro environment

• Total NYC enterprise unicorns increased to 42 and the top sector is Data/AI/ML

• There were no meaningful exits (IPO or M&A)”

HOW TO STARTUP

Early stage fundraising. Semil Shah from Haystack gives practical advice for founders raising early stage funding. While late stage fundraising has certainly slowed down in this environment, Semil stresses that for early stage startups raising reasonable amounts, the macro environment should not impede their ability to raise. The data supports this view. In fact, July global seed funding is up slightly year over year, coming in at $2.5B compared to $2.4B in July 2021.

The first marketing hire. Adam Frankl, who was the first Marketing VP at three unicorns targeting developers, Neo4j, Sourcegraph, and JFrog, shares his take on which marketing role founders of developer-focused startups should hire first. A key take away is that prior to achieving product-market fit, “the founders should do all the marketing. No one understands the problem or the product like you. And if you are not at product-market fit, no one will help you get there faster than you.”

HOW TO VENTURE

A new fundraising reality for emerging VCs. While established venture capital firms still have $220B of dry powder to deploy into startups, emerging VCs raising capital are encountering a new reality — a significantly more difficult fundraising climate. During the first half of 2022, limited partners have slowed their commitments to new VCs. “Pensions, endowments, and other institutional LPs often try to mitigate risk by committing money to more established fund managers. In times of uncertainty, they face greater incentive to stick with managers with proven track records.” According to Carta data:

• “VC fundraising saw a quarter-over-quarter decline. The number of capital commitments to U.S. VC funds and special purpose vehicles (SPVs) on the Carta platform declined by 26%, and the total value of those commitments decreased by 43% when compared to Q1 2022.

• Q2 totals are sharply down from the highs of Q4 2021. The total value of capital commitments fell by 64% in Q2, compared with the peak in Q4 2021. The number of funds and SPVs recording capital commitments is down by 45% over the same interval.

• Smaller funds saw a 47% decline in commitments. Funds with less than $50M in assets under management saw a steep drop in commitments in Q2 when compared with the peak in Q4 2021. Funds with over $100M saw a less severe decline of 28% over the same time period.”

PORTFOLIO NEWS

Lightsolver’s founders are working on developing the fastest computer in the world. [in Hebrew]

Groundcover aims to improve observability and monitoring with eBPF and microservices.

Planable was recognized as a MarTech Awards Winner in the Social Media category, as the Best Social Media Scheduling Software.