Ed Sim (Boldstart): What Do VCs Look for in PLG Founders?
Ed Sim: I want to know where that designer, that UI UX person comes in because as you know, Blake, that is really, really important is how beautiful will this thing be? How much of an understanding for the user to remove clicks and to make things even more frictionless? Where is that onboarding process and time to value look like? Those are languages and words I want to hear about from the founder. And I want to see that in their hiring because if you're a PLG company, there's no designer on board by number 10, that's another red flag for me, that is really, really important.
Blake Bartlett: Welcome back to the BUILD podcast. I'm Blake Bartlett, a partner at OpenView. The world of SaaS is always evolving and we're here to help you adapt, compete and win with your startup. The BUILD podcast brings you stories and insights from my conversations with the most successful people in SaaS. In today's episode, I chat with Ed Sim founder of Boldstart Ventures based in New York City. Ed's investments have included Snyk, Kustomer, Superhuman and many more big names in PLG in today's conversation, we discuss investing. What did you expect from two VCs? We had a great time comparing notes from investing in PLG at different stages. For Ed it's very early in a company's life day one to be exact. And for me, it's after the company has achieved product market fit and is ready for initial scale up, there are many similarities but a number of key differences as well. All that and more on this episode of BUILD. So let's dive in with Ed Sim. Well, Ed, thanks so much for joining us here on the BUILD podcast. It's great to have you on the show.
Ed Sim: Blake, thanks a lot for having me. It's an absolute honor. I love listening to your podcast and you've had several portfolio company founders and execs as guests. So I'm finally excited that you invited me.
Blake Bartlett: Well, thanks for joining. And we're going to talk about all things PLG and investing in PLG since you like doing that. And I like doing that myself. So maybe as a starting point, why are you attracted to PLG companies as an investor? What stands out about these businesses to you?
Ed Sim: Look, first of all, it's a ton of fun. So I think that's great. Then two is, look, if you get it right, the sales efficiency, sales and marketing efficiency is incredible and it's predictable. So I would say those things are super important. And when you cover PLG, I would just broaden it out as not just SaaS for application layer type investing but also developer tooling because that's a PLG motion in and of itself.
Blake Bartlett: Definitely. And in probably the earliest to the concept of PLG was developer tools. I think back in the day, that's probably where it started. And we're just trying to adopt those things in the application layer now.
Ed Sim: Absolutely.
Blake Bartlett: The trade off that I always heard growing up in Venture, which is you can either grow fast and burn a lot to do it or you can burn less but you'll grow less. And with PLG, if you get it right and maybe a little bit of luck thrown in there, you can have your cake and eat it too. You can grow fast and have profits.
Ed Sim: As you know, the if you get it right as the hard part because I can't tell you how many times patients is required and having the right investment partner from day one and actually day two and day three is also important because a lot of times in these types of companies, you want to keep optimizing for product, product usage and when you throw revenue and it creates friction. And so you want to make sure that everyone is on the same page and investing for the same thing, which is incredibly user adoption and metrics. And we can talk about that later. So, I keep thinking about yeah, everyone wants to do it but it's really hard to pull off.
Blake Bartlett: You mentioned something that I think we can just jump straight into it, investing from day one. So maybe first off, before we dive into, what do you look for? What do I look for trading notes? We're at different stages of PLG investments. So when do you get involved and where do you look at Boldstart?
Ed Sim: Yeah. So Boldstart would be involved before you start your company. I think 80% of our investments, we meet founders who are thinking about starting their next business and we help iterate with them before they get going. So that can include companies like Snyk, companies like Superhuman. And those companies were ones where we actually worked with the founders previously actually and help them think through their next model. And I'd probably say about 90% of the time, most of these founders have no product built. So then the question you have to ask is, how the hell do you invest in these things when there's no productability? Is there a framework that you use or whatnot?
Blake Bartlett: Yep. I've always really resonated with seeing the way you refer to Boldstart and your own approach as being very day one partner oriented. I think that's huge and you underscored it there. I come in a little bit later and OpenView comes in a little bit later, not tremendously later but products in the market, users are signing up for it and getting value out of it and there's product market fit. And so we invest post- product market fit but still relatively early stages of company development series A, series B.
Ed Sim: Got it. Yeah. And we'd go pre- product so obviously the founders matter, we only invest in technical founders and we love investing in companies where they start a company because it's born out of pain, born out of a problem that they've experienced for years. And as an engineer, guess what you usually do, you figure out how to fix it and you fix it for yourself, the founders that we admire the most at PLG are absolutely obsessed about product. And they have an ability to zoom in incredibly to the user and to the user persona, to the day in the life of the user, how do I make this user's life 10 X or a hundred times better with my product than without? And by understanding that one user and optimizing for that one user, then they're able to really build a product that makes sense. And of course the question is, is how do you zoom out? How do you actually think about adding a zero to that or another zero or another zero? And so this ability to zoom into the product and then also tell a story where you can zoom out a little bit and show us maybe as an investor that, hey, the market could be this big but we don't know. Every product we launch, whether it's containers or infrastructures code is all around that north star. So when we talk to founders, we're always looking for the founder obsessed about product and the user and that doesn't change, whether it's day one or day 1000.
Blake Bartlett: Yeah. And that maniacal focus on product but really double- clicking into, well, what makes a product? Product has to be built for somebody, it has to solve a problem and really thinking about those things in a deep way. I do think it's like almost thinking about a startup opportunity or startup problem from first principles. And I think boiling it down to those first principles, you talked about persona. Who exactly is the persona that has this challenge? And then how do we build a product that again, solves that exact pain that the developer's having in relation to security? Not prematurely trying to shoe horn that into a SISO pitch but no, stay at the developer layer, stay at that persona layer, stay at that pain layer and build the right product. And that is huge. And it takes maniacal focus. As you mentioned.
Ed Sim: And Blake, you just nailed it. I have met so many founders now that say they have a PLG business but then when you actually talk about, so they'll come to me and say," Hey, I've got this PLG sales platform. I'm going to go after the individual reps." Fast forward through their deck and at the end, they talk about the five milestones, they need to raise the next round. And I'll be like, five enterprise design partners top down and there was no metrics on user activity, user growth. So I feel like they're just saying PLG for the sake of it. And so I think that's part of our job as an day one investor is really sniffing out those folks because Blake, by the time we get to you, you're going to ask the question like," Okay, you say you're PLG, show me the numbers." And if we say," Hey, we're five top down sales and we're just getting started." You're going to be like," Is that really a PLG company or not?" So like Dooly, for example, Chris, who you know, from Dooley, even today, we just announced our latest round of funding a series B, a$ 70 million round. If you look at the press release and the posts around it, Chris is always talking about the users. He's always optimizing for the individual sales rep. He's not talking about going top down, he's not talking about going to sales ops. It's the user and everything is around the user workflow. So those are the kinds of founders and the language and living that product is what we look for.
Blake Bartlett: Yeah. I like that idea of consistency as well. If somebody is pitching on PLG and then you page to the back of the deck and it's showing things that aren't consistent with that, that's a flag. I would say another flag there is how are you building the team? And if higher number one is an enterprise CRO right out of the gates, that's also a flag, that's not consistent with PLG and you need to see that consistency throughout top to bottom.
Ed Sim: Oh, absolutely. And I would hope by the time we get to you, that's where, Blake's like," All right, I got a list of five folks ready to go, let's get this going." And you proved out that bottoms up model. By the way, the other thing I wanted to talk about is once you get that, PLG means you got to get product, you got to nail product. And so when we sit down and think about the anatomy of an investment, we think about how do you actually get product velocity? And think that Paul Graham always talks about, product velocity and shipping product is the number one aspect. In my point, there's a number one B, which is higher in velocity too because I want to know that when I invest in you from the very beginning, you might have three or four engineers ready to join. I want to know where that designer, that UI UX person comes in because as you know, Blake, that is really important is how beautiful will this thing be? How much of an understanding for the user to remove clicks and to make things even more frictionless? Where does that onboarding process and time to value look like? Those are languages and words I want to hear about from the founder. And I want to see that in their hiring because if you're a PLG company and there's no designer on board by number 10, that's another red flag for me. That is really, really important.
Blake Bartlett: And then when you're thinking about, so you're obsessed with product, you're thinking about that initial persona, you're thinking about their pain, where do you start? You got to start somewhere. You can't serve everybody. And so how do you think about TAM? How do you think about market? Should you go wide? Should you go narrow? Should it be somewhere in the middle?
Ed Sim: Man, that is such a great question because it's a trap. I almost think it's a trap question because we all know that we want huge TAM but the investments that I miss a lot are the ones where the markets are starting as new markets and they grow so fast that we miss it. I like to say and this is my one thing that I always ask myself and ask my team," It's not the TAM that you start with but it's the TAM that you exit with"
Blake Bartlett: I liked that idea of the TAM you end with is not necessarily the TAM that you started with and that there are these multiple expansion vectors you could think about. I think one is just, are you in a market that's growing? And you need to appreciate the growth rate of the market. We invested in Datadog. Datadog monitors infrastructure, Cloud infrastructure, first and foremost and so when you do the market sizing, back in 2013, 2014 when we invested, it's a percentage of AWS spend, if you will, as a proxy. But AWS spend or just Cloud services spend is growing dramatically. And so where will it be five years from now, especially if it's compound growth? The other vector is, well, you're probably going to start with a specific segment. We think that industry X and company size Y and persona Z is the place where this pain is felt most pronounced and so let's start there. That doesn't mean you've built the product for them. That just means that's who you're targeting, that's where your messaging is. And you can expand after that but you want to get those initial rabid fans who are going to fall in love with the product versus a bunch of people who think it's fine. Say they've built the product, it's the right product for that persona, it's delivering value. How do you start to advise them on growth and go to market? What do they need to achieve during the seed stage to get to the next stage? Are there milestones? Are there more like concepts you're trying to drive people towards?
Ed Sim: I'll say they're more concepts then milestones because every market's different. And frankly, I'd probably say that two thirds of our companies have raised their A rounds before they even got the full product fully functional. So I think it's more a sign of the market than not but I would say in general, one is product led growth doesn't exist without product. So you got any of that product and just show that there's some rabid users using the product. So not only do I want to see one user, I want to see what the expansion is within one organization to show that there is some real team like aspect to this. I want to see how often they come back or how much time is spent and then I want to see that repeated, in five or 10 or 15 other companies. Two is, I think the thing that people forget about when you think about product and it depends on developer tooling or not but the analytics have to be built in from day one too. Because it's very hard, you can't have a product that growth company and unless you know how people are using it. So you really have to have that obsession around that funnel. And hopefully by the time it gets to you, we have elements, we haven't proven out pure product market fit but there are elements that you'd say," If I put another dollar into this engine, I think we can grow this." But I'll hand it off to you because I would love to hear what would you think.
Blake Bartlett: Yeah. I think what you said about needing to wire the product for measurement from the beginning, is incredibly important because part and parcel to product led growth at all stages but especially the early stages is rapid experimentation. So that's huge but if you're not measuring anything, if you don't have the tooling in place, if you can't actually measure the efficacy of your experiments, then it's all for not. But back to the very beginning of our conversation, what is this product built to do? All products have a primary purpose. Let's measure that thing. Calendly what does it exist to do? Schedule meetings, so how many meetings did you schedule? How many meetings did you schedule by account? And are we seeing that engagement rate go up? That people are using the thing more and more for its intended purpose. And again, you might not have turned on monetization yet but the primary reason this thing exists is going up into the right and so that's good enough to communicate product market fit to me. But again, if you hadn't wired it up to be able to measure that in the first place and you don't know what your north star metric is, you don't know what your activation metric is and there's no data flowing through the system, there's no users, then it still is TBD.
Ed Sim: Blake, you nailed it. And I would say that when you look at those leading metrics outside of revenue because the one thing we don't focus on early is pushing for revenue too early. Those things are very delicate because I feel like you have to wire in the usage, the rabid usage in early and before you start creating friction into the process.
Blake Bartlett: So wrapping up here, I know we've been having a good riff session here on all things PLG but where do you think PLG is five years from now? What's the future look like of this trend?
Ed Sim: I got to tell you, I actually wrote something two years ago in one of my year in predictions. And I said that to win the hearts and minds of a large enterprise you're going to have to go bottoms up. Then two is, is also from the user perspective. When you have new applications hitting the stack, people don't want to be sold to anymore. They know how to use Google. They talk to friends, they use social. In fact, a lot of the buyers are a younger generation. They know how to maneuver these areas better. So I feel like that if you aren't PLG, then I say," Hey, it's not the large companies that you can see today that you have to worry about, it's that ankle biting PLG company that'll come out of nowhere, that will open source your shit and just destroy you in two or three years because you never saw them coming." So think about how to protect your flag. So then at the end of the day, it's PLG or bust in my mind.
Blake Bartlett: So exactly as you mentioned, stay the course, trust the process and be patient. So I think that's a great place to leave it, Ed, thank you so much for joining us here today on the BUILD podcast.
Ed Sim: Hey, thanks for having me. I'm finally excited to have been on it.
Blake Bartlett: Awesome. Thanks for listening to this episode of BUILD. Ed also has a great sub stack called What's Hot in Enterprise IT/ VC and you should definitely sign up for his weekly insights over at whatshot. substack. com. If you like what you've heard, leave us a review on Apple podcasts and subscribe to stay up to date with all the new episodes. Want more insights from OpenView follow me, Blake Bartlett on LinkedIn for daily PLG content and head to our website to sign up for our weekly newsletter.
[2:13] Why is Ed attracted to PLG companies as an investor?
[4:01] Ed explains the value of trusting your investing partner.
[4:42] When does BOLDstart get involved as an investor?
[5:38] Ed believes in a day-one partner investing.
[6:13] What is BOLDstart looking for in the early days?
[8:51] Blake talks about the challenges of building the right product.
[10:10] Ed talks about how to tell if the company is really a PLG or not.
[11:30] The anatomy of an investor.
[13:06] Product obsession is what an investor looks for in founders.
[13:40] It is not the TAM (Total Addressable Market) that you start with, it is the TAM that you exit with.
[15:58] Ed gives an example of Stigma.
[17:06] If a company has already built the right product, how does Ed start to advise them on growth and go-to-market to move to the next stage?
[19:19] Blake talks about the importance of needing to wire the product for measurement from the beginning.
[21:20] You should not push for revenue too early.
[22:30] Your assumptions about the success of your product might be wrong, but users are always right; you have to go back to the metrics.
[24:40] Ed and Blake share their predictions on PLG five years from now.
[27:40] All you have is time and money; choose wisely how you want to invest them.
Mentioned in this episode:
Follow Blake Bartlett on Linkedin.
Podcast produced by OpenView.
View our blog for more context/inspiration.