Community-Product Fit
Community-led growth's compounding benefits as SaaS becomes commoditised
Hey friends! I’m Akash, an early stage software & fintech investor, based in London.
I study startup strategy to help founders/operators navigate their company-building journeys from inception to PMF and beyond.
You can always reach me at akash@earlybird.com to exchange notes and feedback!
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Community matters more than ever.
Firstly, in a world where application SaaS becomes a commodity, community becomes one of the enduring differentiators.
Second, companies that have strong communities will find it easier to go upmarket than it will be for historically enterprise-focused companies to adopt product-focused cultures (h/t Javier Molina).
Nick Mehta, CEO of Gainsight, distilled the merits of community down to:
References and social proof from existing users
Lower TCO given less training required for existing and new employees
Lower Time To Value given content generated by community for onboarding/best practices
Employee satisfaction from closer relationships with customers
Product feedback loops
Durable growth channel (referrals, expansion, upsells).
I was reflecting the other day that I think pretty much every B2B company I worked with has had a pretty big community or open source brand marketing emphasis to it.
And what people are really buying is - I think about it as a way of being, like a way of achieving success. And I think community and brand speaks to more than just the feature set or the competitive positioning. The brand should be what a company aspires to being a part of.
Lattice was one of those companies.
Lattice built a Slack community, hosted regular dinners, and even wrote a book on people management to foster a close community of HR leaders.
If you looked at where dollars of marketing budget went in the early years, it would be 90% brand, community versus, say, performance marketing or sales.
And so between that and throwing events, and these big conferences and dinners, a lot of it was just giving a venue and attention and a space for people who weren't getting as much as they deserved.
Here’s Jess Lee of Sequoia, describing the community Ironclad founder Jason Boehmig built in the earliest days of the company:
Jason is a former lawyer. So he had a lot of affinity and deep understanding. He actually created the open source seed docs while he was a lawyer, that pretty much all the founders use now. And he realized there's a lot that could be done in contracting if you use the product. And so he created Ironclad and he began with just dinners, just helping the legal community hang out, share their issues, maybe even commiserate a little from being beaten up by the sales team so much.
And that grew and grew and grew and fast forward today, he has a Chief Community Officer. That's not a title that you see much in enterprise companies, but that's how important community is. They have a community platform where the legal teams can hang out and talk to each other, solve each other's issues. They still do lots of events and then even, borrowing even further from the consumer playbook, they're big on TikTok.
Notion similarly eschewed performance in favour of community with their hugely successful ambassador programme and the early hire of a developer advocate (something we’ve discussed before).
A strong community was a constant through Figma’s non-linear journey. Figma’s first business hire and eventual Senior Director of Marketing Claire Butler:
Community is such a fuzzy word and there’s no standard definition. How I define community is that it’s not a set of specific programs or a Slack group.
It’s an approach to building and your go-to-market strategy that orients around fostering a passionate user base who’s going to power up your product adoption.
The manifestations of this were: highly technical content that appealed to designers, winning over thought leaders where your users clustered and building out a design advocacy organisation.
Most importantly, Figma never stopped looking after its community, even as it went upmarket. The community was a strength and constant source of leads for the sales organisation, which it continues to be to this day.
Clint Sharp, co-founder of Cribl, attributes the founding insights of the company to the close community of enterprise IT and Security leaders they had built over many years:
We were able to do things that didn’t scale, as Paul Graham has famously written, because we had expertise to offer a community that had nothing to do with our product. We had a vast network of trusted community members who wanted to help us just because we had built long, trusted relationships with them. We had the advantage of a selling into a larger company’s customer base. While they were not universally supportive, we had a large number of supportive contacts whom we had, again, built trusted relationships with.
The trajectory of open source software companies is also instructive.
In our survey, 69 percent of respondents said it took two or more years of community building before they turned on monetization. Some other prominent examples, Confluent, MongoDB, and Elastic, spent nearly three years commercializing before releasing a monetized offering.
Chiraag Deora of CRV identified the point of community traction when you’re ready to turn on monetisation as community PMF.
Brian Balfour of Reforge has an excellent framework on the four kinds of fit needed to reach $100m ARR in a venture-backed timeframe.
To borrow from Brian’s framework and build on Chirag’s framing, I think an even more precise articulation would be community-product fit.
A company has to be in a constant loop of iterating its product with its community in order to earn the downstream GTM benefits. Returning back to the original dichotomy I presented at the beginning of this post, organisations that have lost their product DNA will find it more difficult to attain community-product fit than those who do have it but are trying to get product-channel fit or channel-model fit in the enterprise.
The coming vintages of software companies will embed community in their core. This will start from the very beginning in the form of customer interviews and continue onwards throughout a company’s bumpy path to PMF and beyond. Those who are able to maintain this will reap the magical rewards of compounding that Nick Mehta outlined.
Charts of the week
Only one >30% growth company remains (SentinelOne) with Snowflake now in the 20-30% bucket
Data Sovereignty is a key decision criteria as more workloads move to the cloud
Reading List
Running for your life Hampus Jakobsson
The Unrelenting Ambition of Airwallex
A Framework: Turning Services into AI
AI-first Service Businesses Louis Coppey
Brand = Accumulated Customer Happiness
Quotes of the week
Almost all companies serving other companies are in retention and usually also in net retention business. Ideally, you keep your customer forever, and you want the account to grow over time so their net dollar retention goes over 100% year after year.
Design can have a huge impact on building loyalty. One main reason companies churn from products is when the product quality and design speed drop. Customers get frustrated, so they start looking for other options.
Good design has the power to do the opposite. If you consistently delight the customer, you build up that loyalty and trust.
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