Thank you for being one of the first 14,309 members and supporting PeerSignal research! Welcome back to my almost-weekly newsletter where Camille and I share B2B SaaS data and examples.

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This is part 2 (see part 1 here) of our VC-backed company analysis. In this report, we used Keyplay's 🆕 Growth Signals to analyze funding, hiring, and headcount growth data for 17.5K VC-backed companies and compare B2B SaaS and PLG. Check out my PLG summary on LinkedIn.

🔑 ▶️ If you want to build better account lists and enrich your CRM with Growth Signals, shoot me a reply here.

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Investors love product-led growth (PLG) companies.

Median funding for top PLG companies we track is a jaw dropping $73M. That's ~3.5X more than the median VC-backed company and ~4.5X more than the median B2B SaaS company in our index. Here’s the comparison:

No doubt investors have lined up for promising PLG deals in the past few years. However, many VC-funded PLG companies, even some of the most heavily funded names, have tapped the breaks in recent months. In general, more PLG orgs have reduced headcount or remained neutral than other segments.

The PLG List companies have a similarly wide range of growth stories when compared to the broader market analysis we shared last week. You can see the high concentration of dots at the $100M+ funding level, but also the wide distribution of three-month headcount change across stages.

Interestingly, funding does not seem to have a huge effect on PLG headcount change. Layoffs and hiring stabilize somewhat around $50M (more orgs in neutral) but look relatively symmetrical at every funding stage below $500M. After $500M, there are very few 5%+ cuts. However, there’s also less extreme growth at that stage, no instances of 10% headcount increases from $500M companies in the past three months.

The broader B2B market saw more drastic headcount changes in both directions, but the general shape of our PLG List companies isn’t as different as we expected. In other words, not even PLG is not safe from layoffs. That said, there are more extremes (instances of 20% headcount change in either direction) within broader B2B SaaS.

What we’re watching in PLG for 2023:

• With the massive rounds pulled in by top PLG companies last year, they probably have cash to extend runways, especially after tapping the breaks on the pace of headcount growth. We’ll monitor this closely to see if and when they return to growth mode.
• For every headline about PLG layoffs like Zoom, Airtable, and Miro, there is a sustained growth story on the other side like Zapier, Notion, or 1Password. We’ll keep tracking these.
• We see PLG up and comers like Tango and Lavender actively growing at an impressive clip. We’re watching the next class of PLG and expect new role models with new GTM approaches to emerge in 2023.
• PLG is no longer a differentiator by itself. Adding a free plan ≠ efficient growth. OpenView says freemium is now the expected minimum. We're curious to see how PLG evolves.
• While PLG has certainly proven its ability to run highly profitable business models and close enterprise deals, PLG profitability suffered more than sales-led businesses post-COVID, according to venture capitalist Tomasz Tunguz. While both spend similarly on sales and marketing, PLG spends more on R&D. We’ll see who thrives in 2023.

Who’s still growing like it’s 2021?

Essential software finds funding amidst spending slowdown

To better understand which B2B sectors and companies are 1) still growing and 2) best positioned to win 2023, we looked at funding and headcount signals, along with recent acquisitions.

WHAT’S HEATING UP?

1. Generative AI

Why: Absurd funding (upwards of $11B for a single company) combined with unprecedented adoption rate and buzz around ChatGPT. Within two months of its release, ChatGPT had 100M users. It felt like 90% of those users shared their screenshots on LinkedIn in January.

2. DevOps

Why: ~15% of the top 50 B2B SaaS companies in our index (defined by funding and hiring signals) were developer tools. The sector has some of the strongest hiring in our index. Buildkite grew headcount 120% in the past year. One- and six-month hiring growth also held strong.

3. Expense management

Why: Just five years after its founding, expense management pioneer Divvy was acquired by Bill.com for $2.5B in 2021. As we mentioned last week, Thoma Bravo will acquire Coupa for $8B. Recent acquisitions, funding, and rapid growth have proved product-market fit for this niche. The opportunity was perhaps too obvious. The space is getting crowded. Interestingly, those that niched down (TripActions) or expanded (Airwallex) show strong growth potential while generic spend management tools recently cut staff.

Emerging Tech Takeaways

Remote work is certainly fueling categories like expense management. Offsite workers can no longer ask to borrow the boss’s physical credit card. Similarly, AI assistance supports the forced return to rigor that defines 2023 – the 180-degree shift to move toward efficient, sustainable growth.
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B2B tech companies like Celonis are taking advantage of the tone shift. Their headline sells the new dream. “We reveal and fix the inefficiencies you can’t see.” It seems to be working so far. Or at least investors are bullish on it. $2.4B funding. Positive annual and monthly headcount growth. $365M rumored revenue. $13B valuation.

Want to drastically improve your sales and marketing efficiency? Send me a reply to see how companies like Metadata, PartnerStack, and Mutiny use Keyplay to uncover best-fit accounts.

Have more questions or feedback? Reply or join the conversation on LinkedIn.

I read all replies.

Best,
Adam & Camille

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