Toplyne co-founder Ruchin Kulkarni believes the way that companies buy software products has fundamentally changed. Where it was once the head of IT or another senior figure who would decide what the business needed and go out and buy it, today it is the people in the company actually using software day-to-day who are sourcing the product. This phenomenon, dubbed “product-led growth”, underpins the launch of Toplyne, for which Kulkarni and his co-founders are today announcing a successful $2.5m funding round.
Product-led growth represents the next stage of evolution for the software industry, argues Kulkarni. Software companies spent the early 2000s trying to distribute more product through traditional sales teams. From 2010 or so onwards, they shifted to an approach built on inbound marketing, focused on bringing in new customers through search engines. More recently, businesses such as Zoom and Slack have embraced product-led growth, with their products doing the sales legwork for them, building towards critical mass as users share their experiences with colleagues and peers. “We’re at the cusp of the third evolution: product-led growth (PLG) is going to be the default motion of the future,” Kulkarni says.
For both sides, this makes sense. Software purchasers are actually buying what their staff need for their businesses, rather than making expensive investments in products that then gather dust on the shelf because they don’t get used day-to-day. Product providers, meanwhile, are designing new products specifically with end users in mind, developing the features and attributes that those users are actually looking for.
However, there is a problem. “Most product-led growth companies depend on the freemium model,” Kulkarni explains – they offer their basic product for free with some users then paying extra for additional features or broader use licenses. “That results in the ‘problem of plenty’ – a provider may have very large numbers of users, but relatively few paying customers, and it is not obvious how to covert the former into the latter.”
Enter Toplyne. Its software-as-a-service tool plugs into the software provider’s system and then provides intelligence on which customers are most likely to want to move from the freemium model to paid-for services. To do that, Toplyne’s tools study the way in which customers are using the company’s software, identifying the usage behaviours that indicate a higher propensity to become a paying customer.
“We identify which customers you should be focusing your sales efforts on,” Kulkarni says. “If you have 1 million people using your software for free, who are the 10,000 users who are most likely to be prepared to pay?”
It’s a potentially crucial service for many product-led growth companies, for whom finding paying customers can often be a needle-in-a-haystack process. The typical business has a conversion rate of around 1% to 5% from freemium to paying customer – if your user base is hundreds of thousands or even millions strong, finding and targeting those potential converters can be tricky.
To date, most product-led companies have tried to build their own tools to aid this process, but many have become frustrated. Their best engineers are focused on the product, rather than supporting sales. And, Kulkarni adds, “they don’t realise how technical this work can be”. An engine that works effectively to identify converters requires millions, or even billions, of data points.
Toplyne’s tools therefore provide a vital short cut. The company, launched earlier this year, points to the experience of early adopters of its tool such as InVideo, which has seen its conversion rates increase by 80% to 100%.
That sort of success is already catching the eye of some well-known names in the product-led growth market. Graphic design platform Canva, for example, has recently signed up. “It is important that we’re able to identify users where our premium subscriptions are the right fit and can add value to the way they’re using our platform,” says David Burson, Canva’s head of product, growth and monetisation.
Toplye’s own business is also built on the product-led growth concept. “It would be a bit peculiar if we were seeking to expand in a different way,” Kulkarni concedes. The company offers a free version of the tool, with companies paying as the user numbers for their software increase and pass certain thresholds. Essentially, Toplyne doesn’t get paid unless its tools enable its customers to drive growth.
Investors are confident it will have few problems in that regard. The company’s $2.5m fund-raising is led by Sequoia Capital India’s Surge, the Together Fund, and angel investors from Canva, Freshworks and Zoominfo. The company will use the funding for further product development, as it builds out its existing product and adds new tools to the platform.
“Our ambition is to build a suite of solutions that helps product-led growth companies to solve all their problems,” says Kulkarni. “We see our current solution as an entry-point, but we will offer multiple products as the product-led growth theme continues.”