Fake Multi-Product vs. Real Multi-Product

fake-multi-product-vs.-real-multi-product
Fake Multi-Product vs. Real Multi-Product

So one thing that’s changed radically in SaaS over the past few years is everyone has realized to truly scale, you need to be multi-product.  Sometimes by as early as $20m ARR, sometimes by as late as $200m ARR, or later.

Jack Altman of Lattice had a great session on this at SaaStr Annual, it’s worth a watch here:

Net net, the average public SaaS company has 35,000 customers.  So once you cross 3,500, let alone 10,000 — you’re starting to saturate most B2B markets.  You’re hitting 10%-20% market share or more, especially of your core customer base, and growth almost always slows at that point in SaaS.

The Average Public SaaS Company has 35,000 Customers

Now you can keep revenue growing even with slower new customer growth by driving up deal sizes, adding enterprise editions, going global, raising prices, and more.  That works time and time again.

But at some point, you can’t just raise prices and add enterprise editions to keep mixing it up and growing.  At some point, you have to sell your customers a true second product to truly scale big:

  • Datadog is pushing its customers to buy at least 6 products.  More here.
  • 45% of HubSpot customers now buy 3 or more products.  More here.
  • Elastic’s largest customers buy 3 or more products.  More here.
  • Half of Freshworks’ revenue comes from customers that buy more than one product.  More here.

So there’s one mistake I’m seeing founders make.  Maybe it’s more a conceit.  It’s confusing an add-on with a second core product. 

An add-on can drive up the ACV of your customer, and that’s important to scale.  But ultimately, it’s not truly a second product unless it is a true second product line.  A true stand-alone, second purchase.

And what I’m seeing in many cases is add-ons while great, just aren’t enough alone.  And leaders at scale see growth slow as they don’t have a true second product.  One with a market at least as large as the first product.  And that customers can buy stand-alone from it.  HubSpot again is a great example. Their CRM / Sales Hub product is on track to catch its Marketing Hub and be even bigger.  That’s a real second product.

My only point is this: be honest and aware if and when you need a second product, if you really truly have one, and importantly, if your second product can be even bigger than your first.  If it can’t be even bigger than your first, in the end, it won’t move the needle.  Because it will never catch your first product.

And a great deep dive with Dharmesh Shah, CTO and cofounder of HubSpot, on when to go multi-product here:

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