From PLG to Enterprise to SMB: Insights from Calendly's CEO Tope Awotona

Yeah, so yeah, everyone is not. So I think, you know, if you talk to a sales rep at Calendly, their number one competition is not any of the competitors that they mention. It's the free. It's the free version. The sales team doesn't love it, right? And the recommendation they all make is to limit the features that you give on the free plan. And we've resisted that. Lock it down. Let's give them two weeks. No unlimited. Let's slow it down. Right. I would say besides the first time we put up a paywall was in 2014. Besides then, I don't think we've ever taken anything away from the free plan.

We do not. We definitely do not have all of them. So if you have family members out there, friends, whoever, please tell them to sign up ASAP. You know, we do think a lot about that, but I think the short answer is we have a lot more to go. But we think of our ideal customers as people in external facing roles. So these are people who are typically performing sales activities or customer success activities or recruiting activities. And globally that looks like about 25% of the headcount in a business is doing those activities. And if you say you have a billion knowledge workers globally, and today we have something like less than that as paid customers, I'll put it that way. So we feel like we have a lot more of them to go.

A billion.

About probably it's in the double digits of that.

Right. I mean, the best way we can determine that is email addressing. But we don't really know how to, we have approximations of how many of those are unique people. But a few hundred million unique people have used our product by now.

Absolutely. So one of the things we measure is we look at the rate of, for X amount, like what is the ratio of meetings that convert into signups? Actually, that's a top lighthouse metric: meetings to signups. And then we look at not only that, we look at signups to activation. So I sign up for the product, I start using it, I start sending my links to people to schedule with me. And five people have scheduled with me is what we define as activated.

Well, we've definitely seen those conversion rates decline, but the good thing is the top line, the denominator, is getting bigger. That compensates a little bit for that degradation in conversion rate.

So it has evolved a lot during the course of our business, but today about 90% of our revenue is self-serve still. Today, about 90%. So they come in, they don't talk to a human. The product does the work of signing up, converting them, nurturing them, expanding them, etc. And then about 10% of our revenue is sales-led. But even with the sales-led portion of our revenue, they typically start with using the product in a self-serve way. So they've used the product in a self-serve way. Maybe I can tell the story of one of our largest customers. It's a large financial services organization and they do about a million dollars in revenue with us. The way they started using the product, the way it grew to a million dollar customer with us, is you had a few people in the company using it. They loved it and then they decided that they wanted to expand their usage of the product. So it became, Cameron got involved, it got involved. They did a long evaluation, a lot of contracting. And I think the entire sales cycle for that expansion probably took us six or eight months or something like that.

Six or eight months from like we had some small footprint in the company, and I forget exactly, let's say it was sub $20,000, to it expanded to a million, to a seven figure.

The sales team is pretty tiny today. Been a lot of different evolutions in our business. I think one of the most difficult things to get to balance in a hybrid PLG motion, in a hybrid go-to-market motion, is the balance between self-serve and enterprise. And at different points in our business, we made both of the classic mistakes. One of the mistakes we made is that as we saw this, we started to self-serve and we saw that there are some teams that just needed a little bit of a consultative process. And if you engage in that consultative process, they would expand and become larger customers. Well, we ended up staffing a sales team and fast forward to 2020 was the growth at all cost era. We expanded that sales team greatly and sure enough, revenue grew. The number of accounts over $100k in revenue also grew. But what we found was the growth in our customer acquisition cost outpaced the incremental revenue growth. So essentially what was happening is yes, we were driving some incremental revenue, but more than anything else, the enterprise business was just really cannibalizing the PLG business.

Right. Exactly. Well, I mean, they weren't deliberately stealing the self-serve customers. But part of what we did to feed the sales team is we relaxed the qualification rules around letting you talk to a salesperson. And so what we would see is that revenue would go on to convert. But it turns out that if we just let them self-serve, a lot of them would have converted anyway. So you get the same revenue. And in fact, maybe it was worse because you add time to the deal and friction to the deal by talking to a human. But the flip side of that is there are companies like that million dollar revenue company that would have never converted if we didn't have a sales team. So at other times in our history, we left a lot of money on the table because we didn't staff that team appropriately. So it's a very, very tricky balance. But what I would recommend to founders and CEOs thinking about this hybrid motion is be incredibly analytical, do a lot of testing. At the time we were going through these changes, I thought we were very analytical ourselves, but as I think about it, there's a lot more analysis we could have done, a lot more testing we could have done. Having holdout groups, when we ended up doing them, it was pretty eye-opening some of the things that we saw. So I would just encourage folks to think about that as they consider hybrid motion.

Right. Yeah. We made all those mistakes and I've learned a lot also from my peers. There's a whole herd of companies in which we all came up together and they've all made this mistake. So, misery loves company. So, we commiserated a lot about it. But just get the best data you can. Get it in Snowflake, everything, right? Because I guess you're relearning a lesson to me. Sometimes the superficial look at the data is wrong. And then it looked like it was working, but then you looked at what was happening. You were just transferring self-serve deals to the sales team. It wasn't working like the high level metrics. But fast forward to now, our sales team is crushing their numbers like they've never done better. When we fast forward to when we sort of, well, there's also the part of it like, well, if everyone's making your number, maybe your quotas are too low. But anyway, we could talk about that all day.

Yeah, so the question you're asking is actually one of the most difficult things about establishing that sales motion. Because part of what happened as we stood up the sales team is that it took us a long time to really predictably figure out with a high degree of confidence what types of leads would lead to large deal sizes as opposed to those that would remain small deal sizes. And so you were better off kind of blending them self-serve. Initially we didn't really discriminate the pricing between self-serve and enterprise. But what we did find was the needs of the customers that wanted to go through the sales process and required a consultative sales process, they typically had a large number of people within their company that wanted to use the product and so they needed help with change management. They needed us to integrate with a number of different tools in their product. And so what that meant was typically we were selling a lot more seats to those customers. And also they were going to be on the higher plan. And so we more or less just try to focus on the fact that, I guess maybe the criteria we ended up looking at is we know that in a typical company 25% of the headcount is in external facing roles. And so what we essentially use is the size of the company to approximate what we think the total opportunity is within that account. And that's really how we determine, maybe I'm sharing too much about how we route deals between self-serve and the sales team. So that's really the metric that we use to determine, because we see a correlation between company size and total opportunity within account. That's initially how we did it. Then over time we introduced an enterprise plan which is only sold through the sales channel, but our sales team today sells not only the enterprise SKU, they sell other SKUs as well.

Oh, thank you. I love Germany, too.

It varies by industry. If you get into the highly regulated industries, financial services, healthcare, there are some that initially perceive us as kind of being a rogue app. And so we have to go through very rigorous security reviews and things like that. But outside of those heavily regulated industries, we don't really get that as much as we used to.

Yeah. So, I think on the surface scheduling looks like a one-size-fits-all problem, right? Like the scheduling needs of a teacher are the same as a sales rep. At least on the surface, it seems like that. But as you dig a little bit deeper, I think what you begin to realize is that the needs of external facing teams are very, very different from internal facing professionals and especially sales teams, for example, right? So it ends up looking like the scheduling needs end up diverging by function and by role. And what we've done is really focus on people who are in external facing roles and that's how we end up winning. So there are people who want to use Calendly who maybe now use Google Calendar, but there's just as many who were using Calendly and still use Calendly because of the breadth of our integrations. So being able to integrate into everything in your customer facing stack ends up meaning that Calendly is not just a scheduling product for you. It is part of a very important process like how you acquire customers. You can measure, you can track it, you can optimize for a very specific business outcome as opposed to just purely productivity and efficiency.

Yeah, you're exactly right. Like, I was talking to a customer a month or two ago and at some point they churned sometime in the past year and then they came back. And one of the things I learned from that customer about why they came back is for them they don't view Calendly as just a scheduling tool. They look at it as part of their marketing stack and their customer acquisition stack. And so what does that mean? Calendly is one of the first things that a new customer sees when they come into their funnel. So it needs to be incredibly professional. It needs to be super reliable. And again it needs to plug into all these other things. So when somebody schedules with me, it needs to go into my email nurture campaign because that's how I acquire customers, right? So those are some of the reasons why they ended up coming back. It needs to be super professional, super reliable, and plug into all these other workflows that I use to make sure that people that come in through my funnel get converted as fast as possible and at the highest rate possible.

Well, I mean I think if I sat up here and told you it didn't affect us, I'd be lying. You should question everything else I said. There's a different story for every system, right? But again, I think it has definitely affected us because I think people are scrutinizing the ROI of every single product in their stack to a greater degree than they did a few years ago. But again, I think it comes down to being really crystal clear about why we win and continue to double down on those differentiators.

I laugh because we've tackled it in a number of different ways and I think there have been pros and cons to all the different ways in which we've approached it. But maybe I'll start from the beginning. So I described this thing where initially we were just purely self-serve and we noticed that some customers wanted a consultative process. We were resistant initially because we were like, hey, this product is simple enough, you should just be able to self-serve. Eventually we ended up experimenting and staffing a team around it. The reason we leaned into that motion is because we observed that those customers who came in through the sales process had very, very different retention mechanics qualities. They also had very, very different NDR qualities. They expanded a lot further. So that was the first observation. And then because we saw all those things, we realized we could spend more to acquire those customers and we also decided that we wanted to acquire more of those customers. And so we started to lean more into their product requirements. And that happened maybe three or four years in. So initially we didn't necessarily have a dedicated team that served that. We just started building more of their integrations. So for us that happened to be sales teams. So what did we do? We built a Salesforce integration, we built round robin scheduling. We built a number of things that were specific to that. Over time, we then distributed that into looking at Calendly as well. There are sort of like these general buckets of capabilities that our customers want. They want integrations, they want very specific workflows, they want very specific analytics, they want very specific qualification meeting rules for who gets a meeting and who doesn't get a meeting. And then maybe to answer your question, the most permanent design that we've had is really organizing the team by those different capabilities and then having them own those problems from individuals all the way through enterprise. Again, we've tried a number of different ones, but that's probably the longest design that we've had.

That's also changed a lot over the course of the company's history. So initially it was probably more 90-10, very symmetric. I would say from 2020 onwards we made that asymmetric. So we allocated a lot more to that enterprise than we did PLG. Fast forward to now, it is probably, I don't know if I want to reveal the number, but the pendulum has swung back. But I think it also kind of varies by what we think. We look at the maturity of the product for those different cohorts and really look at like, we hit a point of diminishing returns on certain domains of the product versus others.

Yeah, and you know, I think one of the other things I should mention is that we are expanding into a multi-product company. And as we do that, we do intend to have different strategies and driven allocation per product line. So scheduling for example will be very, very different from the next thing that we do in terms of allocation between SMB and PLG versus SLG.

And I like the second half which I think you asked, which is how do you think about your free users? How valuable are your free users to you today at scale? Yeah. So we love our free users and we're happy for our users to be free. Like the way we view it is the first level of value is you use our product in any capacity. We don't care if you use it for free or you pay. And then the next level of value is you use it and you pay for it. Because in our world even free users have an LTV associated with them, right? Because we spend almost zero dollars on marketing campaigns. So it's all being driven by the activity of our users on the platform. Free users are your marketing team. Yes. Exactly. So we're happy for people to use the product for free.

Yeah. So yeah, everyone is not. So I think, you know, if you talk to a sales rep at Calendly, their number one competition is not any of the competitors that they mention. It's the free. They don't love the free version, dude. The sales team doesn't love it, right? You know, by now we've done a number of pricing and packaging engagements, which I think was another question that came up, and the recommendation they all make is to limit the features that you give on the free plan. And we've resisted that. Lock it down. Let's give them two weeks. No unlimited. Let's slow it down, right? I would say besides the first time we put up a paywall was in 2014. Besides then, I don't think we've ever taken anything away from the free plan. I think we've only made the free plan more generous. I'm sure somebody will test my memory, but I'm pretty sure we've never taken anything away from the free plan since 2014. Whenever I'm in a board meeting or management team, I'm okay if the sales team wants to tighten it, but when it becomes a vibe at the company, I just get worried. It's very shortsighted. I mean, long story short, our approach generally is to add more value to the paid plans as opposed to reduce value or remove value from the free plan.

Yeah, it's a really good question. So I think just like every productivity or really just like any software application, AI is both an opportunity and a threat. And I mentioned one example earlier of how we are preparing for a world in which more scheduling is done by AI agents. We want to be able to support that. That's in the works. We have an AI product that's in private beta right now that we're rolling out to a lot more people. Maybe we'll get to rolling out to you pretty soon and you'll see what we are talking about. So that's one thing that we are working on. Yet another thing that we're working on in general is today Calendly is really, really good at scheduling meetings with people you tell it to schedule. So if you tell us, hey, people who come to my website and match this criteria, I want you to schedule with them, we will do that for you very well. What we're not good at today, what we don't really do much of, is helping you think about who you should be meeting with that you haven't already told us to meet with. So we're working on that. I think towards the end of the year you'll see us make some initial releases around that. But what we hear from our customers is there's just a lot of, there's a person you spoke to last, you say we're going to follow up in three months and then you both forget to do anything about it in three months. We want to make sure those meetings happen. So you'll see us take a stab at that later this year.

Yeah. And selfishly I'm also looking forward to it because I forget a lot of things these days.

Thanks you all. Thanks for having me.