Scaling while Bootstrapping: How Lucidchart Reached 10 Million Users on a Shoestring Budget
Lucidchart may be the poster child for doing (way) more with less. This visual productivity platform has not only scaled to 10 million users (an impressive achievement in itself), they have bootstrapped their growth all the way. In fact, even after their rampant success helped them raise a hefty round of funding, they didn’t need to spend it. How’s that for efficient?
I recently had the opportunity to sit down with Dave Grow, Lucidchart’s President and COO. He walked me through his team’s approach to delivering stellar sales and marketing results while keeping spend low. The team’s multi-level strategy adapted to the company’s growth and evolving objectives, allowing them to take advantage of whatever strengths and leverage they had at each stage along the way.
Starting Out: Keep It Simple and Focused
Dave came to Lucidchart by way of his own SaaS startup and a stint in consulting. While he was still in school, he raised a pre-seed round for a niche product idea he had, but ended up running out of funds before he could establish a viable business. Realizing he might not be quite ready to build a business from scratch, he shifted gears and took a job with Bain & Company. After honing his business fundamentals with the firm, Dave was more than ready when Karl Sun, Lucidchart CEO, invited him to join the team in Utah.
“Right out of the gate, what I focused on almost every minute of every day was how to drive more users to the top of the funnel,” Dave recalls of his first days at Lucidchart. “I knew that everything further down the funnel – pricing, messaging, email nurture campaigns, etc. – could be exceptional, but it wouldn’t matter unless we could get people to the top of the funnel.”
With his objective clearly identified, Dave’s next challenge was figuring out the best strategy to reach his goal. He quickly realized that there wouldn’t be much of a marketing budget. “We’ve always been a product-first company. It’s in our DNA,” he says. “If we had the means to support additional investment, it usually came in the form of another engineer who could help accelerate our product vision.” So, from the start, Dave’s primary marketing resources were his own time and his willingness to hustle. Based on this, he took a scrappy approach of fast, down-and-dirty experimentation to identify the most efficient ways to get Lucidchart in front of a lot of people. Ultimately, he decided to focus on SEO, a channel he knew something about and one that was designed to drive traffic to the top of the funnel.
Optimizing: Build on What’s Working
With his foundational sales and marketing strategy in place, the next part of Dave’s plan was to begin optimizing against that activity. For this stage, he has two key pieces of advice: focus on what’s working and invest in data you can trust.
Many companies, especially young ones, fall into the trap of thinking they have to implement every sales and marketing strategy at the same time. It’s easy to hear buzzwords like “holistic” and “integrated” and assume that the only way forward is to produce all the content and distribute it through all the channels, from social media to user conferences. In reality, that can be a recipe for disaster. It can dilute your message and your efforts. “The most important thing you can do in the early days,” Dave says, “is to find one or two channels that really work and which have the potential to scale, and then double down (or even triple down!) on those channels.”
Dave recommends spending 80 – 90% of your time working in whichever channels are the best fit for your business, wringing out every last drop of their potential. In Dave’s case, working with SEO, he started by focusing on low-funnel keywords with high purchase intent. Once he had established content and ranking for that set of keywords, he started moving up the funnel and adding other tiers of keywords and phrases, all the way up to broad search terms like “what is an org chart?” in order to maximize every SEO opportunity. “We are now seven years into this effort, and we still haven’t exhausted the opportunities within this one channel,” Dave says.
The other lesson Dave learned in his early days with Lucidchart was the value of good data. After earning some success with SEO, the next logical step was to start investing in PPC and AdWords. The strategy was solid, but the team hit a snag on the data side. “We had built an internal system to attract visitors based on their source and to help us understand whether those people registered and so on,” Dave recounts. “I watched our internal dashboards day after day and week after week, and the results just didn’t make a lot of sense. According to our data, no one was paying.”
Based on that data, Dave and his team shut down the campaigns. They rebooted a few times, but the data always showed poor performance, so they kept abandoning the tactic. It wasn’t until they decided to integrate a third-party analytics platform with their system that they realized the problem wasn’t with the channel (which actually turned out to be wildly profitable); the problem was with the data. The internal analytics system had some fatal flaws that were skewing results substantially. “Lesson learned,” Dave says. “Invest in analytics and accurate data so you can make smart decisions. In our case, a lack of that important asset cost us two years of growth in what is now a phenomenal channel for us.”
Adapting: Experiment to Find Your Next Win
At some point, it will be time to branch out into other channels. You may be spending 80 – 90% of your time and energy in the one or two channels that are giving you the best return on investment, but that still leaves 10 – 20% of your time to experiment with new opportunities. You want to stay true to what’s working, but also engage in consistent experimentation on the side so that you’re ready to identify and layer on the ‘next big thing’.
“You don’t want to get to the point where you’re cresting, where you’ve tapped out a channel, and not know where to go next,” Dave says. In other words, stay one step ahead. At the same time, it’s important to stay the course in terms of taking a focused and cost-effective path. As you reach certain growth milestones, you may feel some pressure to increase spending – especially as you prepare to move into new channels – but that’s not always the best choice. Lucidchart’s product led, capital-efficient approach has served them well because they stay committed to it. They maintain an active, behind-the-scenes conversation about where and when to invest in new opportunities, but they don’t spend just because they can.
Expanding: Stay True to Your Approach
After a while, Dave had a pretty solid go-to-market strategy in place, and then everything started to change. After a few years of complete focus on a freemium, self-serve approach, Lucidchart began getting inbound requests from enterprise-size companies that wanted to roll the product out broadly. At first, these inquiries were handed off to a member of the executive team who would manage the sales process as an ad hoc event. But as the number and frequency of incoming requests increased and the scale of the deals also grew, the team knew it was time to expand the business in a new direction.
“To start, we did what we always do, we experimented,” Dave says. “Instead of going out and hiring twenty people, we put one incredibly smart, talented, and strategic person on this with the assignment to figure out the opportunity.” What followed was a series of tests and a lot of phone calls with the inquiring companies. Lucidchart started closing some of the largest deals in the company’s history, providing some valuable proof points that supported going after the enterprise market segment with more vigor.
Dave describes the transition to expand into enterprise as the layering on of additional capabilities. Lucidchart has intentionally kept its freemium/self-serve engine as strong as its ever been, but they have layered in and integrated inside and direct sales capabilities. The shift hasn’t been easy, but it has been successful. “Making this work meant changing literally every part of the company,” Dave explains. “We were hiring for sales roles that hadn’t existed before, building new product functionality and security features for enterprise administrators, and the go-to-market strategy was no longer just about driving people to the top of the funnel and putting them through a frictionless self-serve campaign. Now we had to identify key decision makers within organizations and deliver a highly tailored value proposition.”
Looking at it today, Dave sees that Lucidchart is fundamentally a different product and company than it was just a few years ago. He also acknowledges that, as the company has expanded into enterprise sales and the world of customer success, there are more correlations between revenue growth and the number of people working to generate that revenue. “The enterprise play is definitely more high touch and a more expensive endeavor,” he says, “but it’s certainly been the right one for us to tackle.”
The Reason to Run Lean
Huge success. Big numbers. Impressive expansion. Why does Lucidchart continue to run lean, even after they’ve “made it?”
“We’ve always felt strongly that we want to be in control of our own destiny,” Dave says. “We want to always be in a position where we can do right by our employees and our customers. We never want to put ourselves in a position where our fate is dependent on that next round of funding.” Dave’s philosophy was certainly shaped by his own early experiences in the software industry. Coming out of college in 2008 just as the great recession hit, he saw many friends lose their jobs as companies went under. He never wants to see Lucidchart in those dire straits, so he’s always careful to have a plan to help the company weather any storms that may come, and that includes running a tight ship that allows for autonomy.
2020 was the year of free. And 2021 is the year of reaping the rewards.
They’ve done an exceptional job of bridging the gap between what a product can offer end users at any time and any place, while also enabling a human touch and a tailored experience where and when it’s desired.