Why the Generational Companies of Tomorrow Will Be Built With Community-Led Growth

In 2016, OpenView Ventures coined the term product-led growth (PLG), a strategy that has since revolutionized how companies approach scalability and user acquisition. 

PLG emphasized the product itself as the primary driver of customer acquisition, conversion, and growth and many of the great unicorns of the 2010s such as Calendly, Canva and others followed this PLG model. 

The great companies of the 2010s were built with product-led growth in mind but how will the next decade of successful companies be built?

The shift to a post-Covid world where people yearn for community and connection & where tech talent in software is close to parity amongst companies opens the door for community-led growth, a concept that builds onto PLG and lets companies transform their best customers into their most loyal evangelists & best salespeople through community & connection while building a product that is shaped through the voice of their community. 

Why Community-Led Growth? 

SaaS & tech talent have never been as saturated as it is today. 10 years ago, we had standout companies that were built with visionary operators & 10x engineering working hand in hand and it was a rare thing to see. 

Today, tech talent has become as close to parity so the biggest defensibility for software is now operator talent and the ability to sell effectively. 

In today's competitive selling environment, where companies all vie for the attention of the same buyers and end up having high CACs, the key differentiator moves away from just the quality of the product or the aggressiveness of marketing strategies but into places where buyers feel welcomed, heard and understood in where they buy. 

In 2022, $26 billion was spent on US-based B2B marketing and by the end of 2023, that number will be over $30 billion. In a world where companies need to spend increasingly more to compete with their competitors, how do they win without spending the money? 

The next generation of companies and what will separate them apart is its ability to immerse their buyers in an ecosystem where they feel not just welcomed, but deeply understood and valued—a place where their feedback is valued but more importantly acted upon, and where the product is built with the customer in mind. This approach, at its essence, is the heart of community-led growth.

The era of ZIRP and the growth-at-all-costs mantra is no more and businesses are increasingly tasked with finding more efficient and sustainable ways to grow and sell. The focus sharply pivots to three objectives: 

1. Lowering Customer Acquisition Cost (CAC) 

2. Accelerating the sales cycle

3. Reduce Churn 

Evidence of the success of community-led growth is found in the data:

72% of deals nurtured within a community-led framework close within 90 days, a stark contrast to the 42% closure rate of deals propelled by traditional sales and marketing efforts.

This striking difference emphasizes the power of community as a lever for sales to not only foster trust and engagement but also significantly shorten the sales cycle.

The goal of communities is to create an authentic buying experience rooted in how companies engage their customers. Companies that win in this cycle win with their most loyal customers as their best salespeople. It flips the traditional sales script, focusing on building a vibrant, engaged community where buyers see the value firsthand, become advocates, and essentially sell the product themselves through word-of-mouth and peer recommendations. This method not only lowers the CAC by reducing the need for expensive marketing campaigns but also creates a more authentic, sustainable growth trajectory.

The Beginnings of Community

Humans have been yearning for a sense of community since the dawn of civilization. Throughout history, this quest for connection and belonging has evolved, but at the same time, the goal of feeling connection and belonging has remained the same. From the ancient gatherings around campfires through the medieval guilds to modern-day social clubs, the concept of community has always been about bringing people together, fostering a sense of unity, and building relationships based on shared values, interests, and goals. At the core of all these communities was a fundamental principle that has been steadfast since the beginning of humankind: they were built with people in mind, recognizing the human need for connection, support, and collective identity.

So, how do B2B SaaS companies fit into a concept that was originally designed for human-to-human connection? 

What could digital platforms and software as a service possibly share with the deeply human pursuit of community? 

At their heart, modern software and sales methodologies are evolving to embody this very principle, leveraging technology to fulfill our innate communal instincts in an increasingly digital world. There are always humans on the other side of the buying process and human nature dictates that humans gravitate toward products and services that speak to them. 

Sales Strategies Rooted in Community Principles

For B2B SaaS, sales strategies have evolved to embrace community principles, recognizing that long-term relationships founded on trust and authenticity are key to business success. This shift from transactional to personal selling underscores the importance of building and nurturing communities around shared goals and challenges. Here are a few reasons of what companies gain by building community: 

• Brand: B2B sales strategies increasingly focus on providing value to potential clients well before any sales conversation. By offering useful content, industry insights, and a community town hall where community members can meet other folks, companies position themselves as trusted advisors within their community, rather than mere vendors.

• Engaging Customers & Minimizing Churn: B2B companies should have a mantra of Inspire Customer Love. The best companies of tomorrow will foster an environment where clients can share successes, learn from each other’s experiences, and find collaborative solutions to common problems. Some of the best companies have a “quarterback” that directs this traffic, facilitating these community initiatives, connecting clients with similar interests or needs, and promoting a culture of support and collaboration with the goal of minimizing churn. 

• Turning Customers into Evangelists: Community-driven growth becomes a reality when your customers become your most loyal evangelists and best salespeople. Buyers who are actively engaged in a community & who feel a sense of belonging, are more likely to become brand advocates, contributing to organic growth through referrals. This approach not only lowers CAC but also accelerates the sales cycle, as prospects are more inclined to trust word of mouth from their peers within the community versus an internal salesperson. 

Building products people want 

Community-driven sales are one-half of the community-led growth puzzle. The other equally important half builds on top of PLG. 

YC hits the mark with their catchphrase “build something people want”. 

The best companies of tomorrow will build products that create such a compelling user experience that the product essentially sells itself. However, when PLG is combined with a strong, engaged community, companies can grow even more and inspire a sense of customer loyalty & evangelism.

The goal of community for building an amazing product comes down to listening to the voice of your customers. 

Buyers can provide candid feedback on the ins and outs of a product & this direct line of communication allows for rapid iteration and development, ensuring that the product is built with the backing and vision of the top customers. 

Building B2B Community & What Does That Look Like?

So for founders looking to build a lasting community to become the generational companies of tomorrow, what do these communities actually look like? 

I built out a flywheel called the community growth cycle. 

It’s an always-on approach to selling, preventing churn, and building trust and name recognition as a company and it never stops. 

1. Brand Exposure: The first step of the cycle. This is the crucial element where potential customers first hear about a business/product.

2. Community Engagement: This is the first time a potential customer has any type of interaction with a business/product 

3. Product & Community Value: The transition from potential customer to customer. The customer, after being exposed to the community & product, sees enough to either switch over from an incumbent or realize it solves a need they never solved before

4. Customer Nurturing: New customers get integrated into the community but now as “partners” to the sellers where their voice is heard 

5. Customer Evangelism: The most loyal and happy customers become customer evangelists and some of the best salespeople, bringing in more new customers through a new cycle of brand exposure to potential customers 

These 5 elements of this community growth cycle should define what a founder should build for with community-led growth. 

The emergence of community-led growth has unfortunately sent every single company to try and throw dollars at community but almost 90% of their approaches are wrong and instead, companies abandon their communities when they don’t see results. 

The Keys to Establishing a Great Community & Questions Every Founder Should Ask Is :

1. Why Do You Want to Build Community? 

   1. Founders should ask themselves how will the community they build help them in ways other avenues can’t 

2. Who are Your Target Community members?

   1. Founders should have a clear picture of who exactly they sell to and what value they would have in their community 

3.  Who Are My Most Loyal Customers?

   1. Usually, they become the most loyal evangelists in their community as well 

4.  IRL or Online?

   1. Are you building exclusively IRL or online, or are you supplementing your IRL community online and vice versa?

As someone who has been advising founders on community, these four questions have been great barometers for seeing if a founder has done the work on laying the foundation to a community versus if community is just another hot buzzword they can utilize. 

Especially at the preseed & seed level, I’ve seen so many examples of wasted time & money from founders dropping $$$ for a 200-person happy hour that delivers bad leads or B2B founders trying to do TikToks when the majority of their clients have never been on there in their lives. 

Community could be one of your lowest CAC approaches to growth if done right. 

A Long Tail Game - Building Generational Companies 

Creating a generational company is a marathon, not a sprint. The most insightful founders are well aware that the path to building such enduring companies is measured not in months but in years, echoing the timeless adage that Rome wasn’t built in a day. Similarly, the generational companies poised to define the coming decade are being built on foundations of trust and community—elements that, while taking years to solidify, can be compromised in mere moments.

Founder impatience for the long-term vision is one of the biggest reasons community-led growth doesn’t make it off the ground. Startups need to think decade-long versus year-long in how they look at a community strategy and how they build a lasting company. This impulsive quest for quick results overlooks the essence of what truly powers sustainable growth within this model.

Ultimately, Community-Led Growth embodies the essence of the long-tail strategy, where the fruits of labor—namely sales and deep-rooted brand loyalty—emerge significantly down the line. This approach demands a steadfast commitment to nurturing relationships within the community, patiently laying the groundwork for a future where those bonds translate into enduring success and legacy.

Who I Look For When Investing in Founders? 

Why am I so passionate about the belief that community-led startups will become the unicorns and generational companies of the next decade? 

I’ve seen and built with community-led growth in mind with my own hands and eyes and have seen everlasting value over the last 4 years. 

Outside of generating over $xxM in sales personally through the communities I have built, my investment thesis over the last 4 years has revolved around what the generational SaaS, AI, and fintech companies of tomorrow will look like. I believe the most successful ones will be built with community in mind for how they build their products and how they sell to their customers. 

With the tech talent becoming almost at parity in SaaS, what I personally look for in founders are 

• Experts with Unfair Advantages: Founders with entrenched backgrounds who have unique insights, connections, or technologies that give them a competitive edge in their respective fields.

• Seasoned Entrepreneurs: Individuals who have been through the startup journey before and have valuable experience in building and leading companies.

• Masters of Distribution: Founders with exceptional abilities to leverage distribution channels, reach customers, and scale their products with efficiency and innovation.

• Agile Innovators: Hackers at heart, these founders move at blazing speeds, adapting to changes, and driving innovation with a relentless pursuit of excellence.

• World-Class Operators: Leaders who excel at scaling and growing their ventures, demonstrating unmatched prowess in taking a concept to widespread adoption and success.

• Builders of Long-Term Success: Founders who are committed to creating enduring businesses, focusing on sustainability, long-term vision, and creating lasting value in the market.

I’ve been building out my thesis for the last 4 years at DayDream Ventures and some of my favorite companies that have been building with community-led growth include Copy.AI, Abstract, & Myko. 

At DayDream Ventures, I’m always excited to chat with founders who are looking at building their startups with community in mind, investors investing preseed & seed into B2B Legacy SaaS, Fintech & AI, and LPs who believe that the future companies of tomorrow will be ones that are led by great visionaries that use community to sell and build something people want. 

If this piece resonated with you and you want to chat, feel free to email me [email protected] or send me a message on X/Twitter @thechangj.