Key Product Led Growth (PLG) measures and benchmarks for K12 B2B edtech companies

Graham Forman
13 min readSep 15, 2021
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I wrote a post entitled “Next Generation Go To Market Has Arrived for K12 B2B” and received thoughtful feedback from many readers. Not only did the ideas resonate, but entrepreneurs are eager to unlock this type of growth in their startups. Plus, investors like me are excited to back more startups that figure out product-led growth (PLG), so it makes sense to dig in more on the topic of PLG.

Before I go deeper, this is a longer post than usual, so in the spirit of saving readers time, I’ve prepared a TL;DR summary to hit the highlights. I hope that you find this topic valuable and will read on for more details about key PLG measures and benchmarks for leading SaaS and K12 edtech companies.

Key Takeaways — aka TL;DR

  • Traditional outbound enterprise sales to K12 schools and districts are becoming more challenging and expensive. It’s always been a slog, but an increase in ransomware attacks have schools dialing up their spam filters, which makes it more difficult to reach school administrators and teachers via email and phone.
  • An alternative approach — product-led growth (PLG) — is now mainstream in K12 edtech and many of the fastest-growing companies serving schools and districts are product-led.
  • Key product-led measures and benchmarks vary depending on a startup’s context, but there’s a set of measures that are common across most top-performing PLG companies in SaaS and K12 edtech. Some combination of these measures might be right for your startup.
  • Key measures include user growth and (more importantly) retention, activation rate, time to value, engagement, conversion to paid subscribers, average revenue per user, net revenue churn, and customer lifetime value/customer acquisition costs.

For more on these measures and the benchmarks set by leading SaaS and K12 edtech companies, keep reading below.

Why PLG?

There are lots of good reasons to adopt a PLG model. For one, it beats the traditional slog of top-down enterprise sales. It also enables your startup to reach more users faster and realize the impact you want to achieve with your edtech startup. Coupled with the $190B in additional funding for education from the Federal Government, one could argue there’s a moral imperative to grow quickly and financial resources are available to make it happen.

One additional benefit of a PLG approach includes a valuation premium on your startup. A study by Openview Partners comparing public B2B SaaS companies with traditional top-down enterprise sales models to those with a product-led growth model revealed that PLG companies had a 50% valuation premium over their traditional enterprise sales counterparts. PLG includes a valuation premium for your startup that honors the rapid growth motion. That’a big reason to adopt PLG!

Public PLG companies earn a 50% premium over traditional SaaS (Source: Openview Partners)

Another reason to pursue PLG is that research shows that companies with product-led growth outperform traditional enterprise sales companies, especially as they grow in size. The reason is that as PLG companies scale, they’re not as limited by their ability to hire, onboard, and serve up leads for their sales representatives, plus they generate significant goodwill from their users, which translates into more sales.

Starting at about $10M in ARR, the benefits of PLG are apparent in terms of faster growth rates (Source: OpenView)

As more companies look to product-led growth as a way to accelerate adoption of their products in K12, it’s important to get a sense of the key metrics and benchmarks for top-performing companies. In the next section, I shed light on those key measures and what great performance looks like, drawing examples from leading SaaS companies as well as leading K12 edtech companies.

Key Metrics and Benchmarks

What are the key metrics used by top PLG companies? The short answer is that no two companies use all the same metrics, but many top companies use several of the same metrics. It’s up to your team to determine what the best metrics are for your specific startup context, but here’s a list of the most common metrics based on my research and the benchmarks reported by some of the best companies today. (Note: names of private companies are withheld below to keep their data confidential).

1. User growth and (more importantly) retention. User growth is one of the most common early metrics for PLG progress. It’s a measure of top-of-funnel performance and represents the total number of people who have signed up to use the product in a recent time period. Regardless of the acquisition channel, this metric includes all the users who could potentially become active and move further down the funnel to convert, making this metric most meaningful to growth teams. The user growth rate is highest for very early stage startups that have a small base to start.

Common early stage measures are week-over-week (WoW) and month-over-month (MoM) user growth rates. Among early stage startups, user growth rates of 10% WoW and 30% MoM are outstanding and attract the interest of venture investors. Newsela, a leading venture-backed literacy-focused edtech startup, had better than 15% week-over-week growth after its launch in 2013. Pear Deck, which is now used in more than 66% of schools in the U.S., reported better than 30% month-over-month growth for their first several years after they launched their freemium product. User growth rates tend to ramp down over a period of time as companies accumulate larger and larger user bases. According to Mixpanel’s Benchmark Report, SaaS growth of 4% MoM is the median for SaaS companies in the survey (the survey includes many scaled companies that have slower MoM growth rates). Duolingo, which is among the most scaled PLG education companies, reported monthly user growth of around 3% MoM (34% on an annualized basis) in 2020. They have more than 40M active users, so at 3% MoM growth they’re still adding more than 1M active users per month!

User growth without considering retention is a vanity metric. A user who has registered but is not actively using the product is not getting value from your product and is not a sign of product/market fit. Plus, they’re also highly unlikely to recommend your product to others or subscribe. Top founders focus more on retention of users by cohort over time. One leading edtech founder shared that 40% of free users remain active on the platform eight years after that cohort started using the product (!)

2. Activation Rate. As important as user growth is, it’s more valuable to have active users who regularly use the product. Activation rate is the percentage of users who actually use the product and begin to realize your product’s value. A higher activation rate means better efficiency in customer acquisition, and it’s also important in determining revenue because active users can experience the value of the product (whether it’s via a free trial or freemium offering) in order to convince them to pay for it. According to Mixpanel’s Benchmark Report, the median for a SaaS company is 17% of users who activate or begin using the product within the first week. OpenView Partners has done some great work on activation rates. In their experience, best-in-class product-led companies average activation rates of about 33%. Companies in the top 10% activate 65% or more of users within the first week.

There are a wide range of activation rates among PLG companies that offer freemium and free trial products. Best-in-class product-led companies average activation rates of ~33%. (Source: OpenView)

3. Time to Value (TTV). Another metric related to activation rate is Time to Value (TTV). TTV is the time it takes for users to reach their aha moment and realize a product’s value. The shorter the TTV, the better for effective product-led growth. Users have limited capacity and short attention spans when trying a new product, so it’s critical to get them to their aha moment as quickly as possible. The longer it takes a user to activate your product and experience success in using it, the less likely they are to achieve an aha moment. Duolingo does an excellent job of allowing users to interact with the product prior to registering (known as deferred account creation), thus shortening the time to value. Duolingo guides users through a quick translation exercise of their choosing and users can monitor their progress as they complete exercises, showing how quick and easy it is to begin learning a new language. As a result, a high percentage of Duolingo users reach their aha moment quickly and register on their first day. Remind is an outstanding example of quick TTV. Teachers spend just a few minutes creating an account and adding contacts to their list before sending out a first message to parents and/or students. The moment they receive a response back from a parent or student (which is often within seconds) is their aha moment and they’re hooked.

Some SaaS products require more set up than others for a user to achieve success in using the product. One leading classroom app takes a little more time for teachers to achieve their aha moment because they want to set it up with some content and get to know it well before sharing it with their students. So the 28-day activation rate is their standard measure, not the 7-day. Even so, their activation rate is an impressive 30%+ by the 28-day mark, which is a testament to the quality of the product and the onboarding experience.

4. Engagement. PLG companies use a variety of metrics to determine engagement, which is an important way to determine the value that the product is providing. Common measures include daily active users (DAUs), weekly active users (WAUs), and monthly active users (MAUs). These measures are a next step beyond activation rates because they provide intelligence on repeat and continuous usage of the product. One of the best ways to measure engagement is product qualified leads (PQLs). PQLs are a measure of activated users plus users who completed certain key actions within the product. For the popular business communication platform Slack, free users become PQLs when they’ve sent 1,000 messages. That’s a lot of usage and sends a strong signal to the Slack sales team that the user is more likely to convert to a paid subscription. These are the warmest leads that a sales team will get!

For one top classroom app, the number of engaged users (teachers) was an early indicator of the school’s readiness to pay for schoolwide licenses. With just five active teachers, the sales team started outreach to each school’s principal about a schoolwide subscription. Their success rate in closing accounts with five or more active teachers was more than ten times that of standard, traditional cold outbound closing rates.

5. Conversion to Paid Subscribers. The beauty of product-led growth is that it enables companies to widen the top of the funnel dramatically with engaged users and create a lot of goodwill among their user base. As valuable as this is, the business must be able to convert free users into paid subscribers in order to build a sustainable business. That’s why the conversion rate of free to paid users is critical to track. Among consumer-focused freemium products, paid conversion rates of 2–4% are common. Examples include Evernote (2%), Dropbox (2.5%), and Typeform (3%). Within edtech, Duolingo is again a good example, and their recent IPO was a watershed event for U.S. edtech. Per their S-1 filing, Duolingo had 1.5M paid subscribers in June of 2021, which is 4% of their active user base (up from 3% a year earlier). There are breakout successes among consumer-focused freemium providers. Notably, as of Q1 2021, Spotify has converted 44% (!) of their freemium users to Spotify premium subscribers. Among freemium products geared towards the enterprise, conversion rates tend to be higher than with consumer-focused companies. I suspect this is because as the number of free users across an organization increases, the probability that the organization converts to paid goes up considerably. Then, when the organization converts to a paid subscription, 100% of users within that organization are covered by the subscription, which further increases the overall conversion rate. For example, Slack has a 15% conversion rate from active free plan to paid plan. Among leading K12 companies, I’ve heard through the grapevine about rates as high as 60% of users covered by a paid plan.

6. Average Revenue Per User (ARPU). Another important measure of business health is average revenue per user (ARPU). It’s a closely watched metric, especially for companies that pay content licensing fees or royalties to partners (thereby reducing their gross margins). For Spotify, ARPU was $5.25 per month ($63 per year) in 2020. Duolingo had 40 million active users and $190M in revenues in 2020, which yields about a $5 average revenue per user (ARPU). When you consider that just 4% of their active users are subscribers, there’s a tremendous opportunity to increase ARPU over time. For one leading, private, gamified edtech tool, ARPU was just over $1 per user, but given that they had amassed more than 100 million users with ~2% paying about $60 annually, the business had annual revenues in excess of $100M. Not too bad.

7. Net Revenue Churn. Net Revenue Churn is an important financial metric for both PLG and non-PLG companies that essentially measures the customer retention rate on a dollar basis.

The gold standard in SaaS is negative revenue churn, meaning that the numerator is greater than the denominator in the above formula as a result of customer expansions (expansion revenue) and upsell/cross-sell revenue that more than replaces dollars lost from churned customers. In other words, even after they lose a few customers due to churn, these companies actually net more revenue, not less revenue, with each cohort of customer renewals. In fact, top-performing companies often have negative churn of 30% or more, which is another way of saying they renew customers on a dollar basis of 130% or more. There are many outstanding examples of companies in this category within edtech. Within the Edovate portfolio, we’re fortunate that the majority of companies have negative churn, which ranges from -2% to more than -40%. Slack and Zoom (-40%+) are standouts in this category among public SaaS companies.

8. Customer Acquisition Costs (CAC) and Customer Lifetime Value (CLTV or LTV). I’ve written about this before in “Growing Your Edtech Venture: How efficient and effective is your growth engine?,” but let’s review and put it in the context of product-led growth. Simply put, customer acquisition costs (CAC) are the costs associated with convincing a customer to buy a product or service. CAC consists of all marketing and sales costs, such as labor, travel, CRM, and conference expenses. With PLG companies, the product itself is the primary driver of top-of-the-funnel customer acquisition, so these companies have reduced marketing and sales costs and generally lower CACs than companies that rely on marketing-and-sales led growth. This is important to keep in mind as we think about the CLTV/CAC ratio below.

Customer lifetime value (CLTV or LTV) is the total amount of revenue a venture can expect from a single customer account over the lifetime of that customer relationship. For most K12 edtech companies this is either the monthly price multiplied by the expected number of months you retain the customer or the annual price multiplied by the expected number of years you retain the customer. In a startup, this is typically a projection of expected value because of a lack of renewal cycles. Over time, CLTV becomes an actual number as you build a track record over multiple months or years of renewals.

How to calculate customer lifetime value

A key ratio for entrepreneurs and investors alike is CLTV/CAC. As a general rule of thumb, investors are looking for businesses that have a CLTV/CAC ratio of 3:1 or greater. These businesses generate enough value to not only cover customer acquisition costs but also to cover other aspects of the business including product development, service, and operations, and still have enough left over for profit. A business that has a lower ratio will struggle to become profitable and will require more capital to reach that point. On the other hand, a business with a much higher ratio (say 5:1 or greater) is operating very efficiently. This is an incredibly positive sign for your growth engine! It might also be a sign that you’re underinvesting in growth and that you could grow even faster with some additional investment.

Now, we established earlier that PLG companies tend to have lower CACs because their products include capabilities that help the company market, sell, and onboard users through the product thereby reducing marketing and sales expenses. Well, all things being equal, companies that have lower CACs will have higher CLTV/CAC ratios. As the denominator gets smaller the ratio goes up and so does the financial muscle of your startup!

More than any other metric, the CLTV/CAC ratio determines the viability and growth trajectory of your startup over time. It essentially measures how efficiently you’re able to invest capital into the business and receive cash as an output to fuel the growth of the business. High CLTV/CAC businesses reach breakeven and profitability more quickly and can afford to reinvest more in growth than low CLTV/CAC businesses. Because PLG companies tend to have lower CACs, they also tend to have higher CLTV/CAC ratios and can afford to reinvest more in growth. Yet another plus for PLG companies!


There’s no one set of metrics that can capture all contexts that PLG companies face in K12 edtech, but I believe the metrics above are the most critical for K12 edtech companies working to become best-in-class PLG companies. I hope that seeing benchmarks set by leading PLG companies both within and outside of K12 edtech gives you a sense of the standards you’ll want to hit to become a best-in-class company.

Certainly, there are additional metrics that are valuable (the virality coefficient, also known as “k factor” is one), but for most startup teams a combination of the above metrics will be sufficient for getting you on the right track to measuring and improving your product-led growth efforts. As legendary author, sales coach, and motivational speaker Zig Ziglar said, “You don’t have to be great to start, but you have to start to be great.” I hope this helps you get started down the path of becoming a better PLG company in K12 edtech.

Are you building a PLG company? Are you thinking about PLG in similar or different ways? Do you use other metrics or benchmarks? If so, we’d love to hear from you.



Graham Forman

Serial edtech entrepreneur turned impact investor. Founder and Managing Director at Edovate Capital. #edtech #edchat #education #startup #innovation