#100 — Sales over PLG: The Retool story

A sales-first approach provides direct, unfiltered feedback crucial for startups before achieving product-market fit (PMF). While PLG relies on interpreting user data, direct sales conversations force you to confront market realities. For instance, when Retool's initial messaging failed, a cold email to Rappi's CTO positioning the product as a 'fast way to build internal tools' secured an immediate demo request, validating both the new messaging and their ideal customer profile (ICP). This direct interaction reveals precisely why customers are not buying, enabling rapid pivots in messaging and market focus that analytics alone cannot provide.

Retool systematically targeted recently funded companies, identifying them as prime candidates needing to build new internal tools. The team scraped Crunchbase for 10,000 such companies, then hired freelancers on Upwork to find contact information for 40,000 executives like CTOs and VPs of Engineering. Using a sales automation tool, they conducted relentless A/B testing on their email copy, achieving an impressive 8% conversion rate. This strategy generated 2,400 interested leads and resulted in a $1.5M enterprise pilot contract even before their YC Demo Day.

Initially, Retool employed a 'progressive price discovery' strategy. Founder David Hsu would quote a high price, such as $2,000 per month, during sales calls and adjust based on the customer's reaction, a tactic that helped gauge market price sensitivity. To maintain negotiation leverage, prices were never quoted over email. In a counterintuitive move, Retool later lowered its prices to prioritize long-term user growth and adoption over short-term revenue. This decision, made possible by the company's cash-flow positive status, was aimed at stimulating word-of-mouth marketing and solidifying their market leadership.

The key to being 'default alive' is to ensure revenue grows significantly faster than expenses, especially headcount, during the early stages. Retool focused on securing millions in Annual Recurring Revenue (ARR) with a lean team of just 5-10 people. By achieving and maintaining cash-flow positivity, Retool preserved its operational sovereignty, giving it the flexibility to make long-term strategic decisions—such as lowering prices—without being beholden to venture capital pressure for immediate financial returns. This disciplined approach helps startups avoid a high-burn-rate trap that can be difficult to escape.

Retool's approach to customer support was highly proactive, effectively 'spying' on its early users to anticipate their needs. They developed internal tools, including a 'Big Fish Swimming' alert system, that notified the team via Slack whenever a major account was active or encountered an error. Team members would then immediately call the customer—often before the user was even aware of an issue—and offer real-time debugging assistance. This exceptional level of service turned potential technical frustrations into moments that built significant trust and loyalty, fueling powerful word-of-mouth growth.

Finding the right language to describe your product is as crucial as building the right product itself. Retool's initial messaging—'Excel-like with higher-order primitives'—failed because the target audience didn't understand it. After an attempt to target FileMaker developers also failed, Retool pivoted its messaging, not its product. The breakthrough occurred when they began positioning Retool as a 'fast way to build internal tools' to CTOs at fast-growing, operationally intensive companies like Rappi. This change in language resonated with the correct audience's pain points and was instrumental in unlocking the company's initial growth.

Building a strong developer community creates a defensible competitive moat that compounds over time. For Retool, its community forum and exclusive Slack groups function as a scalable customer support system, with developers assisting each other in solving problems. This ecosystem also establishes a powerful feedback loop for the product team, as power users gain early access to beta features and provide invaluable insights. Ultimately, this strategy drives organic growth through network effects and a developer marketplace that connects companies with skilled Retool builders, fostering a robust ecosystem around the product.

Early success with high-growth companies like Rappi and DoorDash served as powerful validation for Retool's value proposition. The Rappi case began with a single cold email that led to an immediate demo request, signaling strong language-market fit with CTOs at operationally complex companies. For DoorDash, Retool became an essential tool for their internal operations, demonstrating the platform's ability to scale and meet the demands of a major enterprise. These real-world examples provided social proof that Retool could solve significant pain points for fast-growing tech companies, which was critical for attracting further enterprise clients.

A sales-first approach provides direct, unfiltered feedback crucial for startups before achieving product-market fit (PMF). While PLG relies on interpreting user data, direct sales conversations force you to confront market realities. For instance, when Retool's initial messaging failed, a cold email to Rappi's CTO positioning the product as a 'fast way to build internal tools' secured an immediate demo request, validating both the new messaging and their ideal customer profile (ICP). This direct interaction reveals precisely why customers are not buying, enabling rapid pivots in messaging and market focus that analytics alone cannot provide.

Many founders mistake early sales growth for product-market fit, but true fit is about long-term retention and expansion, not just initial acquisition. A key sign of true fit is when customers would be significantly impacted if your product disappeared—a metric you can test by asking them directly. Retool focused on getting to '100 happy customers' who were deeply engaged, rather than just chasing top-of-funnel signups. This deep reliance, combined with high Net Dollar Retention (NDR), indicates you are solving a lasting problem, not just benefiting from temporary curiosity.

The choice depends on your product, user, and deal size. PLG works best for intuitive, self-serve products with viral potential, where users can buy without talking to a salesperson, typically at a lower price point. Retool deliberately chose a sales-first approach because, before PMF, direct conversations were essential for understanding customer reality. Only after validating the market with sales did they layer in a self-serve motion, which now accounts for 80% of their customers.

Finding the right language to describe your product is as crucial as building the right product. Retool's initial messaging—'Excel-like with higher-order primitives'—failed because the target audience didn't understand it. After an attempt to target FileMaker developers also failed, Retool pivoted its messaging, not its product. The breakthrough occurred when they began positioning Retool as a 'fast way to build internal tools' to CTOs at fast-growing, operationally intensive companies like Rappi. This change in language resonated with the correct audience's pain points and was instrumental in unlocking growth.

Retool systematically targeted recently funded companies, identifying them as prime candidates needing to build new internal tools. The team scraped Crunchbase for 10,000 such companies, then hired freelancers on Upwork to find contact information for 40,000 executives like CTOs and VPs of Engineering. Using a sales automation tool, they conducted relentless A/B testing on their email copy, achieving an impressive 8% conversion rate. This strategy generated 2,400 interested leads and resulted in a $1.5M enterprise pilot contract even before their YC Demo Day.

Initially, Retool employed a 'progressive price discovery' strategy. Founder David Hsu would quote a high price, such as $2,000 per month, during sales calls and adjust based on the customer's reaction to gauge market price sensitivity. To maintain negotiation leverage, prices were never quoted over email. In a counterintuitive move made possible by its cash-flow positive status, Retool later lowered its prices to prioritize long-term user adoption and word-of-mouth growth over short-term revenue, aiming to solidify its market leadership.

To be 'default alive,' revenue must grow significantly faster than expenses, particularly headcount, in the early stages. Retool secured millions in Annual Recurring Revenue (ARR) with a lean team of just 5-10 people. By achieving and maintaining cash-flow positivity, Retool preserved its operational sovereignty. This gave it the flexibility to make long-term strategic decisions—such as lowering prices—without being beholden to venture capital pressure for immediate financial returns, avoiding a high-burn-rate trap.

Net Dollar Retention (NDR) measures the change in revenue from your existing customers over a year. An NDR over 100% signifies that your current customers are increasing their spending, which generates organic growth. For Retool, achieving high NDR was a core component of its 'default alive' strategy. It provided a powerful tailwind, enabling the company to expand its revenue without proportionally increasing its headcount or cash burn, thereby maintaining profitability and strategic independence while scaling.

Retool's support was intensely proactive, essentially 'spying' on its early users to anticipate their needs. They built internal tools, like a 'Big Fish Swimming' alert, that notified the team on Slack whenever a major account was active or hit an error. Team members would then immediately call the customer—often before the user was aware of an issue—to offer real-time debugging. This exceptional service turned technical frustrations into moments that built immense trust and loyalty, fueling powerful word-of-mouth growth.

Building a developer community creates a defensible competitive moat that compounds over time. For Retool, its community forum and exclusive Slack groups act as a scalable customer support system, with developers assisting one another. This ecosystem also provides a powerful feedback loop for the product team, as power users gain early access to beta features and offer invaluable insights. Ultimately, this strategy drives organic growth through network effects and a developer marketplace connecting companies with skilled Retool builders.

Early success with high-growth companies like Rappi and DoorDash served as powerful validation for Retool's value proposition. The Rappi case began with a single cold email that led to an immediate demo request, signaling strong language-market fit with CTOs at operationally complex companies. For DoorDash, Retool became an essential tool for internal operations, proving the platform could scale to meet enterprise demands. These real-world examples provided the social proof needed to attract other major clients.

A multi-product strategy allows a startup to solve more customer problems, dramatically increasing its Total Addressable Market (TAM). Similar to AWS, which began with S3 and EC2 before expanding, Retool started with its core internal tool builder and then launched complementary products like Retool DB (backend), Workflows (logic), and Mobile. This approach creates stacked revenue growth over time, transforming the company from a single-point solution into a platform and deepening its competitive moat and customer relationships.