How to Build Out Your SDR Function in 2024 with Sam Blond, Partner at Founders Fund and Host of S…

You know that week over week we are here to bring along another SaaS expert to walk us through some amazing content. Um, today we are thrilled to have Sam Blond, partner at Founders Fund, former CRO of Brex, and host of Saastr's podcast CRO Confidential with us today. Um, when and how to hire the best talent is a topic that we talk about a lot in these workshops and a lot at Saastr. Um, and we know it's on top of everyone's mind, so we're thrilled that in today's session, Sam's gonna be covering his playbook to how to build out an SDR function. We are gonna have plenty of time for questions. So please make sure to drop your questions for Sam throughout, and then we will make sure that we get to 'em when we get to Q&A. So welcome, Sam. Thanks so much for joining us.

Thank you so much for having me, Team Saastr. I am just thrilled to join any events that you all put together and just wanna positively reinforce this idea that you are the best community in SaaS. And just love working with you all. So thank you for having me once again and thank you for everybody that is attending today's session. Hopefully we'll have some fun and make it as productive as possible. With that, should I just jump in, Taylor?

Yeah, well, thanks for that, Sam. We can do your little quickfire questions if you want to jump into those really quick, just so people can kind of hear what you're working on. First up, would love to hear what has been your favorite investment from the past year.

Favorite investment from the past year is, uh, Rippling. So, uh, I am close with Parker from the days at, uh, Zenefits. Parker's now the CEO at Rippling, uh, and we were able to buy, uh, first half to early second half of last year some Rippling secondary that, um, is already being marked up in a really nice way. So that's been fun to realize some price appreciation in what for many in this category of growth stage tech has been a challenging environment.

Awesome. And Sam did an amazing session with Parker last year at Europa, so I'll drop that in the chat because if you haven't caught that session yet, it is a good one to catch up on. Sam, what surprised you most about venture in the past 12 months?

I think one interesting Just one interesting note that really reinforces, I think, Peter's philosophy at Founders Fund around being contrarian. We, for the first time, brought in a crypto-dedicated partner and also started buying, making crypto investments in venture, and then also buying some crypto assets like Bitcoin and Ethereum. And I think that that just really positively reinforced the contrarian mindset that Peter and the firm has because, you know, crypto is sort of considered toxic in the first half of last year. And much like that Rippling investment that I alluded to, those have already realized some exciting price appreciation.

Awesome.

Very cool.

And then looking ahead, what are you most excited about for 2024?

I think— I hope that 2024— well, if we look back at 2023, there was exciting investments to be made on the public market side, oftentimes concentrated in the largest tech companies in the world. The names like NVIDIA and Microsoft and Apple and some of the largest tech and software businesses in the world had really good years. And I think what happened less last year is some of the growth stage tech companies that were sort of just immediately post-IPO didn't quite realize some of the same success that the larger tech businesses that were publicly traded did. And I think 2024, we should, knock on wood, start seeing the public companies that are most closely related to the pre-IPO companies, starting to perform much better. And I think that will trickle down to the venture side where the companies that are pre-IPO that have had a really challenging backward-looking 24 months, if their counterparts that are closest to them, that are sort of the recent IPO fast-growing software companies, start performing better, I think that will impact their ability to go public. It will impact their ability or their want to go public, I suppose, and then impact the price of their stock as well.

Awesome. Great insights. Well, let's see what happens. Well, Sam, thanks so much for the quickfire. Before I let you take it away, just a reminder for everyone, today's recording is going to be available on our YouTube immediately after, and we'll post Sam's slides to SlideShare as well. So if you have to hop off early, which we hope you don't have to, but you'll be able to catch up on everything. And then again, you'll have plenty of time for questions. So Sam, take it away.

Awesome. And I'll just, as you're sharing, Taylor, I'll just say next slide when we're ready to do it. So I'm Sam Blonde from Founders Fund. Next slide. Today we will be talking about how to build out an SDR function. Next slide. I'm going to provide a bit of context before we get into how to actually build out an SDR function. And the context is what we did at Brex. And I will reference back to this periodically through the rest of the presentation, but I think it's helpful just sort of level setting on how we approached building out SDR. Did a lot of things right, did a few things incorrectly that we'll talk about as well. We had 6 AEs before we started hiring any SDRs. And so I joined when there were 2 AEs. I hired 4 additional AEs. And before we introduced SDR to the company as a function, we had a heavy focus on AE outbound. And I think we established a baseline for successfully doing outbound with the existing salespeople before we invested in a dedicated SDR function. The first hire that we made after those 6 AEs that was dedicated to SDR was a senior hire. Her name is Ashley Kelly. I'll reference her a few times in today's presentation as well. We also had a disaster podcast on CRO Confidential the other week that if this is an interesting topic, might be interesting to listen in when you have the time. We brought in Ashley as a senior director, so as a leadership hire, as our first hire. And then it was Ashley's job to take the existing successful outbound process and improve upon it and specialize in the function of SDR. The first thing that she did after sort of effectively being an SDR for several weeks was made 3 in-network experienced hires to start. Ashley came from Lever before she joined Brex, and she hired 3 of her SDRs, top-performing SDRs from Lever, brought them into Brex. And so then I think maybe 2 data points that are worth flagging there. These were already experienced SDRs as our first IC SDRs. And the second thing is they were in-network hires that Ashley had sort of brought with her. We scaled the team when the data supported it. I'm going to go— there's a specific slide around scaling the team. So I'll go much deeper around what I specifically mean by the data supporting it. And then on an incentives, from an incentive standpoint, we started with incentivizing opportunities. We called them SQOs, sales qualified opportunities. And over time we moved that to revenue. So when an opportunity closed and was generating revenue, if the SDR sourced it, they received credit on that revenue, but they no longer received revenue for creating the opportunities the way that they had sort of backward looking. We'll spend some time on that as well. And then the last thing around what we did at Brexton, just providing some context here from a results standpoint, 80% of Brex's revenue came from outbound, both AE and SDR, and that mix shifted over time. Of course, when we were 6 AEs and no SDRs, 100% of our outbound revenue came from AE. And over time, we actually got it to where on a per rep basis, SDRs were generating more revenue than the AEs. And so the makeup of that revenue shifted over time. But a large chunk of Brex's revenue came from sales outbound. Next slide, please. All right. So here is the agenda for how to build out an SDR function. We're going to start with the benefits of SDR. We won't spend a ton of time there because this SaaS audience is oftentimes very educated and experienced. And so probably obvious, but I think worth reinforcing at least one point. We'll move on and try and do this sort of sequentially around how to build out an SDR function from where you start for the folks that today haven't yet started, all the way to folks who have many SDRs and are scaling that team. So we're going to start with when to hire your first SDR. We'll move on to who to hire, things like profiles, We'll talk about how to measure performance. We will then talk about once you have these things in place, ready to scale the team, what are the indicators that you should go off of and how big should you make the team? And then we'll finish sort of tactically on some trends that I am seeing in outbound, both as headwinds and then potential tailwinds. This, this world of outbound seems to be ever evolving and right now is at an inflection point, I think, for two reasons. One is the introduction of AI that everybody seems to be interested in. And the second is sort of the deceleration of what I will call just spray and pray outbound through cold email sequences. And so we'll talk a little bit about the trends that I'm seeing and maybe the direction that I see this space evolving to. We'll wrap up with Q&A, and I think from a time standpoint, we should have 15+ minutes left for Q&A. Next slide, please. Okay. Benefits of SDR. As I mentioned, I don't want to spend a lot of time here just because of the experience level of the audience. The obvious benefit is that SDRs increase demand, which leads to more revenue, and the business grows faster when you have a successful SDR organization in place. That's, I think, the obvious benefit. The less obvious benefit that is worth flagging is— and I'll allude to this example actually later in the presentation as well— there was a point in time when Brex AEs were sourcing more revenue on a per rep basis than SDRs were, and they were also closing that revenue. And there was an internal push at the sort of executive level, both finance and founder, why don't we just hire more AEs? If they are both sourcing more revenue and they're also closing that revenue, shouldn't we just hire AEs? What's the point of having SDRs if they are less successful at this thing they're even specializing in? And the answer, or an answer, doesn't show up on the spreadsheets when you look at things just like attribution of that revenue. But when you looked at the AEs that were influencing the revenue that was being attributed to AE outbound. All of the top AEs were former SDRs, and none of those people exist, uh, at the company without the function of SDR existing as this sort of, uh, training ground to ultimately promote into some of the most successful AEs within the business. Now, um, we corrected this. We got it to a point where SDRs on a per rep basis were sourcing more revenue than their AE counterparts. Parts. But that, that benefit that I just alluded to, which is that this sort of fear system is oftentimes overlooked and doesn't necessarily show up in the data. So with that, let's continue along to when to hire your first SDR. And if we can go back, I think one slide. Perfect. When to hire your first SDR. This is one— I'm gonna try and do two things throughout the presentation. One, I'll try and incorporate some stories. And then two, I will try and not just describe what I think works, but also some mistakes that I observe folks making and I'm sure have made myself. Let's start with when to hire your first SDR. And a big mistake that I see here quite often is that founders and early sales reps really push to hire an SDR before the business is ready. And this can be in the form of the first go-to-market hire. So you're still doing founder-led sales. You hire an SDR to help support the founder from a DemandGen standpoint, or you still have the founder as effectively the sales leader, maybe a couple of AEs, and those AEs are pushing to hire an SDR. To help supplement the DemandGen, help supplement the outbound. My experience is that that is not the right approach. And like with many things, this isn't necessarily one size fits all. I'm sure there are counterexamples where this has worked, but based off of my experience, there are two things that I would solve for. Before I get into those two things, one really important caveat is that, uh, AEs should do their own outbound. And I believe that that is true on day 1, and I believe that should be true in year 10. Um, we had a podcast with Splunk's CRO, uh, that was a recent CRO Confidential. Their AEs are still spending a bunch of their time doing their own outbound, sourcing their own opportunities, in thinking about sort of ROI from a sales rep standpoint, the highest ROI thing salespeople can be doing is closing revenue. I think the second highest ROI sales thing salespeople can be doing is sourcing revenue. Um, and we're going to talk about again the importance of having your AEs do their own outbound, even if you have SDR, later on, um, in this presentation, and why again that's so important. But now to solving for the two things that I would make sure are in place prior to hiring your first SDR. Um, the first is, uh, that you have an existing outbound process that is working and that they can improve upon. Uh, and so you don't want to hire, um, a junior SDR to come into an environment with no systems and no process and no track record of successfully sourcing outbound opportunities. If that's not in place, it's going to be very difficult for them to create that from scratch. The second thing that I would solve for is someone who can actively manage them. And in this environment that I described before, sometimes you have a founder that is their direct manager. Sometimes you have salespeople, individual contributors. They're saying, I will take on some of the burden of managing this SDR, but they're not really managers. And so I think, you know, my guidance here is don't introduce SDR until you have some success around outbound, some outbound process in place that is working. And then the second is that you want to have someone that can actively manage them. That generally can be a sales leader or it can be a dedicated SDR leader if that's the— if that's who you decide you want to make the first SDR hire. And up until that point, just hire full cycle AEs until these things exist. If you've got 2 AEs, you want more demand, just hire another AE. And again, really reinforce the importance of AEs doing their own outbound. If they can't do it, an SDR is not going to be able to do it, or at least isn't going to be able to be set up for success in doing it either. Next slide, please. Okay, so we now have these things in place. We have some outbound successes under our belt and we have someone that will actively manage the SDRs, either a sales leader or an SDR leader. So let's talk a little bit about who we want to hire. As I mentioned, at Brex, we hired a leader before we hired any individual contributor SDRs. In my experience, you can do that or you can hire 2 ICs. But those are the 2 paths that I would go down. I would either hire an SDR leader and I would probably go down that path. Um, if 2 things exist. One, if I know the person I wanna hire, we were spoiled in that I knew Ashley, she was this exceptional SDR leader that we would sort of be silly not to hire if we didn't have the opportunity to do so. And then the second thing that existed is we knew we wanted to grow the team. We were already 6 successful AEs. We knew we wanted to grow the SDR function quite rapidly, and bringing in a leader made a lot of sense. If we were earlier, we probably would have gone down the path of just hiring 2 individual contributor SDRs and having them report directly to me. If you do hire an SDR leader. I think the only caveat there is make sure that they are willing to do the individual contributor work. When Ashley came in, she effectively was an SDR before she brought on her in-network hires. And you don't want a leader who isn't willing to— let's use some clichés— roll up their sleeves, get their hands dirty, those sorts of things, especially if they are your first SDR hire. Okay. Regardless of whether you hire a leader or an SDR, I think that there are a couple things to solve for in who you hire as your first SDRs. The first one, SDRs are entry-level salespeople, but some are more experienced than others. And I think that your initial SDRs should have some experience. When I joined EchoSign with Jason M. Lemkin as an SDR, I was fortunate that I came in with something like 4 months of SDR experience from a prior role at a company called Intact. And having those 4 months of experience really allowed me to hit the ground running. I knew how the systems worked. I knew, you know, some feedback around the types of sequences that were more effective than others. And I think as the first or one of the first SDRs, without that experience, it would have been much more difficult for me to be successful in the role that I took on as an SDR at EchoSign. Another version of this was when we hired Ashley Kelly at Zenefits as an individual contributor SDR. She mentioned this in the podcast the other week. She had came in for— come in from a recruiting background. So she already had real-world sales-like experience, wanted to break into tech sales, started as an SDR. I think the takeaway here with a couple examples, a couple of those examples, is when you do hire your first SDRs, I would try to hire folks with some experience. I wouldn't hire the folks that are directly out of school. The second thing that comes to mind on who to hire is that I would start in network and the networks of your existing team. So at Brex, I hired Ashley, who is a close friend, and I knew that she was an exceptional SDR leader. The first 3 SDRs that she brought on were all SDRs that were in a prior organization that she had led. You also have the AEs that you can leverage their networks. So if you've got a few successful AEs in place, they all came with some experience. They probably remember who the best SDRs at their prior companies were and maybe had relationships with them where they were taking some of their opportunities. They can help source and recruit those initial SDRs. So on the who to hire for your first SDR cohort. One, hire two of them at the same time. Two, solve for some experience. And three, with SDR, even more so than other hires, leverage personal networks. SDR hiring is so hard because you don't have a track record of experience to go off of the way that you do with account executives and sales leaders. SDRs are often— when I joined Echosign, I had 4 months of experience. I couldn't point to this track record of exceptional performance over long periods of time and great references from former managers. So again, this, this leveraging your network is particularly important with this category of hire that is definitionally less experienced. Next slide, please. Okay, so we are now at the point where we've decided it's time to invest in SDR. We know who to hire and we've made those hires. Let's talk a little bit about how to measure the performance of the, uh, SDR organization and SDRs individually. Um, there are two metrics that, uh, I see most commonly used to measure performance. Those two metrics are opportunities. What we did at Brex, where we started, was sales qualified opportunities. And so this is if you schedule a meeting, that meeting is held and it meets some qualification criteria, the SDR receives credit and maybe they have something like a, you know, 10 to 20 qualified opportunity monthly quota. And every time I schedule a new opportunity and it passes through, that's credit. I get one. And then the other most commonly used performance measurement that I see is revenue. And the way that I think about these things is related to quantity versus quality. The further up the funnel you go, the more you are solving for quantity of demand. And the further down the funnel you go, sort of culminating in revenue, You are shifting towards quality. And I think that, that process that I just described is actually the sequencing with which I would approach measuring performance. When you hire or when I hire my first SDRs, almost universally, I want to incentivize quantity. The constraint to growing faster is that we don't have enough opportunities in the funnel. The other thing that we don't have is any data around things like conversion rates by industry persona, revenue contribution by different categories. And so we really want to cast a wide net when it comes to acquiring demos and opportunities. And the constraint here is a volume game. We want more opportunities created in pipeline and more demos on calendars. Over time, what starts to happen— and there are a couple of things that are signals of this— but over time what starts to happen is you start to learn more about the business and the incentives aren't necessarily aligned with the business outcome that you are looking for. Couple examples here. You will hear things like, this wasn't a good demo. The, you know, the, the SDR, the demo quality coming from SDR is low. You will hear examples of things like SDRs campaigning their AE counterparts to give them credit for demos that are sort of on the fringe of whether or not they should count. And it's not going to be closed revenue, but the SDR still wants credit because they created the opportunity. When these things start to happen, my recommendation is it is at least worth going through the process of the thought exercise around should we introduce or shift to incentivizing closed revenue. And the way that I approach this decision is I try to decide which incentive will ultimately generate the most revenue for the business. And intuitively, you would think that incentivizing revenue would generate the most revenue for the business. That's actually not true on day one because SDRs then become more focused around how their opportunities are performing and you actually don't want that behavior. But over time, we learn a lot. We learn again which personas are converting, which types of companies are converting, what a good demo looks like, how much revenue different types of opportunities will ultimately generate for the business. And shifting to further down the funnel metric like closed revenue, I think can make a lot of sense. We're going to talk more about how Brex experienced this transition in the next slide, which let's move along to. But hopefully that gives a bit of an overview on how to measure performance I gravitate towards opportunity creation when SDR is first getting started and then really like at least the thought exercise of shifting to closed revenue that is sourced from SDR. Okay. Again, sort of following the sequence with which we would build out an SDR organization. We know when to hire, we know who to hire, we know how to measure performance. Now we may want to consider scaling the team. And I want to talk a little bit about how I approach that. I was on a call with an SDR leader the other day and we were talking through how the— and this was an SDR leader in a lead-poor environment. So the folk, which most of us are in, the focus of the go-to-market organization was generating more demand. And I asked this leader what, what they recommend doing as the leader of DemandGen and as the leader of SDR. And the first thing that they mentioned was, I think our SDR to AE ratio is too low. Right now we have something like, you know, half an SDR to, you know, 0.75 SDR to AE. And I think we should be more like 1.5 to 2 SDRs for every AE. And so I immediately gravitated towards— well, and this team was not small. This team was a 20 to 30 person SDR organization. I immediately gravitated towards, well, how effective is the existing team of 20 or 30? Let's forget about the ratio for a moment. What percentage of revenue is sourced from SDR? And on an efficiency or productivity basis, how does that compare to our other channels? And the answer was something like, well, conversion rates today are low of SDR sourced opportunities and the impact that we don't have is sort of limited. But I attribute that to not having a high enough SDR to AE ratio. We had more SDRs for every AE. We would be contributing more revenue, you know, on an absolute basis and certainly on a per AE basis. And that is just the wrong way of approaching scaling the SDR team. So the first thing that I think is important is you need to know your numbers cold. So January just ended. We should know what our attribution in the month of January both by new logos closed and by new revenue closed in the month of January. How much did SDR contribute, both new logos and new revenue? If anything, over time, efficiency will decrease as you add to the team. So if you have a 20-person SDR team today, if you want to add 10 SDRs over the course of the first half of this year, expect your per rep efficiency to decline as you increase the team size by 50%. So the takeaway here is that you should only scale when you are encouraged by the numbers. And if you are not encouraged by the numbers, you should focus on improving the numbers before you add to the team. I'm going to tell two quick stories about Brex and how we approached this that I think help emphasize this point and maybe reinforce some of the takeaways for folks in the audience. The first is that I alluded to this environment at Brex maybe 20 minutes ago where the AEs were closing more or sourcing more revenue on a per rep basis than the SDRs were. And I talked with the SDR leader, who is Ashley, about this problem. And we could not continue scaling the SDR function when this dynamic existed. It didn't make sense to hire more SDRs when their AE counterparts were sourcing more revenue on the thing they were supposed to specialize in. So we tried to diagnose why this was happening. And the first thing to mention here is I mentioned earlier the importance of having AEs do their own outbound. If that didn't exist at Brex, we would not have had this insight that AEs were able to source more revenue than their SDR counterparts. And we then would not have done the follow-on actions that I'm about to describe that greatly improved SDR efficiency and the growth of the business. So again, just underscoring the importance of having AEs outbound. Otherwise, we don't even have this insight to begin with that the AEs are sourcing more revenue than the SDRs. Now, how we approached changing and improving that— Ashley at the time had a team of something like 15 SDRs. First, we wanted to make sure that this was the team that we felt confident in moving forward with. So we may have managed out a couple of the bottom performers, but we certainly weren't going to add to the team when we weren't happy with the effectiveness of the team. So we took the existing team, we probably shrunk it a little bit, and then we got back to why do we think this environment exists? And there were two outcomes that were produced from this this exercise. The first is the AEs knew what great looked like from an opportunity standpoint in ways that the SDRs didn't. The AEs took these opportunities to close, and so they knew the types of people and companies that were likely to convert and that were likely to generate a lot of revenue because they worked them far past the point of taking the initial meeting. And so the output or change that we made there was we got very sophisticated around lead scoring and we no longer allowed SDRs to just decide anyone in the universe that they wanted to bring into their named account list within Salesforce and start blasting those accounts. We were very prescriptive about which sub-verticals within the industry which personas, CFOs converted at a higher rate than controllers, which geographies. And we basically said, SDRs, these accounts have the highest probability of converting to customers and they're going to generate the most revenue. Go after them. The second thing that we did was we changed the incentive, referencing back to the prior slide, from sourced opportunities to closed revenue. And the combination of those two changes radically changed the SDR environment, both in terms of where SDRs were focused and then also aligning incentives with the business. And the result was that SDRs started closing or generating far more closed revenue than their AE counterparts. And so, you know, back just to the point around scaling the team, I think the takeaway here is you have to understand your numbers and the attribution of how much revenue is being sourced from each channel. Do not invest in SDR, hiring more SDRs if you aren't satisfied with the performance and the efficiency of the existing team. Adding more SDRs into that environment will only decrease efficiency. So if you're at a point where you brought in a bunch of new SDRs, the efficiency has declined a little bit, take that existing team, make sure that they are successful. And until you're happy again with the data that is coming out of that environment, don't hire any more people. And, you know, have that be sort of a defined constraint to growing the team and use it as something that motivates both SDRs and the SDR leader in terms of reaching milestones where they can again start growing the team because of the success of the existing organization. Okay, next slide, please. And we will wrap up here and I'll try and do so in something like 2 or 3 minutes to leave the remaining time for questions. I want to finish just on trends in outbound. I think one thing is maybe just an observation that in and of itself isn't helpful and maybe a way, in a way, just a bit of a broken record here. I think that there is a narrative that from an outbound standpoint and within SDR as a function, we are moving away from spraying and praying outbound email sequences and that being the primary function and responsibility for an SDR. This approach is just losing efficacy. I think, you know, any, any leader in an organization is receiving countless outbound emails today from companies that they haven't heard of, sent by people they don't know. And most of the time they don't read them and they go into, you know, the archive or whatever. And I think that that is somewhat consensus. I think what is less consensus is, okay, so what should we do? There's this trend that we can acknowledge is less effective. We're getting 1% reply rates, maybe 0.5% meeting rates. And, you know, efficiency is just sort of gone off a cliff with at least this outbound email process. But we still want to do outbound. Here are the 3 things that I have seen be effective in sort of replacing this spray and pray outbound methodology. The first one is around leveraging networks. And I think this comes in 3 flavors that I can think of. The first is personal. I remember when I joined Brex, I probably sent Jason an email at Saastr and was like, hey, I just joined Brex. I'd love for you to use us as your corporate card at Saastr. Like, you know, I'll get you an account set up, whatever, let me need whatever else. And I think Jason was an awesome friend and did that. And, you know, that is an example just coming from me. There were, there were 10 people like Jason that I reached out to. The founders had their personal networks, every employee had their personal network. So leveraging personal networks, I think, is important. The next one that comes up in this category of networks is investor networks. I had a post on Twitter and LinkedIn either last week or the week prior, how to leverage your investors to generate new customers. This is something that is important on, you know, when you're a seed or Series A stage company and early. I remember at Brex when we started moving upmarket, YC was hugely influential in our ability to win DoorDash. And this is true you know, 5, 6 years in the business when the business was much larger. And so, you know, just conceptually continuing to leverage your investor network, far higher ROI than sending DoorDash's CFO an email from an SDR. And then the last one, which isn't necessarily outbound, but I think in this category of leveraging networks, leverage your customers. And, you know, first of all, you have to deliver this delightful experience is a bit of a cliché, but those who you know are your happiest promoters tweeting referring you customers, make sure that you take care of those customers and try and have a strategy around leveraging your existing happy customers to create new ones. The second thing that comes to mind is giving away, giving your target something of value. I'm going to give one quick example. Open Store is a Founders Fund portfolio company. I work closely with the go-to-market team there, a few sales folks. And we are A/B testing a few different ways of doing outbound. I have talked about this champagne campaign that we did at Brex. And, you know, there's a tweet about that, if interesting. And here's the interesting thing that we're finding. They're selling to e-commerce. We have a few different tests that we are going through. One is just purely cold outbound. One is we are sending an email confirming the address to send them a bottle of champagne. It started with enjoy with your family on Thanksgiving. It moved to celebrate the New Year. And now we have enjoy with your significant other on Valentine's Day. So just come up with an excuse to send somebody a bottle of Veuve Clicquot for $45. Ask them to confirm their address. And that's the second option for the A/B test. And then the third option, they're going to these e-commerce websites, they're buying the product, they're sending emails with pictures of them with the product. If they sell swimsuits, they've got the swimsuit on. And the conversion rates of what I described is the offering to send them a bottle of champagne. They're exponentially higher even than buying the product that the e-commerce company is selling. And so I think, you know, just reinforcing this idea of if you send something of value that stands out, something that people want, you're creative about messaging— enjoy this bottle of champagne with your family at the Thanksgiving table. We know how hard it is to run an early-stage e-commerce business and we're cheering for you— that converts to meetings and ultimately to closed customers. So supplement your outbound potentially with something like that for high-value target customers. Last one, and I'm going over— I clearly like to talk. The last one is combining outbound with some brand tailwinds. Examples here at Brex, we put billboards up all over San Francisco when we launched the product. We specifically targeted companies that were— their headquarters, their offices were in downtown San Francisco. We got countless responses to our cold outbound emails that were like, we see your billboards everywhere, and they don't reply if we aren't sort of trying to, to take advantage of the billboard investment that we made. Another example around these brand tailwinds when you have PR around things like a fundraise. I remember whenever Brex would do a fundraise announcement, we would incorporate that in some way into messaging. And, you know, people were just gravitated more towards the business as we were realizing success milestones. And so, you know, try and take advantage of a fundraise both on social but then also in the timing with which you are outbound. And then the last one is around coordinating with marketing, where you're leveraging things like, you know, somebody from this account or this person visited our website. That's a good time to have SDR reach out to that person if you have some data that's tracking their website visits. So again, just sort of coordinating Marketing efforts into your outbound process is the third category of things that I see actually working compared to the sort of spray and pray. I'm going to email this person I've never met and they don't know who I am or anything about our company. Okay, I can go over with questions. I went way over with the presentation. Let's move into Q&A, which is the next slide, please.

And I would stop sharing, Sam. I'm just going to stop sharing so we can see more people.

Okay.

We do have some questions. Thanks, Sam. Yeah, lots of conversation already buzzing around in the chat. Jason, you have a question that actually a lot of people are chiming in on regarding about prospecting and getting people to be motivated for it. So you want to jump in?

Yeah, Sam, I love the idea and I've watched it of the AEs prospecting. My, my life experience myself and across a number of my portfolio companies that maybe aren't Brex is they won't do it. They won't know what they'll do is you'll give them a couple of names, go after Enrique and go after Olivier. They'll do 2 or 3 again and again, but they won't do it for real and they don't generate any real revenue. And I think they don't do it for several reasons, right? Including DNA. But also I think sales reps want to do about the certain amount of work to hit their quota and then think about doing more work. And that's— I'm not sure it's consistent with the least energy, least effort path to quota attainment. So how does that work in practice? Do you yell at people? Do you give them quota? Do you fire them if they don't do— do you have— do you micromanage them doing it if they don't want to do it? Because I don't think 90% of AEs want to, want to do anything but handle a hot inbound.

Yeah, of course.

Sorry, '93, I was wrong.

No, no, you are spot on. One thing that I will acknowledge I really struggle with when I work with portfolio companies or just companies broadly is it is— I have never— I haven't figured out repeatable way of taking an existing sales organization where the AEs are not doing outbound. So slightly more mature, let's call it a mature sales organization where the AEs don't really do outbound. They rely on marketing and they rely on SDR. I think it is very difficult, close to impossible to take that existing team of AEs and get them to start all of a sudden being really effective at outbound. And so the, the answer that, you know, the ship may have sailed for many folks, but the answer, at least at Brex, and the answer that I, you know, provide as sort of guidance or advice for early stage companies is this has to be ingrained in the culture from day one.

Yeah, makes sense.

And Jason, you— this wasn't directly your question, but I think potentially it related. You asked something like, you know, do you micromanage on outbound metrics? Do you fire people? Like, how do you approach, you know, AEs that aren't doing this? Here's how I think about it. I measure the success of let's say specifically, but, but oftentimes salespeople more broadly on, on 3 different metrics. The first, very intuitive, is around performance. And sales is very objective. You see who is at the top of the leaderboard and who is at the bottom of the leaderboard. And top performers are almost definitionally successful. I think the, the two other things that I use to track and measure success don't require actually skill at all. They're effort and attitude. And if there is somebody on the AE team who— and I would define this as in the bottom 50%, so below average, the bottom half of the team, anybody that is in that category I then go a layer deeper and start looking into specifically effort and attitude also. But in this example, effort and what is not acceptable for me as a leader is somebody who is not performing and then also either not putting in the effort or, you know, not bringing their best selves to work, not being a positive influence on the rest of the team. And so you talked about micromanagement, Jason. I do. I don't know that I like the term, but for the bottom half of the team, I know what they are doing. I know how they are spending their time. And yes, if there is a lack of effort on the outbound side, it's sort of like a one-time conversation, like the performance isn't there, the effort isn't there. What are we doing?

Good answer. Thank you.

Thanks, Sam. That actually answered someone else's question too about performance. Ash, I think you're up next with a question about incentives.

Hey everyone, thanks. Thank you so much for this, Sam. A quick question about blending incentives. I'm curious, have you ever seen it work where you have incentives for for SDRs to just book meetings and also go for revenue? Because if you only have just meetings booked, then there's this tendency that we've seen and noticed to just get meetings on the calendar that are sort of unqualified. And that banter doesn't matter what you use, it kind of flexes in many ways. But then when you have AEs who are doing prospecting, it's obviously it's like they only really care about the revenue. And so I'm wondering from your perspective, have you seen any blended model work effectively?

It's a great question. It's a very nuanced topic. And the direct answer to your question is yes. And the reason, meaning yes, I have seen incentives that are blended between qualified opportunities and closed revenue. I've seen that work. And I say that it's a nuanced topic because, you know, I talked earlier about, you know, what you actually do want to incentivize. So the sophistication of the organization, I think starting day one on revenue, you don't yet have the data in place to know where to look. I think it's just the wrong incentive. And so there's something that's like you know, the maturity of the business that allows us to focus on revenue. The other big one that comes up regularly is cycle times. And, you know, if you have an average cycle time of 60 days, that means many of these companies aren't closing for 90+ days. You know, the feedback loop for SDRs, it's too long. And these are folks that are oftentimes in the seat only for something like 9 to 12 months. And so here's, here's maybe a rough guideline on cycle times. I think if you are sub-30-day cycle times, you, you can definitely consider being exclusively revenue-oriented because the feedback loop is pretty short there. If you are, let's call it 30 to 60-day cycle times, I like, Ash, your, the sort of premise of your question. You can have a blended quota where you've got something that's some portion that is incentivizing the opportunities and some portion that is incentivizing the closed revenue. And I think that provides really interesting learnings for the SDR that ultimately will move into that role where their mind is already thinking about revenue. And then look, if you're greater than 60-day sales cycles, I think I don't have a good answer for how revenue should be included in the incentive structure.

Well, thank you.

Thanks so much. We're going to go over 5 minutes just since I know we started a little bit late and we're getting a lot of great questions. So if you have to drop, feel free. But we We'll have the recording on YouTube right after. Sam, your next question is coming from Nancy.

Yes. Hi. Hi, Sam. Great presentation today. I sent you a direct message I'd like to take offline, if you don't mind taking a look at that. Let's connect. Second thing is I'd like to tie two concepts you talked about today and help us holistically connect the two parts. The first one was early in your presentation, you talked about shifting SDRs measurement from quantity to quality. And you, you said do that when you have enough conversion data, right, to make that assessment. And you illustrated with the Brex example where you actually knew CFOs convert to hire. Okay. So can you talk about when you have enough data Do you then just sit down and announce to the SDR organization that efetiv next quarter we're going to switch your compensation and switch your measurement to be quality-oriented? And if that's what you do, how smoothly does it go? Then can you also tie the second part of what you said today with the Brex example, which was a little unusual, which is your AEs were outsourcing outperforming your SDR in terms of leads. That sounded like there's almost like a little competition. And how did you finally get over— because the natural state, I think, is SDRs should be generating more than AEs. So how did you achieve that ideal balance of getting them to do more?

Great. Thank you for the thoughtful question, Nancy. I'll try and cover everything that you mentioned. Okay. So I think, you know, we talked about the sequencing of starting with solving a quantity problem. We want more demand. We need opportunities in pipeline. We need demos on calendar. That's, that's the way most of us start on day one. We don't really know what quality looks like. We got to learn through casting a wide net, and over time we'll get some of this conversion rate data. What I recommend— I don't necessarily recommend switching from an opportunity-based incentive structure to a revenue-based incentive structure when that data exists. What I recommend is at least going through the thought exercise. Of doing that. And the way that I approach that thought exercise is you're going to hear all sorts of things like, but what if the, like, the SDR doesn't have any control on the opportunity once the AE gets it? So it's out of their hands and yet we're compensating them on it. That's not fair. And what if an AE Or what if an SDR is paired with like a less good AE and their conversion rates are half of what another AE's conversion rates are? And so then like, you know, by default they could be half as good and they're making the same amount. You're going to hear a bunch of those types of things. All of that, at least initially, I would treat as noise. And the way that I would approach the decision is which incentive structure do we believe will ultimately generate more revenue for the business? That's the only thing that we are considering right now. And when we approached this decision through that lens, we all decided that we would generate more revenue given the information that we have about our business if the incentive was revenue. And then we dealt with the, like, second-order consequences of that decision after the fact. And we, we dealt with the things like, but it's going to take, it's going to take longer. I get paid on it. I get, I get immediate gratification on the SQO the day that it happens and I get paid on it like, you know, that, that very month with every one of them and, you know, the pairing and all of those things. What ultimately happened for Brex when we made this switch that was influenced by generating revenue, all of these things just work themselves out. We did close more revenue because we made the change, and through that process, every SDR made more money. They were all making more money because they were sourcing more revenue. We were able to grow the SDR team faster, which meant there were promotion opportunities for more of the existing team, leadership opportunities for people that wanted to get into SDR leadership because the team was bigger. And so these, these sort of concerns or risks that we did deal with, they sort of like faded after the change was so successful. And so then, Nancy, your question was something like, do you just roll out this change? You know, there was probably a period where we had like a 30-day transition period and maybe we did something where like, we will pay you on the higher of, you know, we're at February 7th. Let's approach this change. The first month where it's going to be in effect is March. But look, if in the month of March you would make more money on SQOs than you would on closed revenue, we'll pay you on the SQOs for one last month. And so it's like, you know, best of both worlds during this transition period is probably how we rolled it out. But again, like the pushback was very short-lived on making the change and then Trying to think about the second part of your question. Can you remind me what that was?

Yeah, you had a competition between effectively the usual situation, AEs source more than SDRs. So how do you get it back to equilibrium and SDRs sourcing more than AEs?

You know, it was never It was never sort of interpreted as a competition between AE and SDR. We had, you know, we went after a really large addressable market and we had some, some rules in CRM around account ownership and the recycling of certain accounts and you know, after somebody owned account for 90 days, if they weren't able to create an opportunity with it, it went into this like quarantine environment for 30 days. And then, you know, people could grab it. And then there were caps on how much each— the number of accounts that each SDR could own and the number of accounts that each AE could own. But if you were an SDR, you didn't come into work thinking that the AE organization was taking away from you or that you were competing with them. You were much more focused on your sort of day-to-day, which accounts you wanted to go after, who in the account pool you wanted to grab, those sorts of things. So it wasn't— it was never— the perception within the sales organization was never that AEs and SDRs were in competition with one another. There was plenty to sort of go around for each person to be successful. And maybe in retrospect, taking personal responsibility on the SDR side of why SDRs weren't generating as much as their AE counterparts, we weren't setting them up to do so.

Okay. So once you set them up, it just corrected itself.

That's right.

Okay.

Which is the way, you know, at least in theory, that's the way it should be. If you have AEs that are spending a good portion of their time I'm also working and closing opportunities. SDRs have more time to dedicate to outbound than AEs. And so again, at least in theory, SDRs should be sourcing more. Now, I can't maybe enforce, reinforce enough this idea that I really like having the comparison point of AEs also doing their own outbound. Because again, without Brex having AEs doing that, we, we, we wouldn't realize a bunch of these gains that I just described where the SDR organization started contributing so much more. And anyway, yeah.

Great answer. Thank you.

Thank you for the question.

Sam, thank you so much. Yeah, that was a great answer. I was just thinking like a rising tide lifts all boats. So I think that that was kind of the, the vibe at Brex then with everyone moving in the same direction. But I think we probably are going to wrap for today, but we have so many amazing questions. Sam, this is great ideas for your future sessions at Europa and Annual. So thank you so much for being here. We'll make sure that you get those questions to that so that you know what people are wondering about. So we really appreciate your time. Thank you, everyone, for joining us. And speaking of Europa and Annual, we are officially 118 days from Europa and 216 days from Annual. It's not like Amelia and I are counting or anything, but we really hope to see you there. It's never too early to buy tickets. There's an awesome annual pass right now for both events and some awesome group packages as well if you're buying with your coworkers. We love seeing you here every week, but we wanna see you in person too. And Sam's gonna be joining us at some of these locations as well. So great opportunities to, to see Sam and other speakers like him. And then of course next week we are back for another great Workshop Wednesday. We have another awesome sales session next week with Gusto. We're gonna have Gusto's CRO and their head of go-to-market ops. They're going to be talking about some territory assignment strategies that they use for their go-to-market teams. So it's going to be a really tactical, amazing session and hearing their playbook for how they're doing it at Gusto. And we hope to see you there. Sam, thanks so much and we'll see you soon.

Thank you so much for having me. Thank you for everybody that joined.

Thanks, everyone. See you next week.