Webinar: What It Was Like in '08-'09. And We Can Learn for '20.

So I want to do the agenda first, um, and I thought we could, um, we could, we could do a bunch of interesting things. I know we have a lot of interest in this. Talk a little bit about the present and the past, um, and just to ground things, uh, I don't think that, um 2008, 2009 are in any way the same as today. I'm sure Nick would agree. On the other hand, we were both SaaS CEOs back then, and there were a lot of stuff we didn't know back then. In particular, we didn't know how recurring revenue works and that it recurs, right? That's probably the most powerful thing, and probably some of the genesis of Gainsight as a company, right, is enabling this recurring revenue, right? So I want to talk about '08 and '09 and in a minute, but I want to— so much has changed. I mean, Nick and I chatted, we came to the same idea of doing this last week, like last Thursday, and the world just changes every hour. So even the agenda has changed in some ways. And I want to talk— and so I want to use Gainsight as a case study, talk about what Gainsight's seen, and then go back and tell you what we learned back in the day as SaaS CEOs. And before we do that, Nick, for folks, And because there'll probably be 1,000 people join this and probably we'll probably slice some of it into our podcast and 100,000 folks will listen to it. So give everyone that if they don't know Gainsight, give us a sense of what you guys do today, how many employees. I know you've talked about being— a little bit company and then give us a little more commercial what you do. It's so on point for what we're thinking as SaaS executives today.

Sure, totally. Yeah, so we're, we're a late-stage SaaS company, about 700 employees, and my name is Nick Mehta, CEO of Gainsight, and my video is not on due to some technical issues on the Zoom side, but most people would say I have a face for radio anyway, so I think this is very appropriate for the medium. So we, so Gainsight, some of you probably know, we're all about helping companies improve their customer retention rates and improve the expansion that they get from existing customers and overall drive more lifetime value for customers through this process called customer success. And customer success, I think pretty much everyone on the call knows, is about not just waiting for the end kind of renewal retention of a customer, but throughout that whole lifecycle, making sure they're adopting your product, getting value, and then are more likely to renew and expand. And we kind of build a whole community around customer success, and then we build software that helps SaaS companies from very small ones to the biggest publicly traded ones scale customer success across all their customers and be more proactive. And so because of that, we're in the center of recurring revenue, probably as much as any company out there. And we see sort of what people are doing to keep customers. And we'll talk a lot more about that. We ourselves are about a 700-employee company, as Jason said, kind of, you know, sort of later stage of being private. But of course, we think about these things too. So I'll share perspective today, not just from kind of an external third party looking at the market, but honestly just what we're thinking about in our own business. By the way, Jason, a few folks commented you may want to go to full screen on your slides if you want to. So yeah, great. So let's dive in.

All right, I wanna— let's, let's go over— I did, because, Nick, I want to tell me what you're seeing against Gainsight and just from your customer community, right? Because it's so on point.

I did 3 Twitter surveys over the last couple days, which are highly scientific, highly scientific surveys.

I'm sure they're not scientific, but I think there's enough scale given our followers that I think they're— help me pronounce it— illustrative, I think, if not scientific.

Yeah, I agree.

This one I actually think might be the most scientific, as someone who, who didn't excel at stats. But, um, uh, and this is like changing day to day, but how much are you seeing deals slow down And we have a lot of folks out there that are pretty confident that there's been no slowdown, 42%, and 58% that are seeing it. I'll share a couple anecdotes in a second, but what are you learning? What are you— how are you coaching the revenue teams at Gainsight today, and what are you seeing in your customer base?

Yeah, well, I think one thing which I think goes back to 2008 that we all have to watch out for is that there's a sort of knock-on effect and kind of second-order effects that happen. And so sometimes you don't see something even though it's happening upstream from you and it's coming to hit you, kind of like you don't see that, that kind of tsunami on the other side of the world that created a wave that's eventually going to hit you. And I do think that just being real with people, that's what's happening right now. If you're not seeing it, it's just because it hasn't hit your part of the business yet. So just to make it really practical, If you're a restaurant right now, you clearly are seeing it. There's no doubt. I really empathize with restaurants, and I hope everyone is doing what they can to buy gift certificates from restaurants and support them. The restaurants are affected. If you're selling technology to restaurants, you probably see it firsthand. I have a few friends who run companies that sell to restaurants and was talking to one a few minutes ago, and they pivoted their entire company to trying to help the restaurants because right now they can't buy anything. But if you sell companies who sell to restaurants, you're going to see it a little bit. And if you sell to companies who sell to companies who sell to restaurants, right? So where are you in the ecosystem? How far away or removed are you from airlines, hospitality, restaurants, retail, the front lines, right? And so if you are on the front lines, you already see it. If you're one degree from the front lines, you're probably hearing about it a little bit. If you're a few degrees, there's a dangerous thing where you may not be seeing it but it's gonna hit you. Now the reality is your business may be diversified. So maybe your customers are also telcos who may benefit from this, 'cause a lot of people are gonna upgrade their internet, right? Or healthcare, which although it's very crazy right now, the amount of spending in healthcare is gonna be massive. So what I would do if I were a CEO is analyze, well, I am a CEO, so I'm doing this myself, analyze my business and say, okay, how much of my business in parts of the economy that are gonna be massively affected by affected a little bit less? But I think the bottom line of all of this is everyone's going to be affected, particularly in new sales. We'll talk about retention as well. But your question here is about deals. I think every business is going to be affected. And whether that's a 20% slowdown or 50% slowdown, or God forbid you sell into the frontline industries, a 90% slowdown, everyone is going to be affected. And you're kind of kidding yourself if you're not. A friend of mine, the CEO of a SaaS company that's also kind of late stage like Gainsight, I don't wanna share his name 'cause I don't think he wanted to share the details himself, but he sent around a survey to a few dozen CEOs and asked the same question and found very similar results, Jason. If you average it out, it was probably anywhere from a 33 to 50% slowdown, but we're not talking 5%, we're not talking 10%. It's more significant than that. It's important for us to be honest with people about that, I think.

Yeah, I think if folks aren't seeing it, my experience is more anecdotal from the last week. There's one great CEO, I love him, that I'm working with. Last week he's like, I think I'm gonna increase my hiring, which we can chat about. And then yesterday he forwarded me an email from a larger deal saying we have a COVID-9 deal freeze.

Yep.

And so that's sort of what you would describe, I guess, as a second order effect, right? It didn't feel that in the front line and then bam, got hit literally yesterday.

As one principle I was going to share is I think one thing that's reasonable for you to think about as a CEO, founder, executive is whatever you're doing, everyone else is doing or more. So if you have your spreadsheet open of your budget and you're like, what can we cut? What can we slow down? Where do we stop hiring? Everyone else is doing the same thing. This is going back to the '08 crisis where unfortunately in 2008, what happened was every bank was looking at their assets and saying, whoa, we're going to run out of money really quickly. We better sell everything. Every bank was selling everything, but they didn't fully realize that every other bank was selling everything. We'll talk more about how we bottomed out of that, but you have to assume that other people are doing it. You don't want to panic because I do think we'll bottom out, but I think you want to be prudent that other people are going through the same thing. Back to you, Jason.

Yep. So let's tie that, because I want to dig in, but let's tie that to the next slide, which is I think something everybody's working on. You know, it's just crazy to think that we talk about this even 3 weeks ago, I couldn't imagine you and I chatting about this, but how much have you lowered your forecast for 2020?

Yeah.

I couldn't bear to go more than 40% on this for like your restaurant example. I just couldn't do it on Twitter. 20% haven't changed, which may be appropriate, right? If you sell into certain industries, maybe today is not the right time to totally reforecast. And 80% have begun some level of reforecasting. What's your general learning here? And like, how do you think about this with a sales team and a customer success team? Like, what do you think? What do you tell—

Yeah, great. So, so I think on the sales side, it's definitely a legitimate conversation to be starting. I think it's hard to put a number on it. I think probably you might be in the same boat that even we are, almost anyone else is, which is, you know, you're gonna have to lower it, but you don't know how much because you don't know what the impact is gonna be and how long it's gonna last. All these variables are big unknowns. So I do think that you— what I would recommend is scenario planning. So if sales are down by 10%, 20%, 30%, 50%, what are the different knock-on impacts? And we've done that modeling for our business. I think a lot of smart founders and CEOs are modeling lots of scenarios. Interestingly enough, I think very short-term deals and pipelines possible, unless you sell into the directly affected industries, that your forecast looks very similar. Like, you know, our forecast for our Q1, which ends in April, looks quite similar to where we were a few weeks ago. But I think that's a bit of a lag effect, right? So you kind of want to look 3 months out, 6 months out. I think the visibility is pretty low now. So I think to me, for new sales, planning for multiple scenarios, and then also appreciating a core principle I think happens in downturns and anxiety, which is anytime you're in a period of uncertainty long-term as human beings individually, but also as companies, I think we freeze like a lot of new decisions, right? So I think all of us can probably appreciate this. If somebody was like, hey, you want to buy a new car right now as individuals, you're like, I don't know, like, like I'm just trying to get through the next few weeks, right? So I think most people would be unlikely to buy a new car now. But, you know, are you going to maintain your car? Yeah. You know, you have to probably still drive it around a little bit. You might even need to get it washed or whatever. And so the similar analogy, I think, applies for software as a service, which is new, net new logo deals are going to be the hardest, particularly ones that are longer sales cycle, complex. I think your existing customers, and we can talk a lot more about this, Retaining them obviously is gonna be critical. And I think there's a tendency to status quo. The customers don't wanna break things that are working. And there's an opportunity on the margin to expand them a little bit because one thing customers are looking to do is reduce spend. And if they can consolidate vendors because they use 3 different vendors, maybe you can be on the sort of good side of that equation by becoming the consolidator. So I believe that your retention forecast will be hit 'cause some of your customers will go out of business and some will hit budget troubles. But your sales forecast will probably hit significantly more than retention.

It's a good— it is the car wash versus buying a new car is a great analogy. What do you think, um, maybe it's early, uh, because Gainsight's got pretty big customers now, but what are you coaching the sales reps to do with their time as sales cycles might lengthen for new logos? How can us, versus a CS professional, what should us if they're engaged with the new logo, but this is not a good week to close new logos, is it? Yeah, exactly. If they're in the pipe, they might actually close on time, right? 'Cause they've allocated the budget. But what do you, do you change your guidance to the sales team in terms of how to approach sales in the coming weeks and months?

Yeah, I think you change guidance. If you had a transactional business, I think you'd definitely change your guidance. For better or for worse, Gainsight is definitely more of an enterprise-type sales cycle. Which requires patience, and that means that things take longer no matter what. One thing I will tell you, and this is purely my data, but I think even this webinar is exhibit of this, people aren't eager to spend new money right now on new things, but they're open to spending time. And a key in sales isn't just getting people's money, but it's getting people's time. So right before this, we just did our Zoom version of a big in-person kind of executive event we were gonna do. like it was going to be in Napa and now it's on Zoom. And we did it this morning and like almost everyone showed up and they were super engaged because the reality is like all of you, we're all at home. Honestly, we're looking for distractions from like the crazy stuff that's happening in the outside world. And so I believe your customers are actually willing to spend time and almost eager for a respite. So it's time, if I was in sales or CS, to spend time with customers, not on the closing, because sometimes that's not appropriate, but on the evangelism, on the education, on more demos and discovery, and getting them ready so that when we get out of this downturn, which is a when, not an if, just be really clear, we'll get through this eventually, right? And get them ready so they're gonna be ready with their business case, their justification to their boss, and you're gonna see a big uptick in sales if you do it right.

Yeah, I do think that more discovery is a it's a quiet superpower or super activity today, right? Your customers want information from you. They want to learn best practices from customer success. Whoever you are, they want to learn more best practices. Everyone today has time to do that, right? Your customers do. Whether they're going to deploy budget tomorrow. Do you think— an idea I'm thinking about, and I didn't think about it in '08 or '09, because customer success was so nascent back then, right? As a discipline, at least. I've been thinking a lot lately is how do you turn a little bit of your sales force into a customer success army?

Yeah. Yeah, well, one thing, it's interesting, again, this is real time, like everything I'm sharing is things that we were talking about like 20 minutes ago or an hour ago, because that's how life works in this type of situation. One thing I talked about last night is, with our team, is we all as business leaders, and I believe actually even in the world more globally, need to learn to flex our resources right now. So like, let's use the analogy in the real world, right? Right now, wouldn't it be great if the people that are working in restaurants and bars that don't really have as many jobs now could all go work in grocery stores? Like, that would be amazing, right? Because the grocery stores need tons of people and the restaurants and bars unfortunately don't need any. And so we need flex in the economy. You need flex in your company. So at Gainsight, right, we have an amazing team that does in-person events, and Jason, you do as well, right? There's not much to do on that front right now. So how do those people help in virtual events or somewhere else? And I think the same thing, going back to your point, is how can salespeople help in customer success? Because everyone's heard me talk about customer success as a company-wide thing. Sales can help a lot, they have relationships, and to me, sales and CS doing planning right now on your big accounts particularly, and how you're going to kind of really embrace them and do even more calls than you normally would, that is the right thing to do. So going— a lot of people talk about not just how many accounts do you touch, but how deep do you go in those accounts? How many contacts do you have? Are you checking in with the lower-level people and the mid-level people, not just the senior people? If you're a salesperson, now is the time to go deep in your accounts for sure.

Yeah, I think I'm trying to think of— this is all real time for all of us, right? The rate of change is so fast. I'm trying to think of a metric or a KPI where there's a lot of companies that can be fairly large, but they're more sales-heavy than CS-heavy, right? We've talked about this for years. Folks need more CS, less sales. Yeah, percentage of your army. We're both the choir here, right? But what I'm thinking about is what sort of incentives and structures— if you're sales-heavy, how can you draft them into your CS team this week? And I've already seen it happening. but not— you have CS today or your sales team is a second resource, right? It's the restaurant person going to the grocery store. But how do you do that? How do you evolve quotas and KPIs? How do you evolve part of your sales team around driving up retention and NPS rather than bookings? These are like complicated questions, but I think worth wrestling with, especially for folks that are light on CS teams.

Yeah, I think it's a great point, and I think, you know, for a lot of companies, what I see is they'll introduce an incentive for sales, particularly on the larger renewals, to give them some extra kind of spiff compensation, right? And I think that's an opportunity to do that. By the way, one other thing that happens during a downturn is people look at the core sales comp plan, because, you know, we all have to understand that it's going to be harder to sell, so how do we redirect those resources? So you may even eventually revise the core comp plan, But if you haven't done that before, it's actually very complicated to revise the core plan and make people feel good. So a SPIFF is kind of an incentive on top of the core plan to help people kind of redirect their activities. And so there's an opportunity to have a SPIFF around renewals, particularly for your focused accounts. Like maybe pick a list of the 20 renewals that you could really use sales' help and give a SPIFF that says, okay, for every dollar renewal, we're going to pay this much to the sales rep in addition to whatever the CSM is getting.

It's a good insight, you know, that that's actually an area you have much better, at least more experience than I do. You know, you really, if you have to reforecast for the sales team, you really, I mean, these are, these are crazy times. We really would like to do it once a year, right, max. It's so much, so much to—

yeah.

So if you can defer that in this, if you have, if you can defer that with SPIFs or short-term incentives while you give yourself a little time to do that, In an ideal world, that would be better than reforecasting tomorrow if you're not able to do it.

That's right. And I think that's one kind of tying back to the whole concept of reforecasting. I think we all have to be mindful that if we had forecasted on Friday versus Thursday versus Monday versus Tuesday, we might have different answers. So we need a little bit of time to calm down before we make a judgment on what the next 6 to 9 months are going to be like. That doesn't mean we don't need to be prudent and particularly prudent on spending. But to call a number right now is really challenging.

Yeah, I don't know what the right amount of time is, but I can tell you what I've told folks is, yeah, you got to be prudent. If your business is not in freefall, and maybe we'll chat about at the end, I personally— you and I are both pretty quick, and you have, you've managed much bigger organizations than I have now, but I even need 2 weeks from today to come to some conclusions, right? Yeah, the other 2 weeks And I don't know how you felt, but I moved into wartime mode in about 6 seconds when I realized things had changed about 2 weeks ago.

And I can—

I'm very agile, but I need 2 more weeks to, from a data-driven process, to be analytical about some of this.

Yeah, I think that's right. I think that these decisions take a little bit of contemplation. And we'll talk about wartime mode as well. I do think that there's an element of being really, really aware of being able to deal with just the information coming at you at all times because as we sit here now, Jason, I haven't checked the stock market for like 2 hours. So I don't know if it's down 5,000 points or up 3,000 points or whatever. And so you have this level where you have to get comfortable with change being so rapid and not rattling you short-term. It's a hard thing for CEOs and founders to do, but it's what the world needs from you right now. Yeah.

What on that, 'cause we're gonna chat about that on the last slide, we could spend hours on this, but what on that, what's a quick, doesn't have to be quick, but what's your top improving communication hack that you're thinking about right now? How do you communicate better with the team without overwhelming them? What's the number one thing you've learned the last week or two?

Yeah, I mean, I'd say the biggest thing is that having some connectivity, especially if you used to be in an office, which a lot of people were, right? We ourselves were a mix of a lot of people working from home and some small number of offices, but now everyone's at home. And so what we started is a 7:45 AM Pacific Zoom call every day that is a pure connection call. Every day there's a different kind of thing. One day it was bring your pet to Zoom. One day it was go for a walk together where we had our phones and walking. And then this morning was actually using the Zoom drawing features to do like art together. Now that all sounds pretty silly, But the reality is you got to bring your team some peace and joy during the day so that they can then talk up, think about their customers and their sales, because otherwise, honestly, it's pretty hard for people to think about anything. So I think bringing your team some sense of connection and joy is very important.

So you're doing a daily cross-company standup for 700 first thing and not trying to focus on the drama of the hour, focus on something that connects people, right?

That's right.

It's a good idea. I'm embarrassed to say I haven't done a stand-up since it was Scrum style in quite a few years, and we're bringing it back next week.

There you go. Hasn't changed too much.

Too much. But it's the easiest hack that I can think of is for everyone to do a stand-up every day. Totally. This next one, I don't, you know, you can go down a rabbit hole on any conversation and talk about venture capital the whole time, right? I don't want to do that. But you have been a very successful fundraiser and a lot of learning. So I want to get your thoughts on the market and I'll share a few. And then I want to talk about this next slide, which is a comment you made on LinkedIn yesterday. But I put this VC poll up. This is the one that I think is the least accurate, least statistically significant.

Yeah.

But it's probably directionally correct as of yesterday, which is how much money are VCs going to invest? Same as in the past, 30%, and then 70% or less. Again, I couldn't bear prepare myself to do more than 60% less. But I can tell you quite— I'll share in a minute quite literally what I've seen. But as someone with a lot of top VCs on your cap table, what are you— but a decent amount of runway, what are you— what have you learned and what are you hearing in terms of venture capital overall?

Yeah, totally. I think that one— there's one dimension which is how experienced and successful is the VC themselves, right? And what's their relationship with their LPs. And you tweeted about this yesterday, so I'll let you talk about that. But I think the more experienced and successful your investors are, the less they're unnerved by short-term fluctuations, and the more they've honestly made tons of money in previous downturns. We'll pick Sequoia just because they write the famous memo. And they're such great investors that they know that although short-term, this is a big challenge and they need to get their companies through it, long-term, the investments they make now could be the next Airbnb or other big businesses like that. So I believe that some of the really successful investors are going to have like, look at this in some ways as an opportunity to double down. And I see some folks kind of taking meetings and things like that. I think the folks that are a little bit less sure, either they've had funds for a while that haven't been successful, or they're a first-time fund, there's going to be some tentativeness on their part. And it's totally human because they themselves have their customers, which are the LPs. And so I think if I were you, I'd look at kind of one thing, which is the fund that you're working with. Second dimension is where you are in the lifecycle. So clearly, like super hot companies are getting funded no matter what. HashiCorp announced their funding yesterday. I'm sure that it was done a few weeks ago, but they could get funded in pretty much any— What's that? Yeah, it wasn't done yesterday.

It was done yesterday, I guess.

They could get funded in any environment realistically, right? But I think that for a lot of companies that are on the borderline, It's going to be harder for people to get conviction right now. And so the area I'd be comfortable with is if you're long runway and you're doing fine, then don't worry at all. If you got a short runway, you're in that early stage, like seed, pre-A, some repeatability, not a ton, okay metrics, not great, I think that's one of the danger zones that you got to just watch out for. Is that it might be harder to get funding, being realistic, in this environment.

Yeah, I'll give you a good— like, I think where it stands today, and this will change in like each week, maybe even each day. I think for founders and other folks that are on this, I would model today 50% decline in the number of companies that get funded and 50% decline in the dollars that go out there. So basically so much, not only is the market down as much as 50%, right? Which is real, even if you're Sequoia or whomever, but VCs on yesterday, Monday is when most VC firms roll in and have their partner meetings. I can tell you from everything I see, all those meetings were on triage. They're all on where are we gonna put, how are we gonna support our companies, who needs it? A lot of modeling that was sort of shooting from the hip until recently. And that is both a distraction, consumes more capital on paper, and decreases the appetite for total new investments. So everything's— flip that around— everything's at least twice as hard as it was a week ago.

I think that's the good news. That's the good news. Yeah. That is very well said, Jason M. Lemkin.

So if you're— my only advice to folks, and we could talk, we could do a different one like this on fundraising in a week or two, but if folks have not adjusted from fundraising to at least thinking it's twice as hard, even if you're the same company, adjust today. Just assume it's twice as hard, it will take twice as long, and Zach Coley has put up a good post on LinkedIn. This is my last advice because I want Nick's point that a lot of prospects and customers have more time for discovery, which was very, a very good point. He made the point today that VCs have a lot more time for discovery. They're sitting at home in the Bay Area, or maybe they're in Tahoe or stuck in their home in Utah or Jackson Hole. And on Zoom, you can do a lot more calls than when you have to deal with the drama in the office.

Yeah.

And there are different types of investors. I'm personally not that interested in discovery, but folks that wanna learn a lot, they'll take Zooms and meetings they might not otherwise have time for. And that does not mean that that deal has a high chance of closing. So there's almost strain, can be strange signaling over the coming weeks where it might be easier to get VC's attention, but don't confuse that for deals not being much harder to close.

Well said.

But we can dig on that more different. This one, this next one for folks, I almost understood it, but it's so interesting I want you to explain it. We're seeing— this is new yesterday, I think— we're seeing a massive uptick in SaaS adoption across your customers. Let's talk about working from home. Are you getting a Zoom, Amazon-esque boost from— at Gainsight— from folks working from home? Decrypt this interesting data for me.

Yeah, so this— just so you understand the context of this, Gainsight has kind of several different products. One of them is our customer success platform. Another one is all about measuring how people are using products, basically analyzing where they're clicking, how often they're using it, and then doing in-app engagements to drive more product adoption, right? And those two products work together really well. That second product is called Gainsight PX, and because of that, we're sitting in kind of the, the JavaScript layer of hundreds of SaaS applications. And we were just looking at the data yesterday, and we're like, oh my gosh, usage is exploding across our customers. It's in a way that it hadn't in the last few months. So there's definitely like a significant uptick for some reason. We certainly don't know why, because we're just seeing the data, but it seems kind of intuitively obvious that's what's happening is that this, whatever is happening with COVID is driving people to use SaaS more. You can speculate, like I think all of us have done more Zoom calls than we ever have in our lives, right? So that's, I'm sure Zoom servers are running hot right now. But I think that's true for a lot of applications. What's that?

Zoom's like 5x if you look at some of the data.

That's insane. It's amazing. And if you look at a lot of other applications, I think there's a lot of scenarios where maybe more people are using the data because they can't— your application— because they can't go into the hallway and ask you what the data was. They're actually looking it up themselves, right? I'll be honest, I'm using like Salesforce more than I ever did before, right? Because I can certainly call up our head of revenue operations and ask what's going on with whatever. But, you know, honestly, that's more friction. Before, I might have been able to walk down the hall. Now I'm doing it myself. So I do think that SaaS companies— and I'd be interested to see if other people are seeing this— are getting it, going to get an uptick in usage. Now, most people don't monetize on usage, right? Most people are monetizing on seats and things like that. But it does mean that you're more important than ever before. So I do think this is a small kind of glimmer of hope amid some other gloomy news that we have here.

Do you— yeah, it is. Um, yeah, so, but, but, uh, but, but the Gainsight PX, the product experience product, has quite a few customers. So this 50% is across all applications. It's not just the—

yeah, it's an average.

Yeah, right, it's across all the applications.

Um, that's right, it wasn't a couple of customers. It wasn't a couple customers. It's very consistent, which is really surprising.

Yeah, sometimes CEOs actually don't know. In fact, you might not have known this until Ryan pointed this out, right, on the slide. I'm not saying you don't check all your dashboards, but you have a big company to run. If you don't know this, you're probably not pushing it to your customers either, are you?

Yeah, right, right. No, actually, I mean, this literally came up last night and we're like, we should talk about this. And I think this is something that everyone else should know about their application as well as their customers' applications if you're in the ecosystem. So there's a lot of data that you have or could have right now with very simple instrumentation that would tell you a lot more about what's happening in your business. And going back to what Jason said earlier, this situation is changing so fast that being real-time right now is more important than ever. Yeah, and for what it's worth, I'm seeing some—

we can tie this into the past in a minute, but my experience is not 100% telling for the present, but I strongly suspect that if you're seeing 50% increase in your customers monthly, daily, hourly users, if you, if you have this, you may not be able to tomorrow get a whole bunch more seats, right? Not only because you may not be having utility pricing, but also because this may not be the right time to ask for more money from every customer, right? Maybe from some, but I do think this is a great sign for —logo retention and customer activity, right?

That's right, well said. So I think this might be—

there's so much change. This might be sort of a new secondary North Star metric, which is activity in your application. If it's going down unexpectedly, that's a flag. That may be a retention flag. I mean, we've talked about this in customer success in the early days of Gainsight when it's red, green, yellow, right? Yeah, yeah, great. We've moved beyond that, but in some ways it all boils down to that. And maybe, maybe if you're seeing this with Gainsight PX or otherwise, if usage is up, that's a good sign for long-term retention. And reach out and see how you can do more. How can you help them even more if they're using it, right? Today, reach out and see what can you do for free just to help them do more with your product.

Really well said, right?

Okay, quickly, and then I want to go into the past. We hit— this is kind of— I want to make sure we hit everything. We talked about Gainsight as a case study and a SaaS leader. In case anything else you want to add to that from learnings as a case study that we didn't hit for now?

No, I think that's— I think the only other thing I'd add in is no matter how big your company is, everyone wants to help. So going back to Jason M. Lemkin's idea of sales helping in CS, what I would do if I were founder CEO is be messaging to people what they can do small, medium, large to help, and that's helping your business and helping your community and helping each other, right? So just to give 3 examples, and helping your business, you know, somebody actually put in the chat too, you know, this is a great time for lots of people to reach out to customers, not just sales or CS, to get feedback on the product, to learn, etc., right? So that's like one example. To help your teammates, you know, I think that one opportunity all of us have is to really tell each other that we're okay if a dog comes into the video or your kids, in fact, are excited about seeing that, to really help people through the work-life side and help your community. I'm seeing a lot of companies say, hey, let's help people buy restaurant gift certificates, let's help people donate to COVID relief efforts, things like that. So your employees want to help, you want to show them how to do that. That's good insight.

Just, we've talked about stress invention, the third one. I want to just talk about the next one. Gainsight's obviously gone quite enterprise, although I think In some ways, maybe with Gainsight PX, you have a little bit more of an SMB feel, right? Or mid-market feel. Right. I wanna share what I've learned, but what are you seeing now? And then we can talk about in the past on how these different segments perform in times of stress, enterprise versus SMB.

Yeah, so I think that obviously one caveat is that it's gonna be vertical too. So enterprise selling to airlines is obviously gonna be challenging, right? Yeah, we'll have verticals. So, but if you look at non sort of directly affected industries, I think broadly speaking, what I've seen and what's probably gonna happen is your things that are moving in enterprise are gonna keep moving to some extent. They'll slow down, but they'll keep moving. You know, customers will keep using whatever they have. They'll probably keep expanding to kind of meet the need of what their users are. There's probably opportunity to do more through consolidation. And there's opportunity to kind of get the sales cycles that have already started over the goal line. So I'm seeing that, that hopefully you can keep some momentum going. It might be a little harder to get things started in the very beginning because to get things started, you need a lot of consensus in enterprise, right? That's a big part of it is a lot of people have to agree and sometimes it's harder to get those people together. So I do believe it'll be a little harder to start enterprise sales cycles, but a little easier on the margin to kind of keep them going. On the SMB side, because sales cycles are shorter, I think that things happen more in real time. There will be some SMBs where you can sell to them and they have need right now and you're gonna be able to serve them. But I think there's gonna be a decent number that you'll get a, "Hey, we've decided to put everything on a hold right now just for a few weeks." And I think you gotta be empathetic about that. And one key is your messaging, right? So to me, messaging for your SDRs and reps is so important, right? Do not send out the coronavirus, like, email that looks like you're just taking advantage of the situation, but at the same time, don't not acknowledge it. So find the art of that email. If you don't acknowledge it, it looks weird. And if you make it like you're trying to sort of triumph and like take advantage of it, that's weird too. But I think being empathetic and maybe just opening up and saying, hey, look, I know you may be in a lot of, you know, thinking about a lot of different things right now and just making sure that, you know, we're here to serve you, right? But a little bit less of a hard sell. That's what I'd recommend in SMD.

That's good. You know, one quick thought I, that I, that I think may not, should be obvious, maybe isn't. I think that sales cycles and churn rates are highly correlated. Yes. So the reality is, and we'll talk about OA09 next, like very few enterprises that have budgeted you are going to churn today. And even if they do churn, it may be in a year or two with annual contracts. What's gonna happen in a year or two, right? The churn, the quantitative churn, best case is, worst case is sort of deferred in most cases, and we don't even know what's gonna happen. But the sales cycles are lengthening. SMB, I have a startup I worked with where yesterday was their best day ever for SMBs for specific reasons. Wow. The reason is the exact product they have helps folks today, SMBs, right? Today. Today. But you also see the other side, which is SMBs will look at their credit cards every single day and just cancel everything, right? Yeah, they're the fastest to come in and the fastest to exit. And so I think your, your churn for your enterprise customers in March is not going to change, just like you're talking about your sales cycles, right? But, uh, I think today you, you probably, verticals aside, you probably have to double the modeling you have for SMB churn. And they'll also be forced to re-adopt, right, when we bounce out of this, I think. Well said. But there, there, maybe you and I can write a blog post on this, but I do think sales cycles and churn, all things being equal, are correlated. It's just, it's just how it works. Totally agree. The last one won't help anybody individually because everyone knows their vertical like the back of their hand, but boy, it's different, right? And I was talking with a, with a, with a a very successful VC yesterday, as you discussed, and this VC's point I think was travel events and food and beverage, like crash and burn, right? Like massive triage already, right? ERP holding steady, and this is also— Yeah. But it's tough, and the one takeaway from that is I think it's not— why is that, right? It's not just because travel has— I mean, obviously it's ground to a global halt, but I think it's more that when you and I were doing this the last time around, there wasn't a lot of variable revenue out there, right? We forced ourselves to do all recurring revenue. We learned to— I mean, Twilio did pretty good with some variable revenue, right? Slack did pretty well flexing up and down with seats. But if you— the reality is we're learning that variable revenue contracts in tough times. It is what it is.

Yeah.

But anyhow, this is probably— I only put it because if you're a student of this, you might not see how widely divergent the impacts are. If you are, you know your business like the back of your hand. But like you said, your friend that ran a restaurant says, if you're in a tough vertical, you just have to tilt and keep your customers. Exactly. I mean, you know, the Eventbrite one I feel terrible with, but Eventbrite yesterday said they can't issue any guidance. Right? It's in that 2x2 of SMB and events, and there are no events. Yeah, right, right. Rebound because they have the best product, but it will be brutal. All right, you want to transition to the old days for a minute because I want to dig into these couple slides.

I like the old days and old PowerPoint templates. I like it. This is taking me back.

This is a happy PowerPoint template I made before our seed round, and I never changed it. I never— I love it. Uh, and this is an eyesore chart that my head of marketing made, but I'll admit these next two charts— back when I didn't understand recurring revenue until after we sold EchoSign, Adobe Sign, and I wrote that first SaaS-ter post of how it compounds. I didn't actually get what compounding revenue meant until about 2012. Um, I didn't realize how any of this worked, but now if we squint at this eye chart Like, this is us going into Q3 and Q4 of 2008 and Q1 of 2009. So that's when things went from terrible to worse, right? Just sort of fell off the charts. And this one at the top is interesting. If you look at these top two ones, so first look at the top. This is how many qualified leads we got in. And by the way, if you have 1,400 qualified leads, do not sell your company. Like, no matter what anybody tells you, never ever ever ever sell, because that's a lot of qualified leads, uh, before you even have $10 million in revenue, isn't it? Um, that's pretty impressive. But putting that aside and going to Nick, going to your point of engaging with deals even if they don't close, even as the, the world shut down in Q1 of 2009, look at that top, what happened with our leads. They didn't even decline in the worst quarter, did it? They just flattened out. That's it. Wow. Right? They didn't— believe it or not, they didn't decline. And the crazy one, especially think of with your, with your Gainsight hat on, is that white area are upgrades, are upgrades. And right, and they flattened, but they didn't decline, did they? That white box. It's amazing. So this is— we are probably— I got maybe $6 million in revenue. But that sector, while it flattened out when the global economy, when our banking system crumbled, which is not going to happen this time, upgrades just flattened because people were deploying technology. There must have been back then, as many companies as were shrinking, some folks were still growing. Or you know what they probably were, is they were taking silos and partial deployments and rolling them out enterprise-wide. right? Because that's right, other than the worst of times, if you're successful in a group or in a pilot and you're more cost-effective than the additional solution, there is budget even in the toughest times, right? If there was $1 million last year, there's $500K this year for a better solution. And so this is kind of my CS white box, which is— that's— this is my idea of why to redeploy your sales team into CS, because even in the darkest of times, the leads came in and the upgrades stayed. And then everything else had weird effects, as you can see below, we could chat about. And then this next line, I'm colorblind, I think it's blue, this increase in viral. I want to share what we saw and then I want to hear your experiences. This was our natural branded searches in Google going into Q1 of '09, the worst time, right? And again, to your great point of like, not everyone's ready to buy, but they do have time to discover. Look what happened when the economy, when literally our banking system essentially imploded, right? It was bailed out by the TARP. People were still, look at our growth in SEO searches in Q1 of '09. Like it didn't, it might've even increased like your PX example, right? It didn't even miss a beat. Did search miss a beat? Not one, right? It's amazing. So it's too, this has happened so fast this time. Last time we had like 8 months of crumbleness to get our arms around. We've had like 2 weeks this time. right, to get to the same place. But this may, it's not to be Pollyanna, but this search may even accelerate this time with everyone from at home. That's your Gainsight PS experience, right? People may be searching for even more solutions, even if they're not going to buy. And if you have any money in the bank and you're a market leader, this is the time to leverage that. This is the time, in my opinion, to get people into free trials, to get them into longer pilots, to do more content marketing, to do more like webinars like you did this morning, right? To get folks more and more exposed to your brand and offering, whether they're gonna buy or not today. Because if this slide keeps going, whenever we come out of it, you can dominate your market if this trend continues.

So well said. Yeah, I love it. I love that you're sharing that, by the way. And I think that that's what— there was a tweet yesterday, and actually I don't remember who put it out, so sorry for not acknowledging the name, but somebody said that we've been waiting for the catalyst for digital transformation forever, right? Like this digital transformation concept is the biggest buzzword in the technology, and yet this is actually the catalyst. Like what you're finding is if you don't have a digital strategy, there's no way to touch and talk to your customers anymore. And so I do think that, you know, in the long run, this is going to be a catalyst for people going more online than ever. Short run, it's gonna be really hard, as we talked about.

And so my meta-learning looking at this, and it goes to your point of what, you know, bringing people together on the webinar this morning and others. Look, if you can't push everyone down the pipeline today, stick more people on the top, right? Or focus on that top layer of the pipeline, or keep each layer of the pipeline activated in some fashion, even if you can't move it down. Because if you have this amount of— this is natural search, this is the very top of the pipeline, right? But even if you can't push them all down, if you can, if you can give them a webinar, if you can give them some content marketing, if you can give them best practices and teach them how to do their business better, if you can get them into a free trial, if you have one, do it. Right? Because we're all going long, right? We're going for a decade here, not for a week. So this, it'll all pay off if you see this sort of activity, even if you can't close it. And then one last one, and maybe you, you know, feel free to share any stories from the past, but this is just the third data point I had. This was a piece in Crunchbase about a year ago that a VC firm did analyzing the public company stocks last time, back in the day. And obviously there were fewer back then, um, but I found this interesting. Prior to the recession, of the basket of public SaaS stocks, year-over-year growth is 42%. It's probably what it is today, right, with the rule of 40, even with the crazy Slacks and Zooms, it's probably still 40 on average if I had to ballpark it. It's just the ARR is much higher. But this is super interesting, and I think we should model this as the game plan for today until we have more data. During the recession, it grew slowed to 12% a year. Now that's terrible, right? By Q2 was the nader, that was the worst part. And so you can look at this data in multiple ways. You can see, oh my God, that's like the worst drop in the whole world, right? Or you can say, holy cow, like, customer success, all this works, right? Because growth did not go negative in the SaaS ops. Growth just closed at 12%. And this is kind of the North Star that we need to think about of recurring revenue pulling at least many of us, if not all of us, out of this drama. I love it.

So well said. And I think that that's something that if you look at the 12% mathematically, that probably means most of it is coming from their customers. You know, there's probably some churn and there's some expansion and there's a little bit of net new. So that shows almost like a full floor on growth, which is your existing revenue and your customers. For not, not for every business, but for a lot of businesses.

Yeah, I mean, sure. I mean, it would be nice to know what— people didn't share the data as well back in the day. It'd be nice to know what the net retention numbers were like. Everyone shares.

Yeah, yeah.

But we can probably assume even with some issues, it was probably still north of 100 even back then, right? So probably 80% of this was from the existing base and maybe 20% was new logos. But it still saved us, right? That's right. Any other, and I wanna talk about, I wanna get to your 5 positive things and I wanna do one summary, but any other learnings you had that you, beyond these from back in the day that can help everyone listening?

Yeah, I think one other thing just to kind of like orient, 'cause I've been reading the chat and I think there's some great questions on there and one general kind of theme is, hey, this is different from OA, which it totally is, right? Like somebody asked me a few weeks ago, have you ever been through this before? And I'm like, you mean a global pandemic? No, it's my first. I was pretty young during the Spanish flu, right? But like, so we are all in the first time doing this, and we're not claiming to know what's gonna happen. But I think one thing you may not know if you weren't like working during '08 is it had the potential to be devastating. And if you wanna like get a little bit of a pick-me-up, read On the Brink by Hank Paulson. Which is about how the Treasury Department stepped in, and Hank Paulson specifically, and basically begged Congress to save the economy. Literally, if they hadn't done that, the Depression would have been worse than the 1920s. Basically, people had no faith in the financial system, which is a different problem. People don't fully understand how bad '08 was. This is different and very bad, but '08 was not good. I think the fact that people got through it is encouraging. I think the other thing is, in '08, I do think that there wasn't a clear thing about how you would ever bounce back, because it was a loss of confidence. In this world, there is a clear thing of how we bounce back in that it is a virus and sort of defeatable, et cetera. It's just unclear how long that'll take. But there's a little bit more belief in a light at the end of the tunnel. I'll tell you, in '08, at the worst times, Most people had no idea if there was any light at the end of the tunnel or like whether democracy would survive, things like that. It was very bad. So if you're young and you haven't been through that, you're lucky in some ways, but you might be missing out on how bad it was in a way.

No, I think, yeah, it's not the same, especially the rapidity and the externality. But for folks like, I mean, I will tell you my own version of that. I mean, it was literally, we've already injected $1.5 trillion into the, into the bank account the banking system in a day, right? That took us a year to do last time and drama, right? But it already happened. I'll tell you my first, if you wanna know how bad it was last time, as the world was, I mean, literally, first of all, to Nick's point, no one was sure we would ever, like literally ever recover. There was in many cases no hope because there was no reason. I got a call, I was actually at the last event that I did in that cycle, I was at an event I think it was in Half Moon Bay, and I'm having a coffee on a beautiful day, and I get a call from my banker at Citibank who I used through both my startups, right? So I knew him very well, and I had a great relationship. He's like, I'm not allowed to call you, Jason. I'm like, what are you talking about? He's like, but it's 11-something, and you need to get your money out of Citibank by the wiring deadline. And I said, what do you mean? He's like, well, Citibank failed this evening. And I said, Greg, I have 90 minutes. Where do I put it? And he said, put it anywhere but Citibank.

And what do you do?

And I called my VCs. They said, we have no idea. And I mean, that was a moment where, I mean, this is crazy today too, but that was literally the world ending, right? That Citibank, the largest bank, I had 90 minutes to get my money out. And I don't mean to be Pollyanna, and today is insane, right? I mean, this world is insane today. But if we find a way to bounce back in 60 days, 90 days, or whatever it is, it's not the same set of structural failures that we went through. And even not to be Pollyanna, but even going to that, looking at the slide, still grew 12%. Yeah.

Really bad.

It was really bad back then. The way people today just think, you're right, people don't understand how bad it is. Maybe we'll get there, but people don't understand how truly bad that is when your money is going to disappear at the number one largest, you know, US bank. I mean, that's almost impossible to understand. What do you do as CEO? Like, I don't know. Um, uh, yes. So I think that, and so, so, and then So yes, I think folks that are critical that some of these lessons don't hold today, I think those are fair points. But I also suggest like for folks out here, this is a great webinar. Do lunch and learns with folks that were around before. Like you don't need to hear all these Citibank stories and these horrible stories. But, but, but we, the folks that have done it before, we do know how to go into wartime mode. And it is different, but we can, we can benefit from some of this confidence in this 12% number on this slide. And I don't mean to be Pollyanna, but I think it would have to— for your average company selling into the right industries, I think it would have to be even worse for us not to ultimately— not to ultimately at least see the kind of performance on this slide. But, and so I kind of summarize it on this, and I want to get to your 5 positive things, Nick, and make sure we don't run out of time. But I was thinking, I did this on Twitter, just because so many folks have not been through this before, right? Here was my summary for everything, and maybe you could give give your version of advice. But I think this is my idea, roughly, if your growth rate was pretty good and your burn rate wasn't too high 2 weeks ago, you will adjust and find a way. We have, you have to reforecast, right? You need to do a little bit this week and solidify it in 2 weeks. But if they were, if your growth was 100% last week, maybe it's some verticals aside, maybe it's 50%, maybe it's 40%. And you're, but if your burn was not out of control, you'll adjust. If either of these were problematic 2 weeks ago, if your burn was too high and your growth was, was problematic, you're in trouble and you need to figure it out now. This was kind of my rough summary. Any feedback on that in terms of like the two camps?

No, I think you nailed it. I think you nailed it. The companies that were on the bubble are gonna be, it's gonna be more challenging, but the ones that were already over the line of sort of viability, it's just about adjusting a little bit, so.

Yup, all right, okay, so what, and I don't know how much time you have, Nick, but what were your five, talk to us, you put this together, five positive things 'Cause I cut straight to the data sometimes and the experience. What are the 5 things, you're better at this than me, much better. What are the 5 positive things that SaaS CEOs should do for their team to get us through this?

Well, thanks for saying that. Yeah, I think that, and first of all, just tying it to what we talked about, I think everyone heard this is different. This is an, every time it's a new challenge, but there's some positives that we'll be able to get through and some businesses I think have an opportunity here. On the business side, I think, you know, clearly focus on retention, focus on upsell. I think we get it. In fact, I just published a blog post on that. I'll put in the chat window. On the kind of team side, I do think this is where leaders are identified, right? Like this is where people figure out who the real leaders are, is in times of crisis. We can all think of our favorite like political global leader back in the 1940s, whether it's an FDR, Winston Churchill, anyone else. We remember those people because they stood up during the tough times. And I think it's important for us, for our teams, to really find that way to lead through this. So I wrote this blog post about my experience and honestly just remembering another tough time with 9/11 and how tough it was back then and kind of how, how we get through things together. And the 5 things very quickly were kind of gratitude, really just you kind of every day finding ways to thank people, making sure your team knows that you're still kind of working hard and kind of The show doesn't stop is number 2. So honestly, I have a packed calendar day, tons of customer calls. If I were your leader, I would share— what's that? You shared that on Twitter or something.

It was insane.

Your calendar was completely full. Yeah, right. And honestly, I'm not slowing down, and I don't— I hope that you aren't either. And tell your teams you're not slowing down. You're there to make the business. Number 3, you know, definitely take ideas. Like, I'm listening, I'm seeing the chat, learning lots of things too. We all need to work together together, to learn together. Number 4 is, you know, focus on your existing customers. Most self-serving thing ever, because that's what I do, but it's also true. Jason showed it in the data. And then number 5 is bring a little joy to balance out the negativity. I think that there's a lot of negativity right now, and whatever you can do to bring out some joy for your team, whether it's through Zoom, whether it's through Slack or something else, I think it's really important. It's on you.

Yeah. And what do you— and then maybe just two things. If you're a CEO and you're having a few moments of panic or concern and you don't have a great coach or mentor, any advice on what to do? How to get through those? Is it because it's— any advice on what to do if you're in a challenging moment that you can't share with the team?

Yeah, totally. I mean, I don't, I don't think there's anything super easy, but 3 things that I think are kind of quick tips. One is I think people feel better when they're doing things versus just being anxious. So I would literally schedule things to go do, you know, get like meet customers, ask them for feedback. If you feel like you can have an impact in the world, this is true for your team too, you're going to feel better. Number 2 is go help other people in your company and show gratitude. It makes you feel better. Number 3, very tactically, since we're all home, I think an opportunity to go out for a walk and like if you have to do a call, do it while walking. It's a huge hack. Actually, I got this from Deidre, the CEO of Workboard. She does walking AMAs with her team. And I love that idea. So we started doing them too. So get outside and walk. We're still allowed to do that. And I think it's a good way to kind of reflect that there's Still beautiful world out there and we just have some challenges we need to get through. But do stay home, everyone. Stay home and let's all get through this together.

And what about things— and do you have, Nick, when do we leave? Do you have 5 minutes for questions? Can we dig into the questions or do we lose you at the— I know you have that packed schedule.

Yeah, unfortunately, I do have a hard stop in a minute here, so I'll probably have to drop off, but yeah.

One question for you and then I'll stay on. I'll dip into the questions. Any— in terms of transparency, any thoughts on sharing all the cash flows and models and all that? Is there too much transparency? Transparency too much? Is it time for more, or should— does everybody need to know the cash position and the viability of their company?

Yeah, I think, I think share— it's all about your culture, right? But at Gainsight, we're very transparent, so we share that information. I think you want to share it in context, though. So just giving numbers doesn't do anything for people. Helping them understand what's the runway, what's the runway right now, what's the scenarios, what are you thinking? And how are you making decisions? I think that's what's really, really important. Yep. All right, Nick.

Well, let's let you go. You're a star for joining this, and I will figure out how to exit this window, and then I will stay on as long, at least for a while, for questions for folks that I can help with. And we'll talk to you soon, my friend.

Thank you. We're all in this together, everyone. Thanks so much. See ya. Thanks, Jason M.

Lemkin.