LIVE Workshop Wednesday: How to Grow Revenue Faster in the Second Half of 2023 with Founders Fund

I'm calling from Miami.

Miami, okay. We have a lot of things coming. Yeah, definitely warm. We have a lot of things coming in through the chat. Different parts of California, Minnesota, South Africa. Wow. Points to you. No idea what time it is there. Houston, Texas, Tampa, Munich, all over India, all over the world here, France. Thank you all for joining Brazil. Everyone gets every country imaginable here. All right, well, thank you and welcome back to Workshop Wednesday. Week after week we share interactive and hands on sessions that make sure we get your questions answered. So as a reminder, these sessions are short and people love to ask questions. So put your questions in the chat early. I try to get to everyone. I will be messaging you privately in the chat to see if you want to ask your questions out loud or you want me to moderate them for you. So get those questions ready because this will definitely be a busy one. We have Sam Blond, partner and partner at Founders Fund, also the host of our CRO Confidential podcast. Hopefully you all are listeners. He will be discussing how to grow revenue faster in the second half of 2023. I'm sure something that is top of mind for a lot of you. Welcome Sam.

Thank you so much. My Internet just went out briefly of course, but let me know if we ever have any issues. So excited to be here. Thank you for having me, Saster. And thank you for all the folks that are in attendance.

Great. I just said a bunch of good things about you so missed only the good stuff, I promise. I of course we are going to get things kicked off with a few questions to get to know you a bit better. First one being what is one of your favorite investments you or the firm has made in the past year?

Cool.

So I've been at Founders Fund now for almost 10 months. The investment environment both within the firm and broadly has been a little bit slow. But we've made two sort of headline investments, both of which I'm excited about because of the businesses and the price. So the first is Stripe and we wrote a large check in a round that valued the business around $50 billion, which is a nice haircut and an incredible business from its peak. And then we did OpenAI and so we did that earlier this year. Another just like unbelievable business that can be sort of generational company.

Great answers. And also both companies have been Saster speakers. Our next question, what has most surprised you about venture capital this year?

I think the so I joined in September and I remember when I was interviewing the first half of 2022 was a little bit slower and everybody was saying when I was interviewing, like it's been a little slow, but like we think it's going to pick up towards the second half of the year. And in the second half of the year it didn't pick up. And everybody was sort of saying we think it's going to pick up the first half of next year and then the first half of this year, like it didn't really pick up. So everybody is saying we think it's going to pick up the second half of this year. And optimistically, hopefully that happens. Certainly the public markets are rebounding and so if that cascades, we'll start to see more activity on the venture capital side as well. But I think one thing that not necessarily surprise more just like reality, it has been slower, which may sound like a negative thing, but long term for me and anybody that is investing in this sort of like 2023, 2024, 2025, 20 cohorts of startups, the returns on those venture classes are just going to be much greater than the prior few classes because it was so competitive, the price inflation. So not necessarily a surprise, more just sort of like a reality. And hopefully the pickup of investing that we keep talking about comes to fruition here momentarily.

Yeah, fingers crossed to the pickup. Okay, our last question before I hand it over to you. Who is one of your favorite co investors?

Well, this one is a bit of a layup for me considering at Saster Workshop Wednesdays. Well, so I've known Jason. Let's see, in 2008 I graduated from college and moved to San Francisco and one of my basically my first job out of College was at EchoSign. So I was an SDR manager, met Jason in 2008 and have sort of become close friends and just learned a ton from him over the years. And of course Jason is now incredibly successful vc. When I was at really more Brex than Zenefits, Jason would introduce me to his favorite VC investments and allow me to angel invest alongside him. And looking at my angel investment track record, the ones where I co invested with Jason are the outlier performers in a positive way. And so hopefully we can continue that relationship now that I'm with Founders Fund in sort of like a more formal capacity.

Great. And we scripted that answer for him.

We really didn't.

I found out about this question 30 seconds before workshop Wednesdays, but it's true. Yeah.

Well thank you so much. Agreed. Jason definitely has an eye, but I am going to hand it over to you again. Everyone put your questions in the chat and take it away. Sam.

Awesome well, as I said, thank you Saster, for having me. Thank you Caitlin for the intro and thank you everybody that is joining for your time today. We will jump right in. I will try and keep it brief, but I have a sort of reputation of talking a lot, so we'll try and buck that trend. The category today is how to grow revenue faster in the second half of 2023. Seems timely that we're entering July Q2 is over. I have one to two calls every day with a startup founder and, or a like sales leader or go to market leader. And one way that I often pick topics is like, what is the most common conversation that I'm having with folks? Uh, and so that is how I arrived at today's topic. And just for a context, setting general sentiment from founders and go to market leaders, we, you know, get on these calls that I have. I say, as I said on a daily basis, how did the first half of the year go? Almost universally it's like, well, first half of the year was pretty tough. Um, you know, we, we missed the revenue targets that we Projected in like Q4 of last year where we thought we would perform in 2023. I think that's probably more common than not for SaaS businesses in the first half of this year. Maybe we reforecasted our revenue target because of that miss but for the first time, I would say in certainly like several months, there is like a bit of optimism that follows that it was a tough first half of the year and people just like the sentiment is more positive. And at the end of Q1, this, this like positive sentiment didn't exist. It was like tough Q1. We're bracing for a tough Q2, but now the conversations are more tough. First half of the year, but it seems like there's like light at the end of the tunnel. There's some like, positive trends in the business. We're excited about, you know, certain opportunities. And there are public data points that are reinforcing that like positive change in sentiment around public markets that are rebounding even more so today on a positive inflation, PR and layoffs have slowed. I remember first quarter of this year, maybe Q4 of last year, it was like every day new layoff announcement. And in turn like, at least in part because of these layoffs, burn has come down mostly across the board. And so folks have been able to extend their Runway and people are just feeling more positive about the business than they were in. Let's call it February, March, April, maybe even maybe. And so that sort of transcends into the number one question that I'm being asked right now, which is what should we be doing to start growing faster in the second half of this year given sort of like positive sentiment change that is taking place? And so that's where we'll focus today's deck. This is sort of how I approach the conversation on an individual basis. But what I'm going to try and do is just have that, that conversation I'm having one on one with, with a group setting. And so we'll see how that goes. The first thing that I do is I ask a few questions about the business itself and specifically about the go to market strategy or the go to market funnel and how things are performing. And so we start with things like how many qualified opportunities are we creating each month? And even at a very early stage, businesses should have an understanding of how many qualified opportunities we created in June. I then asked like, okay, and how many qualified opportunities is that per sales rep? What do our conversion rates look like? How are these things trending over time? Do we have an implementation backlog? How long does it take to onboard a new customer? And I just try and get sort of a high level understanding of the customer funnel as it exists in the business today and some of the trends associated with that. And so, you know, maybe the takeaway from this slide is you just want to have sort of a baseline understanding of how the business is performing at a very early stage even. And we'll get into why in a couple of slides here. The next thing that I try and do is diagnose the bottleneck to closing more revenue. And I'll sort of start this with the bottleneck in four out of five companies that I speak with is opportunity creation. It's demand gen. And this is oftentimes misdiagnosed as conversion rates. And so when I first asked the question to folks, which is like, what is the largest opportunity for us to grow faster? Like, where is the bottleneck? Is it conversion rates? Is it top of the funnel? Is it implementation most folks will sort of gravitate towards? At the end of Q2, we had a couple of these big deals that we had been tracking for much of the quarter. And those deals, they didn't convert, they pushed. And so what that meant was we weren't able to hit our Q2 revenue targets. And so, gosh, had those couple big deals converted, we would have been in a much better place. And so I would say, you know, let's figure out how we could get those deals to convert next time. Around or get those deals to convert faster. And that may be true, but the next thing that I do is push back a little bit on that and just try and get an understanding again of the demand gen environment and an easy way of doing this. As I say, how many opportunities per AE are we creating on a monthly basis? And there should be a number for that. And it's easy math. Like how many total opportunities did we create in June? How many, how many sales reps do we have? Like there's your number of opportunities per sales rep. Another way of doing this that is a really helpful test for me is I pull up sales reps calendars and it's not one size fits all because enterprise sales is going to be very different from transactional sales. But what I like to see is something like two new demos every day on a sales reps calendar. And what that means is a sales rep is doing something like four customer calls every day. So if we think about a sales reps day, there's something like eight hours in the day. We want to be spending something like three to four of those hours customer facing. And then of course that leaves us with, you know, four or five hours to do non customer facing activities, follow ups outbound, whatever those things may be. And what I see more often than not is that that environment doesn't exist. Calendars are relatively empty and or the blocks that exist on calendars are not customer facing activities. They're things like you know, a prospecting block or the gym or internal meetings. And so it's important to both pull up the calendars and also see the time is being spent to diagnose if we've got a demand gen problem or if we're actually like swimming in demand. And that isn't the bottleneck. If you get to this point where calendars are packed, you're sort of inundated with demand. You then want to sort of move down the funnel. So are the leads converting? And if the leads aren't converting, why not? Is it, is it a quality issue with the demos? Do we have product market fit issues with the. These prospects aren't closing. Do we need sales training? Is it that our sales reps are not educated enough in the domain to be able to sell this product that otherwise would be sort of flying off the shelves. So again we're sort of like trying to diagnose what the biggest constraint to growth here is. Again with the caveat, like more times than not it's demand gen. And then lastly, you know, if all of these things are happening. The bottleneck could be implementation and onboarding. I referenced Jason referring me companies to Angel Invest in. There's, there's one that's performing quite well right now. And I think they'd be comfortable with me highlighting this because it's a good problem to have. Owner.com Jason introduced me to the company. Jason's an investor. Their bottleneck is implementation. They have a lot of demand. They have a lot of customers that are signing up. And right now it's just taking too long to onboard those folks that are raising their hand and saying I want this. And so the sort of like prescription to fix that is different. But before we get there, we've got to really diagnose what the bottleneck is. Whatever it is, again, it's likely to manage and figure it out. The next thing that I do on these calls is I get an understanding of how the go to market organization maps to the customer acquisition funnel. So how many people do you have dedicated to generating demand? And it may be something like we have a marketing leader and we have four SDRs. Okay, great. How many people do we have further down the Funnel? We have 10 A's, so one head of marketing for SDRs. 10. 10 AES. Okay, great. And are the AES outbounding? And if the AES are outbounding, what percentage of your closed revenue do we attribute to a outbound? And so then again, we're just trying to sort of like map the existing resources both by Persona and then also activity to the acquisition funnel. And we can see where people and focus is concentrated. And then you'll sort of like see the next thing that we do here with this information is are these people and are, is this focus being mapped appropriately? And so if we have one marketing leader, if we have four SDRs and we have 10 AES and these 10 A's, like in theory they're outbounding, but they're not really generating a bunch of closed revenue. Well, like the bottleneck is demand gen. Most people and most of people's focus is, is further down the funnel. We have sort of a resource attribution or allocation issue on our hands. And again, like this is true with most companies that I talk to. And so the next thing that we want to do is we want to right size and refocus the go to market organization based on the bottleneck. If the bottleneck is demand gen, which most of the time it is, we really want to have all hands on deck applying pressure to this bottleneck. And so what that means is if we have a bunch of AES that are sort of waiting around for demos to fall on their calendar like manna from heaven, we need to change that. And the way that we change that is we either shrink the AE team or we have the AE resources and go towards demand gen acquiring their own customers. Now, as companies get larger, the latter thing that I just described is harder to do. This sort of like culture of outbound where AES generate their own demand and ultimately source their own revenue, it sort of becomes ingrained in the culture. And I have seen companies really struggle with making this shift. And so if you have a mature sales organization that historically has not done much outbound, has not generated much demand and revenue on their own, it's hard to change that. And it's a muscle that like maybe hasn't been worked in a long time for these sales folks. And so what you may find is the right decision is actually sort of like shifting resources around. It may mean you have too many AES. And I see this as a hangover for a lot of companies where we sort of staffed up in 2022. We hired a bunch of AES when money was, was easier and we thought that we were going to have a bu demand. And now we have like these leftover AES but you know, they aren't closing as much revenue. And the reality that I think a lot of people miss, and it's counterintuitive, more salespeople does not mean more sales. And when you're in a demand constrained environment, if you have, let's, let's just use this 10A example to just like further, further this along the line. So if you have 10a and your demand constrained, meaning each AE is getting, let's call it a few opportunities each week. What you're doing is you're spreading the limited demand that you do have across 10 people. And there's going to be performance variance across those 10 people. And so if you shrink the team to, let's call it seven, you know, like very plain speak here, like you fire the three worst performers on the team, you have just taken the sort of conversion rates on the opportunities that were going to the three worst performers, those demos now have a higher likelihood of converting because they're going to salespeople that have a higher chance of converting them. And so in this scenario, it's actually sort of like addition by subtraction. You will close more revenue with fewer salespeople when you are in an environment that is demand constrained. And this is a conclusion that I'M coming to with a lot of companies, it's certainly not one size fits all. Again, just sort of like go back and do this test for your specific environment. But a lot of folks like there is a mismapping of people and focus based off of this bottleneck that I described. And so that is how I sort of start to get to the outcome of generating more revenue in the second half of this year is diagnosing the bottleneck, applying pressure on that bottleneck as much as we possibly can until it moves somewhere else. Now, we can in the question and answer period, if there are folks that are in the sort of pleasant environment of the bottleneck not being demand, we can, we can get into solutions around how to fix those things. But As I mentioned, 4 out of 5 companies bottleneck is demand. Let's talk about some things that I recommend to help remove that bottleneck beyond just the sort of appropriate mapping of resources. The first one that I think folks oftentimes miss and I certainly have, is to leverage your happy customers. There's an example that I'll give here. A company that I'm on the board of that Founders Fund, large investor, I'm close with park firms and if it's Rippling, does a really clever way of doing this that I like. So they onboard new employees through their software thousands of times a day when one of their customers hires someone and what they do is they give an NPS survey at the end of that onboarding. So when I joined Founders Fund, I onboarded to Rippling and the NPS survey. I market whatever I mark it based off of my experience onboarding. I probably marked it a 10 and then I would receive an email if I market nine or ten offering me, I think they give like a $25 gift card that if you post on LinkedIn about your experience onboarding with Rippling, we'll send you a $25 gift card to all the nines and tens. And so then on LinkedIn when I go search for like hashtag Rippling, hashtag sponsored, I can't remember. I think that's the way that they figure out who's doing it. There are like countless posts from people that have onboarded to this product and it's free. I mean, I was about to say free marketing. It's $25 marketing. Like, and it's marketing from what is, at least in theory, this like impartial third party versus a paid ad on LinkedIn. And I thought that was just a really clever and effective way of doing it. And many of these posts have like dozens, if not hundreds of likes about people sort of raving about their onboarding experience with rippling. The next thing as it pertains to leveraging your happy customers, reward the right behavior. If you see someone post on Twitter, LinkedIn, whatever, something positive about your company, send them something like send them a handwritten thank you note and whatever you think is like a cool thing that they would appreciate some, let's call it like a gift and just like positively reinforce the behavior that they have gone out of their way to do to help your business. And when you do that, it will likely generate more of that type of behavior. And then another example would be like if somebody refers you a customer, maybe you don't have a formal referral program in place, but one of your happy customers told, you know, one of their friends or colleagues that they should check you out, send them a thank you for that, like hand, like either handwrite a note or get a handwritten note done for you in an automated way and send them a bottle of champagne or like something that you know that they like, whatever it might be. And then lastly, one thing that, let's see, I'll try and time box this to maybe 10 minutes. So we leave 25 minutes for questions. One thing that I recognized at Brex and this happens organically, all of the focus of the business when you first start from a go to market standpoint is on customer acquisition because you don't have any customers. And so you hire folks for demand gen, you hire folks for closing customers in the form of salespeople. And over time you start closing a bunch of customers and your customer base grows. And one day I was looking at a report that was relevant to a meeting that I was in and we could sort of cheat at Brex in that we could see the payments that were flowing to other cards we linked to folks bank accounts and we could see how much they were paying us and we could see how much they were paying American Express. And I saw one of my friends that works at a company that I had recently closed, they were still paying American Express $100,000 a month. And I texted him and I said, hey, I still see you have a hundred thousand dollar Amex bill or you're paying $100,000 to Amex, like any reason keeping that on Amex and not moving into Rex. And 30 seconds later I had an email in my inbox to me and his CFO and was like, hey, CFO Sam flagged that we have $100,000 going to Amex. It's probably like some legacy subscription. Can you move it over to Brex? And they did. And $100,000 card spend, if we have 265 basis points of interchange, that's, let's just call it 2500 dollars a month in revenue, that's $30,000 of top line revenue that took like, you know, text message to move over. And what I realized at that moment in time is we had a real missed opportunity on expanding revenue within our customer base. And so this goes back to sort of like mapping resources appropriately. What we did was we took one sales rep and this was when we were something like eight folks on the sales team and we moved him or her to being dedicated to expansion in the base. And he looked at these reports exactly as I just described. Where is there sort of an upsell or expansion opportunity? And he would reach out to folks. I think it was a he. And he was just closing more revenue than the new customer acquisition folks. And so we knew that that was a sign that we were under resourced in focusing on expansion and upsell. And that oftentimes happens sort of organically. As I described it, where you start a business, you're hyper focused on new logo acquisition, but you start building this base of customers and over time there might be a real revenue opportunity that exists within the base that you are sort of underserving. Okay, back to very top of the funnel and ways to generate demand. Don't be conventional. This is like a broad category. Don't be conventional. Get creative. Here is an outbound example for what I mean by that. Most folks buy Zoom info and outreach and you know, Salesforce or whatever the systems are, they go to LinkedIn and they add accounts to Salesforce and then they use zoom info to get the contact information and then they put them in like a 10 email sequence in outreach and the response rates are like, you know, 0.8% or something outrageous. And like, you know, maybe it ultimately it like eventually works, but it's few and far between and like, you know, a lot of wasted effort along the way. The first outbound campaign that we did at Brex was we bought 300 bottles of Veuve Clicquot champagne. So those are like 40 bucks each. Good enough champagne that people are going to break. Excuse me. Good enough champagne that people are going to drink it. Not expensive enough that it's going to like break the bank. We're not sending bottles of Cristal or whatever. I think the entire campaign cost us something like $20,000. We sent the 300 bottles to early stage tech founders who had raised money in the last six months. Handwritten note that was sort of automated through a handwritten note service. And it said something like, congratulations on your recent fundraise. We're, you know, an early stage startup and know like how hard it is to build a business. We're cheering for you, Enrique, who's our CEO. And then we would follow up with an email to see if they would be open to taking a demo and be from Enrique. And it would say, hey, just wanted to see if you got the bottle that I sent you. I hope you enjoy it. With the team wondering if you'd be open to checking out Brex and the stats on this were like off the charts. It was like 75% champagne to demo conversion rate and then like 75% demo to close rate. Now like Brex is. Brex is like free in a way. We made, we made money on interchange and so 75% conversion rate is extremely high. We weren't asking for a check. And I guess my point in saying that is I wouldn't necessarily expect that 75% conversion rate from demo to close to apply to other businesses just because the barriers to closing deals at Brex were lower. But and by the way, I'm also not saying don't go send everybody bottles of champagne. This is more just an illustration of the primary point, which is don't be conventional, think outside the box, get creative. And so that is an outbound example that was really effective for us at Brex. The next one I'll talk about is events. Most people buy a booth, they send their best sales reps, they show up with like some tchotchkes and they raffle an iPad. If we scan your badge like, and, you know, we pull your number or whatever from the fishbowl, you get an iPad at the end of the conference. And so then you get like a bunch of people stopping by the booth, a bunch of random badges that are scanned that have nothing to do with buying your product. And you come away from that event and you're sort of like, gosh, like, we scanned a lot of badges, but we didn't see much revenue from it. And that is like what most people do. Brex did things very differently. We definitely did buy the booth and you sort of need to have a physical presence at the event. Saster was our best performing event. So encourage folks to take advantage of this with the annual. But we didn't just buy the booth, we did a bunch of sort of ancillary supporting activities that made our sponsorship far more effective. We sponsored the hotel key cards so that anytime anybody checked into the hotel that was associated with Saster, their room key was a Brex credit card. And so they were just like constantly looking at a Brex credit card because they would go in and out of their room multiple times a day. We had taskrabbits standing outside the event handing out breakfast burritos. So there was like an immediate branding opportunity for us. We got the billboards around the event and so as you were walking to the event, you saw Brex branding. And at our booth we had this magician who incorporated Brex Brex's value prop into his magic tricks. And so whenever I looked at the expo hall, Brex's booth would be like packed with people watching this magic show and all the other booths would be empty. And we would probably give away like, you know, a handful of $25 gift cards at the end of the magic show or whatever else. And then we would have sales reps that were scouting the crowd and seeing who is our target buyer. Are there founders that are watching this magic show? Are there CFOs that are watching this magic show? And if yes, like, I'm going to go talk to those people and sell to them. And so we, like, we're unconventional with our approach to sponsoring events, I guess is the, I would say long story short, but it was sort of a long story. And then the last example here on this, like, don't be Conventional, get creative. 2018, when Brex launched, most startups were spending a lot of money Online. Online advertising, LinkedIn, Google, wherever you see online ads. And we wanted to be contrarian or different and we wanted to go offline. And so what we ended up doing was we bought a bunch of billboards. We had a geographically concentrated target market that was tech startups and most of the startups were in San Francisco. And so we bought a bunch of billboards in San Francisco that was really effective. And it was also really helpful with our Outbound because when we sent an outbound email to somebody whose headquarters was in downtown San Francisco, the probability of them replying was significantly greater than because they had seen our billboards everywhere. And so that's sort of like a brand tailwind effect that that campaign had on Outbound. The runner up, because I've, I've used a bunch of these examples in the past, probably at a bunch of Saster talks, the runner up for this was actually coffee stands. So what we considered doing was we were going to Put a bunch of like high end coffee stands downtown San Francisco. And if you've ever been to downtown San Francisco, maybe before 2020, you would see like a bunch of carts. They were like carts that would do lunch and coffee and whatever else and they were sort of like, you know, day carts that would probably show up in the morning and then they'd be gone by five o' clock in the afternoon or whatever. And so we were going to get a bunch of Brex branded coffee stations like high end espresso machines, make lattes like whatever people like to drink in the. And if you weren't a Brex card holder, you paid for it like any other place. But if you showed your Brex card with your name on it and your ID or something like that, so we made sure that the name would match the I.D. you got free coffee every day. And it would be like a major perk for employees that had company issued Brex cards. They got free coffee every day and like good coffee, like you know, espresso machine legit stuff. And so those are sort of like the non conventional examples that come to mind. When most folks were buying Google Ads, we were buying billboards and thinking about doing coffee stands outside of our customers offices. Now like don't do the coffee stand example, come up with whatever is sort of like best for your business or on brand do, you know, late night whiteboard session where everybody comes with three ideas on unconventional customer acquisition tactics and maybe vote on the best ones and do those. But that's where we landed with Brex. And then the last thing that I have, and then we can open it up to questions. For most companies, AES really should be sourcing their own revenue. There's almost never going to be this perfect equilibrium where you have exactly the number of demos and opportunities that you're working that mean that as an AE you're filling eight hours a day. And maybe in like, you know, boom times that equilibrium exists and maybe even you're more busy than you don't have enough hours in the day. But there's like an ebb and flow here and many times you don't have a full eight hours of work to be doing as an ae. And I would argue the second highest ROI thing you can be doing besides customer facing, closing customers, working opportunities is sourcing more opportunities, generating your own revenue. And so I like to instill it sort of an early stage or as an early stage if possible, that AES should be sourcing their own revenue. If they're not and they're not hitting quota. You have too many AES. You should be spreading around the limited opportunities that you do have to the highest performing a is and you will close more revenue. So those are some of the ideas that come to mind on if your bottleneck is demand gen. Quick recap and then we'll open it up to questions. Make sure you understand your go to market performance metrics. Using that information, diagnose the biggest constraint to growing faster. Map your existing team to your customer acquisition funnel. Does that align? Do we have most of our resources applying pressure where the bottleneck to growing faster exists? Make sure, as I said, you're going to market resources are appropriately mapped. And then lastly, more salespeople does not equal more sales. Maybe I'll add one on the fly here, which is be sort of unconventional in your approach to customer acquisition and don't just go through the motions showing up at events, paying for online ads and doing the things that every other tech startup in the world is doing. Cool. I think that is it. So I will stop sharing my screen and then would love to take some questions.

Yeah, we have a ton of questions. Thank you so much for that presentation, Sam. I am always down for a champagne campaign and free content coffee. So I am definitely your target audience.

Reinforce that. Sorry to interrupt Caitlin, but like for, for those like this is. This is a, a rhetorical question. Like when was the last time just out of the blue you got a bottle of like decent champagne that you would actually drink in the mail and. Or when was the last time like you could just get free really high end coffee based off of, you know, being a member of like it just doesn't happen very often and so you want to do things that are like differentiated in that way. Sorry Caitlin, continue.

No, it definitely does not happen to me enough. If anyone wants to send feel free.

No Sam, I think, I think it's actually gotten worse the last 18 months. I think marketing budgets have gotten cut, marketers are judged by instant return and there's huge pressure on upsell to sales teams. So I see less and less energy going into the extra mile. Right. The extra mile for prospects and customers. I see it almost having evaporated as an overreaction to the current macros.

I totally agree. And, and to reinforce that point, Jason, both on like a lot of the things that I mentioned, they do cost money and so that's counter to what a lot of folks are saying right now, which is like cut, cut, burn, cut costs and probably why we've landed. Jason, where you just described which is like a bunch of these creative, clever, cool marketing tactics being less popular today than historically. But, like, let's just take the example of you see a customer post something really nice about your company on Twitter. You see a customer refer you a really great new opportunity, a handwritten note thanking that person. It's nearly free, like, the postage, and it takes a little bit of time, but, like, send them a handwritten note. And Jason, to your point, like, I never get handwritten notes. Like, nobody ever sends me a thank you note for anything. And if they did, I would remember it. They would stand out. And that is something that, like, it's not technically free, but it's pretty close.

Yeah, it's. I don't want to. I want to make sure you get to your other questions. It's. It's actually so easy to stand out. So few people go the extra yard in sales, marketing or customer success. It's so rare, right? Everyone's running the same programs, the same cadences, the same vanilla stuff. And if you go the extra yard on this stuff, you'll. You will stand out today. Right? You will stand out.

Agreed. And I know how hard it is for me to get to the post office, so I'm always impressed if someone else can.

Hey, related to that again, sorry, One more question for you, Sam, and then I will shut up and let the other folks do the questions. But what I'm starting to see now in the second half of this year, related to the point, I'm curious what you see across Founders fund or companies that angel invested in. I am starting to see sales teams bearing the price for no pipeline being generated. In the first half of the year, marketing spend was cut back so much that now we're paying the price. We are naturally paying the price of the pipeline not being there because hooray, hooray, we cut our marketing budget in half. I. I know there's no existential answer to that per se, other than that we'll now see the mistakes of how we did it. Not that we did it, but how we did it. But are you seeing this too? What are you learning from. From not having done any marketing for a year in many cases?

Well, that. Absolutely. And that is the cause of sort of where I started with the. The deck today, which was we have too many salespeople and not enough demand. And that is what I'm hearing on, like, four out of five calls that I have with founders and sales leaders. And that is a consequence of. Or one of the consequences of what you just described. Jason, which is like, at the beginning of the year, we made the decision to cut marketing spend, but we kept on the salespeople, or we kept on, like much of the sales team. And now we have more salespeople than we do demand. And so, yes, that is sort of what has led to the environment that I described at the top of the call.

Yeah, but I think that's great. It's almost twice as bad. Not only did we do that, but by generating no pipeline, we created this downward spiral. Right. As bad as it was, it gets worse as the year goes on. It's getting worse. There's less and less. It's like the writers strike. I don't watch a lot of network tv, but at some point we're going to run out of network TV to watch. I don't. That's the story. But right now, it's no big deal. You can still watch YouTube, but we're going to run out of legacy pipeline, aren't we?

Yeah. These things generally don't take effect overnight. So when you slow the spigot of demand gen, you know, spend or campaigns or whatever, you see some effect immediately, but it really takes, you know, a couple quarters to realize the full effect.

Yeah. I just think this is for a lot of founders that are listening or watching. I think this is a for. For folks that have always been efficient, they won't. They almost won't even understand what we're talking about. But for folks that were inefficient, there's another whammy to come that founders haven't fully reckoned with is the cost of not marketing. And now you're in a tough spot. But it's always hard to be a founder. Folks are going to have to figure out how to do more marketing with the same budget. Right. You got to do more. You can't. You can't do none. Right. You can't do none. And too many folks I've seen have done, you know, not literally none, but close to none. Right. Cut it. Cut everything that doesn't have an ROI of this week. Right. And so it's. Your job is getting harder as the year goes on. Even though I think things are getting better in SaaS. Things are bouncing off the bottom, multiples are up, inflation is down. You've got this one whammy coming, which is you got to figure out how to get. Do more marketing. You have to do. You have to do more marketing. Right?

Totally.

All right, Caitlin, Sorry, let's go to the questions. I just thought it's a It's Sam touched on a million great things.

Yeah. No great additions to that. Our first question is going to come from Ryan Bostick, if you want to unmute yourself.

Yeah.

Sam, thanks for today and thanks for London. You did a great job. I love hearing about the former employer. I moved to the Bay in 2016, so I saw all your billboards, especially during the pandemic. A lot of their billboards seemed to stand out as you were driving down the street, but I think I even saw a couple of the crazy little ones that y' all put above hotels. But anyway, great job. My question is we're fixing to finish our seed round, and during Yalls pitch, the founders Fund, it was clear that you guys are like series A and up, I believe, or B and up. So it wasn't something we would have ever pitched to y', all, but we found the investors we needed. We found the support we needed. My question is, if you took on a younger startup with a large investment, what would be Yalls advice of how to kind of allocate those funds? I need six roles filled. I can afford three. And it's like, who gets the. The extra person? Because right now there's just four people on the team, me and SDR and two engineers. So definitely need an engineer. They're definitely going to get someone. So that's one. The question is how do I spend the money on the other two.

Yeah, it's a great question. Jason might have some interesting insight, but more. More educated, certainly insight on the answer than I would. First, congratulations on the fundraiser. Second, just as a flag, we invest in companies at all stages. First, check in all the way to, you know, as I mentioned, we did stripes latest round. So as late as. As late as they can be. And in terms of the sort of allocation of those funds, I would go back to this constraint or bottleneck diagnosis, certainly on the go to market side, and then like sort of apply that to the product side as well. And if you have limited funds, I would be putting those towards resources that can be people or activities that solve the biggest constraint or bottleneck that exists in the business today. And so I'm trying to think of a specific example. Jason, you'll do a better job of this than me. But yeah, like I said, you know, I wouldn't be hiring a bunch of salespeople and having them focus on closing a limited number of opportunities. I would be focused on generating demand. If that is the constraint right now to growing faster.

I think that's for what it's worth, if the question, Ryan, to simplify is I got money, I can hire two great people. I need four. Right. That's essentially the question. Right. And I assume you're really talking about executives. Right? More senior folks. Right. I think the theoretical answer, if you're an insane recruiter like Sam, and Sam is a very good recruiter, I'm sort of a B level recruiter and I'll explain the difference. I think Sam's an A plus recruiter. If you're an A plus recruiter, you can, you have the luxury to do what Sam did. You can look at the plays on the chessboard and you can say, I'm going to put, I need. What I really need is demand gen. I need a head of demand gen ahead of growth. I believe in that classic old Saster post. I hired my VP of marketing at 20k MRR. It wasn't a month too early. It's true. Right? If you're a slow recruiter or a mediocre recruiter, then I give you dissonant advice. Then I say hire the best VP you can possibly find in any role. In any role. Don't screw around. If you're at your stage and you're like, I don't need a great VP of product yet, but you find the best one in the world and he or she can help you build 10 other features you wouldn't get out and you can close 100k deals from that, hire her. If you don't think you really need sales, it's a demand gen problem. But you meet the next Sam Blond somehow and he's excited about your company, hire him. He will figure out how to get you more leads. Right? And sometimes if we're not incredible recruiters, we spend way too much time planning what's the next sequential hire when the right answer is higher that every great VP is recruiting is accretive and there's literally a company of 50 million SAM and I are both investors in. And I was just talking with the CEO about this and he's trying to, he's amazing CEO, but he's trying to optimize CRO versus CMO versus co. And I'm like, like hire the guy I talked to yesterday because he's the best person I've talked to out of the 20 candidates. I'm like, figure out the parameters of the job. Stop trying to get your org chart perfect. Right? So that's me. But, but people are different. If you're, if you're an incredible recruiter, you have the luxury of playing chess here. Right. But if not, hire the best. They're all accretive. The mediocre are never accretive. The mediocre burn all your limited money you just raised. But I've never seen a great VP of sales, marketing, product or engineering or customer success. That's great. Not be accretive. They're all accretive.

Perfect. Thank you very much. That's all helpful. Appreciate it.

Great. Okay, our next question from Henry fan.

Hey Sam, thanks again for your time. It was super helpful.

My question goes back to when you're.

Mentioning that you like to see two, two demos kind of on your AU calendars per day. So that got me thinking from your.

Experience, what's a good benchmark for kind.

Of how many outbound email to cold call that will do you like to see done in order to get that kind of result? Yeah, so really good question. I think a couple things come to mind. One, to sort of like reiterate the two net new to like brand new demos versus follow up calls per day. It's not one size fits all. And so that, that was a number that worked for Brexit and Brex on the spectrum of like hyper transactional to true enterprise. Brex was in the middle but probably more towards the transactional side. And so if you are selling six figure traditional, traditional software that has, you know, 60 day sales cycles, you're not going to be at two demos per day on that product. And so I think maybe a better heuristic would be something like you want to be spending a few hours a day, something like three hours a day as long as you're inside. If you're inside sales, you should be spending about three hours today in front of customers. And that can be on new demos, that can be on implementation calls with customers that you closed, that can be.

On.

Opportunities that are in your pipeline, sort of like middle of the funnel that you're hoping to close. But where I get scared and nervous is when it's like an hour a day or less and it's like what are we doing with the rest of the days? And unfortunately I know the answer and it's not, we're not working eight hours a day. And so that's sort of like let's use the three hours a day customer facing. And then the point of your question was like what are some of the inputs that get us there? And again, I hate this to be the answer, but it is, it's not one size fits all. And I'll say what happened at Brexit? It's so different from what happened at Zenevitz or Rippling, which are two other businesses that I have a really deep understanding of how they work. So at Brex, we sourced 80% of our closed revenue from sales outbound, 50% was AE outbound, 30% was SDR outbound and 20% was other activities, marketing and inbound and, and whatever else. Now like, that's very high. It's very high on the outbound sourced revenue. And we got it down to a science where it was sort of like when we hire a new ae, they need to do these things to generate this much revenue. And we were able to expand the team pretty aggressively because of that. We knew that there was incremental revenue with each AE that we added because they were generating so much of their revenue at Zenovitz and at Rippling, reps are largely dependent on what, what sort of behaves like inbound. A lot of it is outbound emails, but it's SDRs that are fielding responses to emails that are then setting up demos. And so we were sort of constrained with hiring more AES, with how much, how, how much marketing was sourcing in the form of demos. And so like, I hate that. The answer is it's not one size fits all. What I, I would say maybe the takeaway here is whatever works for your business, double and triple down on it. And that's what we did in each of those businesses where at Zenefits we had our cmo, his name was Matt Epstein, he was able to generate a bunch of opportunities through this really creative email campaign. And we could pay SDRs, not very much money to field the replies and then schedule the demos. And so we just kept pushing on this program because it was working. The same thing happened for us at Brex where when we had AES and SDRs that were able to source really high ACV demos, it was working. And so we just kept applying more pressure until it sort of like reached diminishing or unrealistic returns. And that's maybe the takeaway here is just like find what works for you, double and triple down on that and don't be too prescriptive around like, you know, we need to be having a certain number of people in sequence each day because that's going to be very different from Brex to Rippling to other businesses.

Awesome. Thanks so much, Sam.

That's super helpful.

Great. Our next question comes from Jill. If you are on the line.

Yes, I am here. Thank you so much. I'm just like folding laundry and doing that multitasking so I'm not on another device. Hey Sam, thank you so much. Great content today. Just thinking outside of the traditional call, email, outbound, LinkedIn, et cetera, and then all the wonderful things that you shared here today. What's your take on working with partners and looking at, you know, account mapping around overlap where your partners have a customer, you have a customer identifying what this value proposition is and then looking for where your partner has customers and they're not your customer, but they're in the icp and then vice versa where the partner has, you have the customer, the partner doesn't. And again, shared icp. What's your take on the efficiency that you get from working with partners?

I've seen it work really well and I've seen it work less well. And I think the, the, the primary difference between those two is getting the incentives correct. And if, if you have a partner that is appropriately incentivized on generating effectively additional demand for you and there's either some combination of like a rev share agreement that is in place or you know, sales reps are quoted on generating closed one customers. And so there's actually an incentive at the rep level. I have seen those work and where the incentives are less aligned, where it's just, you know, we have like, we launch some integration and you're hoping that the NetSuite sales rep sends you new deals because they're on NetSuite and they need a new credit card. Like, why would the NetSuite sales rep muddy the conversation with their customer to injury if they're, if there's not an incentive to do so both at the business and individual level? And so that's the, there's probably a lot more to it than that. But that has been the primary difference maker. Where I have seen partnerships be effective versus ineffective.

You know, the one thing I totally.

Agree, for what it's worth, I've been thinking about this a lot. It's very SMB. But when you look at folks like HubSpot and Shopify that get half their revenue from partners, that's very SMB. But you, you want to learn from SMBs, right? Because there's so much velocity. And I'll tell you, the number one thing I've learned from them is probably Joe, what we learned in the early days of Salesforce and others, which is you, you gotta hire great people that know how to do this. Now if you're, if you're enterprise like Salesforce, there's hundreds of folks that know how to manage, not just Salesforce but no automatic Zendesk. As a partner that Sam talked about, I've invested in several companies that are deep in the Zendesk ecosystem and they've accelerated when they have deep experts that know how to manage that and build those relationships. And when they hire someone that's shooting from the hip, that's a business development person, they get zilcho revenue. They get zilcho. Right? But the good news is there's veterans out there. There's so many people that worked at HubSpot and Shopify and Zendesk in Salesforce that I think it's almost criminal if you don't try to find someone great because they know, they just know the playbook, right? They know and they, they. And for me, I don't know how to do that. I don't know how to manage a thousand E Commerce partners and agencies. I'd blow my brains out trying to beat a thousand. Right? But I was a company, I invested is just crossing 10 million. And the CRO there comes out of Shopify and he's like, he's been chomping at the bit to roll this out. He's like, I got the team, I know how to do it. I'm going to add a thousand partners in the next 12 months. I'm like, I wouldn't even know how to add 8. I could add 8. I could add 8. But anyhow, not to ramble, but this is an understood thing, but only works if you do it great. There's other things you can do a mediocre job of. And let's be honest, if the product's great, it'll work. I don't think a mediocre job of partnership works, especially because this is the last learning that's so obvious. But I didn't learn it until Brian Halligan and others. For the most part, only one partner wins in each category. Almost everyone is only a HubSpot shop, they're only a Shopify shop. In E Commerce, they're only a klaviyo shop or a gorgeous shop or others. And there's no room for number two or number three. Right. BigCommerce has deeply struggled. Not because it's not a great product, but you can't penetrate the Shopify ecosystem. Right. It's impossible. And so you also need to be aware of partners are important in your company and then you gotta hire those folks because otherwise someone will do an end round around you and get turned twice your revenue.

Yeah, there aren't enough playbooks today for.

The ecosystem and they're people, they're people that still want, that know how to do it and have the relate. You know, I'm not literally saying it's a Rolodex type thing, but it's close. This is one, you know, you don't ever want to hire a Rolodex. I'm sure Sam will say that never works hiring someone's Rolodex. But sometimes it works a little bit. In the beginning, if you have someone great and they have a Rolodex, then it works, right?

Yeah. Like if somebody has done this successfully at another company, the, the probability that, that they will be able to do it for you is just significantly higher. I think just reinforcing like there are people who are really good at this is, is what I'm taking away. Jason. Is that right?

Yeah. I'll give you one other story. There is, you know, one of the, one of the most explosive areas, if we call it SaaS, is compliance. Right. There's so like the. Everyone from Vantage to Drata to Secure Frame to. I mean the, the revenue growth is jaw dropping in all of these. We all need a sock too, right? I mean it, it makes sense. But I was at an industry event with one of these vendors and they're all doing great and I was just one of the founders and I'm like, I gotta be honest, sometimes I don't know the difference between all the vendors. And he's like, there is, there is some overlap. But I'll tell you, you know what the number one difference is? We're the only one that's here at this huge industry event. All the AES and the CSMs, they have a problem and they give us all of their business. Right. And so there's. It's not even. And this is an area. If you do partnerships well, you can get a profound competitive advantage. Right? Because. But it's not equal. And then someone else will show up with a better product. And you're not going to get HubSpot out of a thousand agencies. There's just no way a better HubSpot is going to displace an agency. Right? There's no way. And so you got to be hyper aware as founders, I think of getting boxed out in the partner ecosystem in 2023. You can get boxed out and you'll never, you'll never get back in. You'll still win, but you'll never get back in. Right?

Sam, I know we're already over time. Do you have time for one more question?

Let's do it.

Okay. Because we're talking 2023. We obviously have to ask an AI question. So Grayson, if you want to unmute yourself.

Sure, yeah.

Thanks Sam. This is awesome. So the question that I have is, as Caitlin mentioned, we're kind of at this unique point in time. We're obviously in the midst of this AI hype cycle that doesn't seem like it's going to meaningfully die down at any point soon. And I think one of the interesting things that's come out of this is you've had a lot of enterprises basically make some version of a public statement around like we want to invest X amount of dollars in AI, but there's still kind of this question mark on the other side of that equation in terms of what it actually looks like. And so to your point around demand gen, I think in some regards it kind of creates this interesting opportunity for founders and startups, specifically ones that are doing interesting things in AI, to kind of engage and develop thought leadership around interesting use cases and how enterprises should adopt it and things of that nature. Just curious how you would think about or advise founders or startups on whether to invest in kind of like AI centric customer education or thought leadership to help with demand gen.

You know, I, I, I talk to folks pretty regularly on like the rev ops side of things and one thing that I'm hearing sort of regularly is gosh, we've got like, you know, a couple dozen vendors that make up our rev stack and all of them are coming to us with like AI pilot program for this like one off point solution. And then you've got a bunch of new entrants to this space that are sort of like AI first. So you have the what I'll call legacy players that might not be a fair description but you got like the gongs and the outreaches and the zoom infos and all of these traditionally SaaS, businesses that are like incorporating some AI strategy into their product and they're coming to their customers and they're saying we'd love to either have you be part of this pilot program or we want to deploy this AI feature within your company. So they've got all these point solutions from the existing vendors and then you've got all of the new entrants that are man like the last YC batch. I don't know how many dozens of sort of like demand gen focused AI first point solutions existed in that class, but you have like, you know, countless AI first new entrants to this space. And I think like what's hard for like this is where I'm landing and this is where I think most people I talked to are landing. It's hard to cut through all this noise. Like what, what actually works. Everybody is saying they've got some cool solution and maybe it like, you know, writes an email and tests the reply rates and then writes a different email. And like there's, there's all sorts of noise that exists, different vendors. And so maybe there's an opportunity for. You asked. I think my interpretation of your question is like, is there an opportunity for thought leadership here? Maybe there's an opportunity for someone to just sort of like cut through all of this. Like, I understand the problem which I just described. I don't know the solution. And so if there was somebody that was, was sort of like sophisticated, impartial third party, they could sort of like break through the noise on a lot of this stuff and say, here are some things that are actually effective in leveraging AI with customer acquisition. I would think that there would be like demand from a viewership standpoint to that type of information.

Yeah, that makes sense. So more so from a third party that can kind of take some sort of neutral stance as opposed to a founder in this space that could potentially be like self serving.

I mean, I imagine this is coming from the perspective of a founder in this space. And so like, you should do that. You, you, you should try and become a thought leader. We talked, you know, we talked about earlier, like, it's free and so you, you should post on LinkedIn and, and other places and if you, if you start to gain a following, it's sort of like free demand for your business and then maybe you can reinforce that a little bit with some impartial third parties. My dog is his. Bear.

Hey, Bear. Yeah, thank you. Yeah, that's, that's helpful.

Okay. I think bear is where to end it. But if you enjoyed this session and you're looking for more of Sam, we have his Europa session on YouTube as well as he does run our CRO Confidential podcast, so you can catch him there as well. Thank you, Sam for this awesome session.

Thank you so much for having me. Always a pleasure to be involved with the community. So thank you to Saster and thank you for everybody that attended.

Yeah, of course. And to everyone else, thank you for joining. We will see you next week for strategic finance in today's market, a tactical guide to building and scaling your team with ibp. So see you next week.