"Your Secret to Doubling Your Magic Number" with Sapphire Ventures

Ladies and gentlemen, please take your seats. Our program is about to begin. Please welcome to the stage Rajeev Dom, partner at Sapphire Ventures. Karan Singh, partner at Sapphire Ventures and.

Jane Lee, VP at Sapphire Ventures.

Thank you all for coming. Excited to be here. We know it's a Friday afternoon session on the third day of Sasser, so we'll try to keep it energetic and content interesting. But yeah, excited to be here. We're here to talk to you all about go to market design, which we firmly believe is a far too often overlooked yet critical driver of the health of any SaaS business. And this particular talk is portrayed through the lens of the magic number, which as we all know is a top one or two metrics SaaS metric for any business. So excited to get into it. Before we do that, we'll maybe introduce ourselves. As mentioned, I'm Rajeev. I'm a partner at Sapphire Ventures on the investment team. I've been investing for over a dozen years now across a few dozen companies. Been fortunate to partner with companies like Monday.com, braze, Outreach, Flo, Cast6Sense and a whole host of others over the years. And I have a particular passion, I would say for working with management teams and founders from that 5, 10 million ARR scale to hundreds of ARR and particularly around go to market and the iterations around go to market. Different motions, different metrics, different organizations and the ups and downs across it all. So that's what inspired a lot of this particular topic and excited to talk to you about it today.

Right on. I'll introduce myself as well. Hello everyone. Kuran Singh, also a partner at Sapphire Ventures. I run our revenue excellence, practice and manage curate our broader go to market community. Before safire, I was an in seed go to market strategy operations leader for large B2B technology companies. Most recently at Pro, Procore and before that at Cloudera and ArcSight. In all three instances, I was responsible for and helped participate in building what I would call sustainable, durable and efficient go to market organization. So this this topic that we'll cover with you folks today. Near and dear to my heart as well. Looking forward to chatting about it.

Thanks Karen. Hey everyone, I'm Jane. I am a Vice president here on the investment team at Sapphire Ventures. I've been investing for a little over five years now and have also had the fortune to work with and also learn from a ton of amazing B2B SaaS companies. So really excited to be here today and share some of our key learnings on this very important topic. So before we dive in, we want to give you all the quick context on what it is that we do here at Sapphire Ventures. As a firm we are laser focused on investing in all things B2B SaaS from infrastructure companies like Mulesoft, Nutanix, JFrog, to application layer companies like Box, DocuSign, Monday.com, segment and Braze. And really our mantra is to to partner with exceptional teams building what we call companies of consequence. And what do we mean by that? To us that means enduring companies that can become category defining leaders. And our goal is to be long term partners to our companies and help support them every step along the way. Whether it's through our B2B software expertise, our enterprise network or our amazing team of in house portfolio growth experts. And we've been around now for over 20 years and have been fortunate to partner with close to 200 enterprise software companies. Many of them have had the fortune to become public companies. And we really think it's this exclusive focus on all things B2B along with our experience working with some of the best B2B SaaS companies that really gave us some unique insights into the changes and the evolution we're seeing on the go to market design and efficiency front. So that's what we're here to talk to you all about today. So so over the last couple of years we have seen a significant drop in go to market efficiency. By efficiency we are specifically referring to the net magic number which is calculated as total net new ARR, total sales and marketing spend in a given time period. And we've seen this metric drop pretty precipitously across both public SaaS companies, as you can see here, as well as private companies that we have observed in our own portfolio. And just to give you a sense of magnitude on this change, we can see here that the median net magic number for public SaaS companies has dropped from 0.7x earlier last year to 0.3x in the most recent quarter. Just to put this 0.3x in perspective for all of you, this means that you are spending $3 in sales and marketing to generate every $1 in net new ARR. And we're here today to not only talk to you about why we think this decline happened, but also more importantly, one less talked about way that you can use to double your magic number without having to reinvent the wheel or just cross your fingers for better quota attainment. But before we get there, let's just take a step back and talk about why the magic number is such an Important metric. So the magic number is a key measure of financial health for any SaaS company. And it has really significant implications for a company's ability to not only drive profits, but also its ability to drive growth. So let's just kind of bring this to light with an illustrative example we have here. Say you have a mature B2B SaaS company doing $650 million in GAAP revenue and it's growing 30% year over year, but operating with a 0.4x magic number. And say, you know, you back into the sales and marketing expense from magic number and assume that the R and D and G and A expenses aren't around similar levels as public SaaS comps at similar scale. What you end up with is actually quite an unprofitable business, operating with negative 25% operating margin despite having significant revenue scale at above 600 million in revenue. And what does this mean? Well, it means if you want to reach break even, you will have to cut that growth down by half, down to 15%. Or if you had a magic number of 0.7x in this case, you would already be at break even. So this just goes to show that efficiency is what gives you the ability to double your growth and grow faster. And all of this also goes to paint the picture that having a low magic number really diminishes your ability to not only drive profits, but also your ability to drive growth. And it makes that path to profitability just that, that much more challenging. And I think we all know that profit is what drives shareholder value in the long run.

Thank you, Jane. Well, now that Jane helped to reground us and refresh us in the importance of magic number. Again, to reiterate what she said, it's not just a sales efficiency for the sake of being efficient. It actually drives your ability to grow faster. Let's talk about why. What's driving that deterioration? I think core reason number one, we all know it. I think most of us know it and most of us feel it. I feel it in board meetings. It's just hard out there to sell most software. Maybe there are some verticals or some motions that are still working, but by and large it's hard. And that's really reflected in a decline in the core AE sales attainment. It's interesting. I was just reviewing in preparation for this, a lot of the board decks coming out of Q2, just the quarter that just passed comparing the sales AE sales attainment to Q2 of 21 and Q2 of this year was roughly at 60% for some of the best performing private SaaS companies. That same number was 90% in Q2 of 21. That's about a 1/3 decline in AE sales attainment. Again, macro clearly has an impact on this. We all hope the demand environment will soften up, and I think it will one year from now and that'll boost back up. But the point here is I think that's just one reason and there is something still missing to the equation of what's driving this decline in magic number. Because as I just mentioned, there's two factors. One, the decline in sales efficiency has been 60%, but the decline in quota attainment we think is roughly 30%. There's still a big gap. Two, I've had three conversations with CEOs that I work with talking about second half of the year planning and next year budgeting. One's at a 25 million ARR, one's at 50, one's at 150 of ARR, all at different scales. And we were sort of modeling some uptick in attainment, hoping we would get back to 85% attainment. In my experience, I think Kearns and Jane's 85% attainment, assuming healthy RAM times and quotas across your sort of sales organization is pretty darn good. I mean, I would be pretty excited if you could perform at 85% anyone, consistently. I saw that input and then I saw the output of these models and I'm like wait, why are we still at a 0.4x magic number? There's something disconnected. I would have expected a 0.8 or 0.9, something close to the 1x that everyone dreams of. That's kind of top decile of companies. Oh, but there was something sort of a massive disconnect that still leaves a reason number two, which got us to really thinking and led us to the next slide. Which is what we really are missing is this go to market design point, this ability to holistically look at your go to market organization beyond just the AES. Realize that of course there's so many other folks in a go to market organization and pockets of spend. And then most importantly and Karin will get into this, we've spent a lot of time looking at the data, the board decks, surveying the operators, at best in class companies over time. And what we've noticed is five to seven years ago, this composition of the go to market team, the ratios of this individual to that individual has changed dramatically over the last five, seven years. I saw it start to happen in 2018 and now I think there is some re engineering to go back because the sales attainment hasn't kept up with that shift. I know that sounds all very murky. That was just a teaser. So I'll let him get into the data and tell you exactly what that means and how that translates to numbers.

Right on. Subjeev, thank you for setting a little bit of context here. I'm going to obviously go a little bit deeper on the same topic. So we do. We have a belief that go to market Org design and more specifically the composition, tuning the composition of your go to market Org is probably one of the most meaningful levers you can pull on right now and has massive implications to the success of your business. Now that's our belief. It's something we wanted to dig in deeper for this session and we wanted to make sure we substantiated it a little bit more too with both data as well as an operator's perspective. So let us start by showing you a little bit of what we've done in preparation for today. So for starters, just by virtue of being part of our portfolio, we do we have access to, to, I would argue, some of the best B2B organizations, tech organizations in the world. And we were able to go in and look at around five to seven years worth of data, trended data, to see if we could glean any observations or learnings about how go to market efficiency has been changing. Now the data actually tells a pretty interesting story. We'll get into that in some more depth. But we also wanted to sort of imbue the operator's perspective as well. So we what's happening practically out there and that's where we went out and we reached out to a slew of operators in our network from companies like Mulesoft, New Relic, Procore, Snowflake and others, and got their perspective, effectively pressure tested some of the things we were hearing, feeling, sensing to come together and have a perspective on sort of how go to market efficiency's been evolving. So that's a little bit of what we're gonna talk about today. And let's get into it. So let's start with the numbers. So this is what jumped out to us when we looked at some of our board decks and some of the trends that we've been seeing that go to market composition has changed pretty significantly over the last five plus years. Most specifically, we're seeing that the percentage of investment that we've made against quota carrying sellers has dropped. So back in 2018, on average, what we were seeing was around 30% of go to market investment was going to quota carrying sellers. Now that number is actually closer to 10%. That's a pretty meaningful and significant change in composition and something that I think has ramifications. We know has ramifications to what we were talking about earlier, which is magic number and overall efficiency. So we know there's a challenge here. And when we saw this number and we saw this data, our immediate reaction was well, why did this happen in the first place? Rajeev alluded to some of it, but I think there's more beyond here's our belief, so oversimplified, our belief is that there's external think macro events, macro changes that have ultimately informed and influenced how company leaders are thinking about investing in their go to market. Let me get a little more specific as to what I mean there. So for starters, I think we all know, felt, have seen, seen the zero interest rate free money environment in the years past. What that meant tangibly, and we see this now from the VC perspective, I certainly do, is that that led to an abundance of capital that needed to be deployed out. Right? VCs did exactly that. Which has led to a proliferation of SaaS companies, in other words, a highly competitive environment. I suspect a lot of the operators in the room have felt that in the companies that they've been a part of. Right. I see some hands raising. I was one of those and I felt the same too. So on one hand we have, we've seen this increase in competitive environment. Then we've also felt and seen that growth rates haven't slowed down or hadn't slowed down back then. There was some aggressive targets we were all achieving. So knowing those two things together and having that additional capital, we saw some of the behavior trends change across our portfolio. And some of these things should make sense. We for starters, investing ahead of growth. It's something I did at Procore because we had such aggressive targets. So how do we set ourselves up not just for now, but for one year from now? What are we investing in? And certainly that's a healthy behavior. But what we've also seen both in the data as well as in our conversations, is that there was an additional incremental investment against what I call supporting resources, resources around the entire go to market engine that ultimately, ultimately should drive up seller productivity. Think sales, engineers, SDR, CSMs, et cetera. And the thesis is pretty straightforward, right? It's something that I also was involved in in past lives, which is that if you allow for more specialization across the go to market engine, and really help sellers focus on the main thing, which is closing deals. In theory, what should that do? That should drive up productivity, that should lead to more pipeline generation, better conversion, conversion and ultimately help hit the targets that we have in place in practice. That's not what's happening. Rajeev kind of spoke to it earlier. We're seeing a drop in seller attainment. In fact, we went in and spoke with a lot of the operators, a lot of the CROs within our portfolio and they all kind of alluded to the same thing, that this in these investments, while it was the right decision in some way, shape or form or the premise was correct, have actually led to a diffusion of responsibility which has led to a lack of ownership. In other words, nobody's quarterbacking the full go to market engine the same way as they were before. Once again, this has some pretty sizable implications and we're going to go in some, some scenarios that explain that. But the moment that we recognize the challenge at hand, which is the composition of go to market is changing, we understood why it was happening in the first place. We packaged all that up and went back to our go to market community and said to the operators in our network, well, we know there's a challenge here. The challenge is that we need to rethink go to market org design. Especially in this day. How should we think about it? So consider a complete blank slate. Forget what you're doing today, forget what you've seen. Tell me what good and great would look like if you had the chance to start from anew and we captured all that information through, through a survey, through conversation and put it together. Here's what we saw and I'm not going to belabor this. I'm not going to go too deep in this. Actually SAFIRE published this a little while ago, so take the photos, but you can also download all of it. All good. The only thing I'll say about this, this is very much more sort of SLG centric than plg. So if you're more sales led versus product led, it is a little bit of a different animal when it comes to these ratios. But directionally, this is what they all came back with, is what good and great looks like. Here's the observation we had when we looked at the data. Actually, the way that operators think about what good best practice go to market orgs look like actually are not reflective of what we see in board decks and in org Design today in 2023. In fact, this is far more similar to what we've seen in 2018. So by no means am I suggesting we need to turn back and look at what 2018 is and was and use that to reflect what it needs to be today. It's more so the observation that great operators in our community understand the importance of a balanced go to market organization and the importance of sort of the efficiency gains that you get from that. So with that I do want to take a step back because this is to me a really important concept and, and the best way I think we can illustrate it is actually through scenarios and examples. And so I'm gonna actually pass it over to Jane now and she's gonna go through a few of these to give you a sense of the impact of org design on your overall company success.

Thanks, Karen. So let us just walk all of you through an illustrative example of how go to market teams were typically designed back in the day, say five to 10 years ago. Let's say you have a business with 36 quota carrying reps, each with a million dollar quotas. So altogether you're supporting a bookings goal of 30 million for the year for these 36 sellers. What we used to see in terms of the composition of the various supporting roles for the sellers looks something like a 3 to 1 AE to SDR ratio, a 3 to 1 AE to SE ratio, a 3 million book of business size per CSM and a 10 to 1 revops to revenue FTEs ratio. And under this specific go to market composition, let's say we assume 85% quota attainment with some reasonable assumptions around churn. What we're looking at is an aggregate sales and marketing spend of $24 million against 20 million in net new ARR. And this gives us a magic number of 0.86x which is actually pretty healthy based on a lot of the survey data we have seen published out there. And in fact it's actually pretty close to the historical tiny top quartile magic number of Trends of around 1x. Now let's fast forward and look at, you know, how these teams are designed today and what this composition of different roles and how that's really drastically changed over the years for the same 36 sellers. What we're seeing today is an AE to SDR ratio closer to 1 to 1:1. And this all came from a fair attempt to boost pipeline generation and take prospecting responsibility off the sellers for SES. You know, we're seeing a similar lower AE to SE ratio now closer to 2 to 1. You know, as companies now claim they have a much more technical Sale and maybe much more technical resources on top of that, you know, with the increased focus on driving up retention and expansion, we're now also looking at much bigger CSM teams with much smaller book of business sizes. And you know, this similar trend also holds true for marketing and rev ops. And all in all, you know, all of this happened as part of a very significant sincere effort to drive up seller productivity. However, what you end up with is a significantly different go to market Org. One that has so many more supporting roles with so much higher expenses for the exact same number of sellers for the exact same bookings target. And not surprisingly, this change in go to market Org composition has some pretty significant impact on your go to market efficiency. In fact, if we want to go back to the same level of efficiency that we had from scenario one, what we have to do now under today's go to market composition is to increase sales quota attainment to 120% across the board. So just let that one sink in.

By the way, I would have loved to have 120% attainment never happened for me. I think those scenarios are really interesting and I think illustrative of the point that we're making. In fact, when you put the two things right, two scenarios right next to each other, it's even more evident the challenge that we're facing. Same quota capacity in both scenarios, almost double the scale spend and that is certainly untenable and that is effectively what we want to speak to today is that there needs to be a rethinking around go to market Org design because that has massive implications across your organization. And in particular we have a belief that sellers need to come and become right at the center of the go to market engine. Once again, over specialization or specialization in some ways can be a very healthy exercise. But we still need somebody quarterbacking the entire initiative to make sure that they can understand how these different roles work together, how they hand off. We can make that shift and we'll speak a little bit more on the how in a moment and we have the mindset of having a more balanced go to market Org. I think you can set yourself up for what I think is the most important thing right now, which is a durable growth company, a company that can stand and withstand the headwinds that we're all facing and feeling today. So with that we want to give you a little something to chew on as you go ahead as look forward in your go to market organizations. How to think about resetting or restructuring or recomposing your organization. There's some guiding principles we'd suggest. Before I go into the three that we're showing here, I do want to start by saying that, and we've seen a little bit of this. When you see that efficiency metric and it hits you right in the face, the immediate reaction for some companies is, hey, we gotta cut spend. We're here to tell you that's not the goal. It's not to indiscriminately cut spend, but rather to rethink and recompose the spend that you have. We kind of spoke to this with a magic number slide at the beginning as well, which is that if you can spend effectively and in a balanced fashion, you actually can drive up growth in your business as well while maintaining that cost efficiency. So that is what we're advocating for now. How do you do that? For me, there's three primary guiding principles. And by the way, there's probably more than this. These are the ones we're most passionate about. So number one, be customer centric. It's a lot harder to have role redundancies and poor handoffs if you start first with the customer in mind. And we do this, I do this a little bit with our portfolio companies as well. Well, map your customer's journey by phase and stage and then look at that to understand what the objective is for the customer by the phase and stage of their journey with you. Very quickly and very easily you can find out exactly what it is you need to invest in from a go to market standpoint and where you may in fact have role redundancy. So start with customer first. Secondly, look at the full go to market picture. If there's one thing you should glean from today is that looking at go to market comprehensively is the approach to take. So I'll give you an example. We have a lot of folks talk about quota to OTE ratios being 4 to 7x things to that effect. It's fair we should consider things like that. But what about quota to full pod cost? All the resources that are being supporting are supporting the revenue generation we're talking about. Consider that as a benchmark, as a guardrail for you as you can build out a go to market org, the full go to market picture and then finally benchmark and iterate. Let me see if I can say this correctly. So benchmarks to me are the starting point, not the ending point of a conversation. They give you the directional of when you're out of the swim lanes, when you may be off the reservation. Use those to start conversations internally. Leverage those Other two guiding principles to see if there's a good reason why you may be out of the benchmarks or if there isn't, how do you want to tune and iterate? Which brings me to that point, which is that Go to market. Org design is not a conceptual exercise, it's a people centric exercise. So we have to be mindful about how we make this progression and transformation. Take the time, tune, iterate and continue to do so until you get to a healthier place. Ultimately, we think that if you can look at your Go to market Org, rethink it, assess it, pressure test the composition, and make sure you're following some of the guiding principles that we've set here, you have the opportunity to build that durable growth organization, to build a little bit more consistency in your org and help it drive success. So with that, I want to pass it back over to Rajeev. He's going to close this thing out with some key takeaways.

Rajiv, this is more summarizing what we all just talked about. I just wanted to reiterate. This is hopefully all relatively obvious given the presentation, but reiterate a few points I'm pretty passionate about. I was talking to a CRO about this topic at a board meeting a couple of weeks ago and I said, hey, do you see this trend? And he said something that was interesting. He's like, yeah, Rajeev, we've gone to this era of hyper specialization which has led to less accountability, which didn't make quite sense to me. I thought if everyone's super specialized and everyone's accountable for what they're doing, but actually has led to less accountability because there's not that hub which should be the ae. Instead the AE is a cog in the wheel. There's not that person that's orchestrating the full go to market flow and everyone's doing a little piece of it, which by the way is bad for customer experience but also no accountability. So you haven't seen seen that increase in sales attainment on the back end. So I think this idea of elevating the ae, another numerical example, when I really press where's pipeline coming from? What I find is, is that nowadays 0 to 10, maybe 15% of pipe is coming from the AES themselves. Back in 2016, 18 AES had to create their own pipe, 30, 40% of all the pipe was kind of created by AES. And so I think elevating that AE, the importance of them doing a little bit more and being asked to do more because they can I think is going to be a critical solve in this go to market design issue anyways. Hopefully that was instructive for folks and happy to take some questions.

If you do have questions. They told us to usher you to that mic right in the middle. Feel free. Also by the way, it's like 100 degrees up here on the stage. That's why we're sweating.

Great presentation guys, really enjoyed that. Thank you very much. Out of the companies that you're working with at the moment, have you seen any particular shifts or motions or changes that they've done that you've looked at and gone? That was a stroke of genius and you are seeing the numbers come out of the back of that. Is there anything specific that you have seen in that reorg design?

I can speak to that a little bit. I'll actually go back to my past lives at Procore. It's a story I wanted to tell anyways, which is that it's one of the guiding principles I'd mentioned which is be customer centric. When companies do that, you'd be surprised at how much of a change you ultimately end up seeing. When I first joined Procore I went in and looked, we had the full pyramid segmentation models, SMB, mid market, enterprise. And I went in and I looked at our SMB segment and noted it was like an eight legged sales cycle. We had SES and SDRs and AES and CSMs and, and, and, and the premise was well, white glove, service support, all the things we talked about today. That's where I actually paused everyone and said no, let's go map their journey. Map that customer's journey in the SMB which is different than mid market, different than enterprise. Very quickly we realized the average mom and pop shop that's spending $5,000 dollars with us is not looking for 10 people to talk to, they want one. And so this was an example where we went in and said, you know what, we're actually going to change the roles that are going to be allocated to SMB. We in fact could reallocate them right up to mid market enterprise elsewhere. And we ultimately ended up with a renewal rep, a sales rep who is actually doing all its own prosecution and closing as well. And that was effectively it. Our teams came back and said hey, we're going to lose productivity current, we're going to actually have less. And we actually mapped some of that out. I think our Average quotas were 6, $700,000 before we brought it down to 500 to try to accommodate for it within 6 months we were at 750k attainment or productivity rather because it was actually healthier for the business to do so this way. So it should give you an illustrative sense of how we think about this. It's not always more is more. If you have the right conversations and the right pressure testing, you'll actually come out far more ahead, especially in some of these segments.

Yeah.

The other, I would add one more thing and we were wary to talk about too much PLG here because this is more sales led companies. Ed, you guys have a thousand presentations on plg, but I was in a meeting recently and they analyzed, I think they found that 40, they listened to the gong calls and 40% of the losses at least this is what the customers are stating. You never quite know if that's the truth, but they're stating that. We'll go with you, but you have to give us a piece of the product to play with and try. You have to show us it kind of works. Right. This particular company is a big company, 180 million of ARR growing well, but it's a big honking marketing tech thing that you gotta install and implement and do best practices. And so you guys know that trend. I think it's very hard, I'm wary to provide that advice to all my companies that are more sales led and have complex solutions because it's not so easy to just develop one very easy lightweight module and pretend you're a PLG company and you have a lot of sales led companies trying to act like plg. It's a lot harder than you think. You almost have to be ground up. It's from the way you do billing and lack of services. It's not just a customer acquisition funnel, it's the way you track telemetry and how you staff against that. And so Katie, Katie knows probably a lot about this. Right. And so I'm weary to advise against it, but I do hear that more and more from customers today saying, hey, I don't have the budget, show me the value a little bit and then maybe I'll pay for something.

Great presentation guys. Thank you. Cool to see some numbers also on this. So my question would be in a world where technology is kind of taking over the, the sales cycle and it's moving further down the line, the moment where people jump in, in this process you mentioned, people are at the heart of go to market strategy. Do you have some tips on how to bring this personal interaction and touch back into go to market strategy?

No, I mean, listen, I think it's inevitable. I have a lot of companies in my portfolio, Outreach and many others that are, are embedding AI into their sales, engagement or other workflows. 6Sense also has a email sort of capability. I still think at least where we are today, a human or humans really need to be involved. Well, first of all, most of the AI content today, it's very hard to make it more suggestive. You can make it factual and it can write you, write you something, a descriptor about a company. But a salesperson needs to suggest and push you along in this sales cycle. That's one just very basic technical nuance. Even if that technical nuance is solved, you still need this quarterback, this orchestrator to understand who's doing what and how to push a deal along the flow. Right now I think, and where I will be in the next three years is just each step might be accelerated. Right. But that person that's jumping you from step to step and analyzing the whole sort of process I think is still going to be a very human centric process.

Actually I love this question, so I want to just respond to it as well. I wanted to give Rajeev a chance to. So essentially you're asking how do we keep the heart in sales? Right? Which I think is true. That human interaction, that connection. Actually the AI example is a good one. I don't think it's that we're removing the seller. In fact, our advocacy is the exact opposite. But I think technology is a force multiplier for the same. I was doing a dinner around exactly this generative AI and things to that effect. And I asked that same question, like what happens? Are we going to wake up five years from now and there's no more humans in the interaction? Actually that's not the case. In fact, a lot of AI tools, what they're doing is they're synthesizing all the data points that we have access to earlier in the funnel, et cetera, and actually making it easier for sellers to truly understand the heart of what's happening in the conversation with the prospect. Imagine if that's the case. When you have those conversations, all you're getting rid of are the non meaningful conversation. You're getting right to the most meaningful discussions because technology has helped you parse out what's most meaningful, what's most important, what the customer is looking for and you can meet them where they are. So I think if anything I see a trend heading back towards that human element. And everything we do should be around either the customer or that personalization in that touch point as well.

Quick follow up question on that one. So I think the seller's point of view is very digitized but the bias like process is still very human. Right. I have some intuition that eventually that's going to change too. Do you see it that way as well or do you think that's going to remain this way? Like maybe like easier question being, do you think at some point technology is going to take over the buyer, the buyer's process in the sales cycle?

I think segmentation matters. I think it depends from buyer Persona to Persona as well. I think what you, you're selling matters as well. So there are some instances where transparently and SMB is a good example of that a buyer doesn't want to talk to anyone until the very end of their sales motion. And at that point they actually don't want somebody to prosecute and close. They want really more of a customer support as sort of seller. Right. And so in that instance, yeah, you could see a place where it's very digital centric. That's what they are looking for. I don't necessarily see it the same way, say when you go up market where there needs to be that connectivity because again, that connectivity is sort of the benefit of having a seller engaged. I remember in past lives and I won't name names of the company or the customer, but we had an enterprise seller selling to one of the largest corporations in the world. The reason he was able to do a 10, 20 plus million dollar a year deal is because he was able to go into that company and build bridges and connections that the company itself didn't even have. There were divisions within the company that had never spoken with each other. There was giant brick walls in between. So that human touch is why I would argue they were able to get that massive deal and actually derive value for the customer. So I think it kind of depends now. Who knows, you know, maybe 10 years from now this animal kind of changes and that's part of the fun of all of this. But I do think it is about the Personas and what they're looking for and the customers, the segment, what you're selling, etcetera, etc, etcetera.

Thank you, thank you for sharing all the information.

Very helpful.

How do you see this, these numbers and statistics that you're sharing apply to a series A company?

Sorry, can you say that a little bit louder?

I can't understand if I'm speaking louder or not.

That's okay.

How do you see these numbers apply to a series A company? Thanks for all the information that you shared already.

Do you have a thought on the same?

I mean I think it's largely the same. I know the example we chose was 36 reps was a lot just because of the ratios. We wanted to show round numbers. I don't see the distortion the the that 10, 30% going to 10% AES as as much in series A because I think in your series A company you're doing a lot of the sales as the entrepreneur. Maybe you have a VP of sales or co founder and then like one, one or two killer salespeople, they're generating their own pipe, they're sort of doing everything. I don't think series A companies at a million or less of ARR already have tons of SDRs, a whole enablement and ops team. Where I see that start to happen is usually around I would say 4, 5 to 5 to 10 of ARR. So whether that's a series B or series C, the goalpost is always changing. That's when I see people look at that and that start to happen. And actually the interesting thing is most people think this sales efficiency increases over time because you have more brand power, you get better your category leader for whatever reason. I think I know the reason which is you get through first adopters and then you got to go international, you got to go to non technology companies. Just gets harder when you have scale, therefore efficiency. Every time we look at this it actually declines over time. Series A companies and B companies, when we're doing diligence on them, we actually expect better efficiency because everyone's kind of scared, scrappy and doing multiple things and taking ownership. That's a good question. Yeah.

Hi there. Super insightful presentation, especially given its planning season in some. On that lines I'd love to get your perspective on. I know you qualified the presentation with the fact that it's primarily related to sales like growth companies. From a growth spectrum you have sales led growth to product led growth. And given the secular trends in product we've seen from 2018 up until now, if you had to, would love your perspective on how this could apply to somewhere in between say a product led sales company. Especially as we go up series CD and beyond where you probably hit a ceiling on economies of scale from a sales perspective. So what in here can be applied to that product led sales spectrum?

Yeah, I'll take a crack at it. I'm sure Rajiv has perspective and others do too but. So while I don't have like a direct number for you because I am Very data driven. I'd want to do a survey and learn from others as well. But what I would tell you is in general, when I've had more of a product LED approach, it really just changes the composition of your go to market engine. So for instance, I typically like to see a little bit more on the marketing side with respect to investment as well as in revenue operations. Why? Because both are very technology centric, infrastructure centric, which is the backbone of a great PLG motion. Right. It's not just product building, something where you can download etc. Etc. It's the infrastructure you need on the sales and marketing side as well that actually gives the right handoffs at the right time, etc. And that's kind of a hybrid PLG SLG motion, for instance. So that's the main thing I've seen is there's a little bit more investment reallocated, say to marketing and rev ops in that instance. But again, I think this is where you want to dig in a little bit deeper too and debate what your company needs and where the gaps actually are.

I think what you'll find is most investors will still look at your overall magic number. So the composition does change. As you know, I was on Monday.com that was maybe more of a paid marketing plus product led growth company and therefore that investment was really high. Up until about 80 or 100 of ARR, they didn't have a lot of pure outbound. It was all inbound SDRs, qualifying stuff because things would come inbound from marketing. Right. But overall we still looked at cash payback, we still looked at CAC payback on a gap basis. We still looked at magic number and that's how we really measured ourselves against long term strategies. Churn. As you know, if you have heavy churn, if you have a prosumer audience, then your CAC and your magic numbers probably got to be even better than 0.9 or 1x.

You've got to be at a 2x.

Probably to make up for that LTV issue. Right. And so there is a balance there at a macro level that no matter what, that's going to drive the financial success of your business as well.

Got it. Thanks.

Yep. Hi there. Thank you very much. It was really a good presentation. I was wondering, especially for an outbound sales organization, how much of the difficulty in building pipeline and also the decreased efficiency due to an increased personnel spend, for example, on the SDR side is due to the increased difficulty in getting fruit to the customer based just by the noise in the market. And how much of the decreased efficiency is just more a temporal phenomenon versus a structural change?

Yeah, it's funny I use the term growth absolves all sins. Right. And I think we're seeing a little bit of that now because we have seen the altitude change for a lot of companies. And so now when you look under the hood, the same stuff that we were just not ignoring but weren't as worried about around efficiency and approach. Efficiency and approach has changed pretty dramatically as well. So one, I do think there's an efficient, there's a.

Acknowledge I'm at these board meetings, trust me. And it's like every single micro category saying is we were all on board to say well let's hire more SDRs to generate that pipe. It just hasn't worked at the end of the day. And even if it does work, again, it's got to work to the tune of 120% attainment in order for the numbers to ultimately work. And I think some of this is because again, I think AES generate less of their own piping. We say, well SDRs are lower cost resources, let's just do more of that. Something in the equation is off and therefore I think there's a structural retuning not exactly to those benchmarks. Maybe that's a guardrail, but a structural returning we need to think about.

Yeah, and sorry I choked a little bit, so thank you for being patient. The other, the other thing I wanted to say is actually think of it this way. All of a sudden we woke up and we said, hey, you know what, SDRs are the tip of the spear for us in prospecting and pipeline generation. Some of the things you mentioned. Yeah, on average my SDRs have been 23, 24, 25 years old. Probably didn't get the level of enablement and training that they were supposed to and they're at the tip of the spear. So I'm not saying that that shouldn't be the case, it just shouldn't be the case in majority. And if you are going to do that, there is a training and enablement component and things to that effect as well. So yeah, I think the composition matters and if you are changing the composition, you are putting onus on folks like SDRs and others. Just ask yourself what do you need to believe in order for the this to actually work and then therefore what do you need to do to support those teams rather than just leave them out there, which unfortunately you see a little bit of an earlier stage companies because they don't have some of that same infrastructure and support and processes in place. So it's a mixture of a few different things, but hopefully that gives you.

A little bit of last thing I'll say. Sorry it's not every one of these ratios. I have a company that has a pretty heavy implementation and it takes a lot for them to get up and running. So there's CX ratios are sort of inferior to what we show here, less efficient. But on the flip side, I hope that their retention, their ACVs will be higher. Right. And all of that will be superior. So if you have more outbounds per rep, that's fine, but maybe there's another place then on the flip side, you're able to make up for it, right?

Yeah. I think we operate in a. We have enterprise like whale hunting, so it's not really applies so much to ask the question around, like having 100 SDRs. That wouldn't work. I was just asking generally in the market.

Awesome. Thank you. I think we're up for all the questions. Yeah, thank you so much, everyone. Really appreciate the time.