WEBVTT NOTE This file was generated by Descript 00:00:04.550 --> 00:00:09.290 Hey folks, welcome to another episode of The Science of Scaling, a show about 00:00:09.300 --> 00:00:11.490 how to scale your revenue and sales. 00:00:11.830 --> 00:00:13.630 I'm your host, Mark Roberge. 00:00:14.429 --> 00:00:16.180 Today we're doing something a little different. 00:00:17.240 --> 00:00:21.249 We're talking to Kyle Duffy, someone that I have a lot in common with. 00:00:21.849 --> 00:00:25.959 He's a former go to market operator with a bunch of great companies. 00:00:26.150 --> 00:00:27.680 And now he's on the investor side. 00:00:27.680 --> 00:00:30.960 He's over at a firm called Gradient Ventures, which if you don't know 00:00:30.960 --> 00:00:34.949 them, they're part of Alphabet, the parent company to Google, and 00:00:34.950 --> 00:00:39.340 they specialize in early stage investing in AI and machine learning. 00:00:39.589 --> 00:00:40.370 Exciting stuff. 00:00:41.330 --> 00:00:45.740 So we're going to unpack Kyle's perspective on the early stages of 00:00:45.740 --> 00:00:49.509 go to market development across the portfolio companies he works with. 00:00:50.069 --> 00:00:53.379 What is the biggest opportunity that he sees? 00:00:53.850 --> 00:00:57.340 That early stage founders and companies don't exploit. 00:00:58.160 --> 00:00:58.810 Let's find out. 00:01:02.019 --> 00:01:08.119 This is a fun one for me because you and I have been spending the last few years 00:01:08.299 --> 00:01:15.030 looking at the startup ecosystem through a very similar lens, not just as a venture 00:01:15.030 --> 00:01:21.460 capitalists, but as venture capitalists that help early stage portfolio companies. 00:01:21.799 --> 00:01:23.160 With their go to market strategy. 00:01:23.449 --> 00:01:27.339 Uh, you and you were specifically around AI and us a little more broadly at 00:01:27.339 --> 00:01:29.460 stage two capital and just B2B software. 00:01:29.660 --> 00:01:37.029 What is like the biggest opportunity that you see startups not lean into as much 00:01:37.029 --> 00:01:38.979 as they should at that very early stage? 00:01:39.315 --> 00:01:39.994 That's a big one. 00:01:40.304 --> 00:01:43.884 So for go to market, something that gets overlooked, you know, 00:01:43.884 --> 00:01:47.085 from the beginning, they see it as, okay, we need, we need revenue. 00:01:47.085 --> 00:01:48.854 We need customers in the door. 00:01:49.335 --> 00:01:54.464 I don't think there's enough focus spent on customer success and 00:01:54.464 --> 00:02:00.115 specifically around that, how to expand customers that you already have. 00:02:00.905 --> 00:02:02.234 Hey folks, this is Mark here. 00:02:02.425 --> 00:02:03.164 Bingo. 00:02:03.255 --> 00:02:03.845 Yes. 00:02:04.035 --> 00:02:07.359 All of these founders and sales teams are. 00:02:07.919 --> 00:02:11.840 obsessed early with new customer acquisition, with revenue growth. 00:02:12.070 --> 00:02:12.940 And I know why. 00:02:12.970 --> 00:02:15.140 That's the first question that everyone asks. 00:02:15.190 --> 00:02:16.209 Where's your revenue at? 00:02:16.510 --> 00:02:18.789 No one's like, Hey, that sounds like a cool business. 00:02:18.810 --> 00:02:19.750 What's your retention? 00:02:19.829 --> 00:02:24.539 But kudos to Kyle, that that is the perfect orientation in the 00:02:24.540 --> 00:02:25.649 first phase of the business. 00:02:25.740 --> 00:02:28.189 Would you rather have a business that's tripling in 00:02:28.190 --> 00:02:29.980 revenue, but has a leaky bucket? 00:02:30.300 --> 00:02:33.029 And half of them leave or a business that's growing steady at 00:02:33.029 --> 00:02:38.050 30 percent a year and everybody loves the product and everybody 00:02:38.060 --> 00:02:40.800 sticks around and everybody expands. 00:02:40.979 --> 00:02:45.469 The latter might sound less sexy, but it's a far better foundation 00:02:45.639 --> 00:02:47.339 upon which to build a company. 00:02:47.530 --> 00:02:48.409 All right, let's get back to Kyle. 00:02:49.779 --> 00:02:52.119 I mean, we both know it's easier to. 00:02:52.394 --> 00:02:56.565 Expand a happy customer than to land a new customer, you know, and I've been 00:02:56.565 --> 00:03:00.725 thinking about this with our companies a lot and specifically our founders, like 00:03:00.845 --> 00:03:07.134 how from the beginning do we set the stage for a good land to expand motion? 00:03:07.344 --> 00:03:07.664 Love it. 00:03:07.684 --> 00:03:11.254 We've got this obsession with the new customers, but you want to 00:03:11.255 --> 00:03:15.305 orient them around the land and expand with the expand in capital E. 00:03:15.459 --> 00:03:19.190 Why do you think founders don't lean into that as much as they should? 00:03:19.310 --> 00:03:19.980 I don't know if they're 00:03:19.980 --> 00:03:21.209 seeing the opportunity. 00:03:21.260 --> 00:03:24.629 Um, at least in our portfolio, you know, we're working with a lot of 00:03:24.629 --> 00:03:29.380 founders and even early stage sales leaders who haven't necessarily 00:03:29.390 --> 00:03:31.370 had the customer focus in the past. 00:03:31.410 --> 00:03:34.349 They're just focused on getting new logos in the door versus 00:03:34.349 --> 00:03:35.769 the opportunity to expand. 00:03:36.349 --> 00:03:39.465 And I think from a sales leader perspective, perspective. 00:03:39.505 --> 00:03:42.745 Once a company has hired a sales leader, it's more about like, 00:03:42.745 --> 00:03:45.835 how do we get the biggest deal possible right from the start? 00:03:45.905 --> 00:03:50.715 What I'm seeing, and especially in 2023, where procurement cycles have lengthened, 00:03:50.765 --> 00:03:55.025 and we could talk about that, it's easier to get in the door with either a 00:03:55.025 --> 00:04:00.665 sliver of your product set that's maybe less risky for the customer, or into 00:04:00.695 --> 00:04:07.005 a group, one specific team at maybe a larger enterprise to prove out the model 00:04:07.055 --> 00:04:08.935 before going bigger within an account. 00:04:09.204 --> 00:04:09.865 Makes sense. 00:04:09.865 --> 00:04:14.585 And does this apply in all entrepreneurial settings or are there some where that 00:04:14.585 --> 00:04:16.215 it's a better application than others? 00:04:16.470 --> 00:04:17.240 I think 00:04:17.269 --> 00:04:23.990 probably the most applicable is it's a company that has something to expand. 00:04:24.050 --> 00:04:29.659 So, um, either you're, you know, you've got a product solution that, you know, 00:04:29.669 --> 00:04:34.119 you can, you can sell part of it to begin with, and then you can, um, you 00:04:34.119 --> 00:04:37.960 know, upsell in the future, you know, another part of the product, or it's 00:04:37.989 --> 00:04:42.789 a product that applies to a number of different teams within an organization. 00:04:43.955 --> 00:04:47.395 This is crazy actually hearing Kyle right now, because literally two 00:04:47.395 --> 00:04:51.185 months ago, we made an investment at Stage 2 Capital and we're having 00:04:51.185 --> 00:04:52.454 a debate about land and expand. 00:04:52.454 --> 00:04:53.335 I really want them to do it. 00:04:53.395 --> 00:04:57.395 And I wrote this sentence in their go to market assessment, land and expand motions 00:04:57.405 --> 00:05:01.785 are becoming more common in SaaS and are preferred generally by most customers. 00:05:02.120 --> 00:05:04.640 Especially for large transformative technologies. 00:05:04.700 --> 00:05:06.650 It's unclear if you have this context. 00:05:06.690 --> 00:05:09.520 However, here are the strategies to mitigate the negatives of the 00:05:09.520 --> 00:05:13.200 land and expand model by choosing the land product modules that 00:05:13.200 --> 00:05:14.820 fit the following four criteria. 00:05:15.050 --> 00:05:18.880 Number one, enable low time and effort to retainable value. 00:05:19.550 --> 00:05:23.249 Number two, align with the currently perceived versus 00:05:23.380 --> 00:05:24.960 evangelized customer need. 00:05:25.760 --> 00:05:30.575 Number three, Provide a strategic wedge for further platform adoption. 00:05:31.245 --> 00:05:35.205 And number four, develop high switching costs once implemented. 00:05:35.325 --> 00:05:38.055 So if you're thinking about land and expand and you're evaluating 00:05:38.065 --> 00:05:42.825 options, think about that lens as a way to pick the optimal approach. 00:05:43.324 --> 00:05:44.154 Let's get back to Kyle. 00:05:45.304 --> 00:05:46.705 So you can start with one team 00:05:46.705 --> 00:05:46.805 and 00:05:46.805 --> 00:05:48.224 you can expand it to others. 00:05:48.414 --> 00:05:48.635 All right. 00:05:48.635 --> 00:05:51.825 So let's talk about if I'm listening and I'm a founder, I'm like, Oh my 00:05:51.825 --> 00:05:54.175 gosh, you know, Kyle's totally right. 00:05:54.234 --> 00:05:56.354 I'm banging on the door here. 00:05:56.354 --> 00:05:56.814 Try to. 00:05:57.114 --> 00:06:01.335 Move through these nine to 12 month sales cycles to sell my big product vision. 00:06:02.005 --> 00:06:05.505 And if I could just do a more of a land and expand motion, this 00:06:05.505 --> 00:06:07.085 will accelerate everything for me. 00:06:07.375 --> 00:06:11.635 What are some of the foundational steps that a founder needs to 00:06:11.635 --> 00:06:14.265 pay attention to, to make sure they've set their organization up 00:06:14.455 --> 00:06:15.974 for success with land and expand, 00:06:16.585 --> 00:06:20.474 I think first is setting the foundation in terms of who you're selling to 00:06:20.474 --> 00:06:24.744 within the org, you know, and being very specific around your, your 00:06:24.745 --> 00:06:29.575 persona that you're selling to thinking that, okay, we can get in the door. 00:06:29.625 --> 00:06:30.525 What's our wedge. 00:06:30.645 --> 00:06:36.095 So what's going to be the least friction to get in the door to a customer, making 00:06:36.095 --> 00:06:38.375 sure that everyone is aligned around. 00:06:38.645 --> 00:06:42.055 The foundation of the persona and the ICP that you're selling 00:06:42.055 --> 00:06:45.515 to next up in sending the reps. 00:06:45.705 --> 00:06:53.474 So it's okay that they sell that 25k deal versus a six figure deal to get in the 00:06:53.475 --> 00:06:58.975 door and that their comp structure is set up in such a way that they're going to 00:06:58.985 --> 00:07:06.034 be motivated down the road to grow that business, making sure that the, the AE. 00:07:07.054 --> 00:07:12.125 Is comped not just on new business in the door, but also business 00:07:12.135 --> 00:07:13.745 coming from existing customers. 00:07:14.145 --> 00:07:16.004 That doesn't mean they get comped on a renewal. 00:07:16.015 --> 00:07:19.325 So if they close the 25, 000 deal to begin with, you know, and it 00:07:19.325 --> 00:07:21.724 renews a year from now at 50, 000. 00:07:21.724 --> 00:07:22.195 Okay. 00:07:22.214 --> 00:07:24.715 So you might not get comped on that initial 25 K. 00:07:26.305 --> 00:07:30.365 However, you do get comped in that net new 25k expansion. 00:07:30.725 --> 00:07:32.864 Now, I love that. 00:07:32.865 --> 00:07:36.715 I've used that very successfully and it gives me like conviction. 00:07:37.395 --> 00:07:42.230 I've also been in board meetings where I've had pushback from other 00:07:42.340 --> 00:07:45.780 VCs like, Hey, AEs should close. 00:07:45.930 --> 00:07:49.940 Let's not waste their time on, you know, renewals and expansion. 00:07:50.070 --> 00:07:51.320 Let's these are hunters. 00:07:51.320 --> 00:07:52.260 Let's make them hunt. 00:07:52.620 --> 00:07:56.470 How do you deal with that conflict at sort of the board and strategic level? 00:07:57.779 --> 00:07:59.100 I don't think it's a waste of time. 00:07:59.635 --> 00:08:01.515 It's revenue and it's good revenue. 00:08:02.035 --> 00:08:07.295 You know, and that, that expansion revenue, I will guarantee the CAC is 00:08:07.295 --> 00:08:13.635 lower on that, the cost to acquire that revenue is lower than a net new customer. 00:08:14.385 --> 00:08:14.545 All right. 00:08:14.564 --> 00:08:16.795 So those are great foundational steps, Kyle. 00:08:16.814 --> 00:08:21.894 What about common potholes you see where, you know, you walk into an early 00:08:21.894 --> 00:08:23.164 stage startup and you're like, wow. 00:08:23.860 --> 00:08:27.549 You set this up to really hurt your ability to do land 00:08:27.549 --> 00:08:28.710 and expand successfully. 00:08:29.479 --> 00:08:32.140 So the best companies I see do this. 00:08:32.360 --> 00:08:37.789 You've got a customer obsessed founder and beyond the customer 00:08:37.789 --> 00:08:40.989 obsessed founder, you've got a customer obsessed sales leader. 00:08:41.345 --> 00:08:45.345 And a customer obsessed, whoever is leading customer success at that point, 00:08:45.405 --> 00:08:51.154 you know, so I think across the board, you have to be focused on the customer. 00:08:51.675 --> 00:08:54.205 Um, and I actually didn't mention product as well. 00:08:54.224 --> 00:08:57.884 So product has to be thinking about the customer to begin with, 00:08:58.895 --> 00:09:00.794 because you need to be creating. 00:09:00.835 --> 00:09:03.515 And I used to say this to my last customer success team. 00:09:03.515 --> 00:09:05.645 My, at my last startup is. 00:09:06.120 --> 00:09:08.719 At the early stage, we're not just creating customers. 00:09:08.750 --> 00:09:11.530 We're creating raving fans of our product. 00:09:11.960 --> 00:09:15.779 I usually say for, for founders anyway, at the early stage, you should be having 00:09:15.779 --> 00:09:18.339 10 to 12 customer conversations per week. 00:09:19.300 --> 00:09:21.100 And if you're not, there's, there's something wrong. 00:09:21.490 --> 00:09:25.940 You know, some VCs will say, you know, don't offer services. 00:09:26.190 --> 00:09:29.990 You know, we don't want services revenue, you know, where I would, I would. 00:09:30.390 --> 00:09:34.940 You know, push back on that for at least some, some types of products 00:09:35.020 --> 00:09:39.650 that require some level of services to get a customer to be successful. 00:09:40.279 --> 00:09:47.459 And, you know, we did some data mining at my last company to show that customers 00:09:47.459 --> 00:09:51.609 who churned ultimately it was because they would never onboard it correctly. 00:09:52.290 --> 00:09:56.250 That's probably the number one reason that we could point to for customers 00:09:56.250 --> 00:10:01.170 churning or not expanding is a customer has to see value in the product and to 00:10:01.170 --> 00:10:05.200 see value in the product, they have to be onboarded correctly and they have to 00:10:05.200 --> 00:10:07.910 have operationalized product successfully. 00:10:08.910 --> 00:10:10.290 Hey folks, just Mark here. 00:10:10.699 --> 00:10:12.519 I agree with Kyle. 00:10:12.560 --> 00:10:19.319 This 20 years is we went through a interesting entrepreneurial journey 00:10:19.330 --> 00:10:23.230 in sort of the mid nineties, late nineties, early two thousands, where. 00:10:23.550 --> 00:10:28.380 We confused services businesses with scalable software businesses and a 00:10:28.380 --> 00:10:33.810 lot of investors and entrepreneurs got a little screwed over because, 00:10:33.850 --> 00:10:39.090 you know, services revenue is valued usually around one X and good software 00:10:39.090 --> 00:10:41.150 revenue is valued at say 10 X. 00:10:41.689 --> 00:10:44.559 You have a 10, 000, 000 services business worth 10, 000, 000. 00:10:44.560 --> 00:10:48.009 You have a 10, 000, 000 software business worth 100, 000, 000 00:10:48.490 --> 00:10:49.540 because it's more scalable. 00:10:50.379 --> 00:10:52.679 And so because of that, we swung too far. 00:10:53.430 --> 00:10:56.280 We have a lot of businesses where 98 percent of their revenue. 00:10:56.780 --> 00:10:59.060 Is software and only 2 percent of services. 00:10:59.060 --> 00:11:02.649 But what people aren't looking at is if we just loosen that up a little 00:11:02.649 --> 00:11:08.240 bit and maybe went to say 90 percent software and 10 percent services. 00:11:09.005 --> 00:11:13.545 The impact on customer attention is enormous, and it's okay that that 10 00:11:13.545 --> 00:11:18.915 percent is only valued at 1x, and our software is, the 90 percent is valued 00:11:18.915 --> 00:11:24.205 at 10x, because the, the increase in the services revenue we're taking on. 00:11:24.710 --> 00:11:26.650 Is making those customers to stick. 00:11:27.290 --> 00:11:29.199 So I like Kyle's perspective here. 00:11:29.530 --> 00:11:34.139 And let's not swing too far on the software to services revenue ratio. 00:11:34.470 --> 00:11:35.430 Let's get back to Kyle. 00:11:36.679 --> 00:11:39.729 And especially when it comes to enterprise products that are more 00:11:39.729 --> 00:11:44.370 complex, to offer some level of services, it's not necessarily a bad thing. 00:11:45.189 --> 00:11:45.709 That's great. 00:11:45.709 --> 00:11:46.140 And now, 00:11:46.170 --> 00:11:48.969 um, you talked a little bit about the team, but I'm 00:11:48.969 --> 00:11:51.370 curious about the transition. 00:11:51.540 --> 00:11:57.859 So let's just imagine that The founders are probably doing some level of selling, 00:11:57.890 --> 00:12:00.319 onboarding, renewing, expanding initially. 00:12:00.869 --> 00:12:03.139 Whether it's the first two customers, the first 20 customers, 00:12:03.139 --> 00:12:04.589 the first 200 customers, whatever. 00:12:05.580 --> 00:12:08.150 And at some point they're like, okay, I need to like delegate this. 00:12:08.730 --> 00:12:12.579 Let's fast forward to having this cross functional team. 00:12:12.969 --> 00:12:15.060 But at some point you start to have a team. 00:12:15.770 --> 00:12:18.949 Three or four AEs, two or three CS folks. 00:12:19.710 --> 00:12:22.350 And you still want to preserve this land and expand. 00:12:23.915 --> 00:12:25.745 What happens at that point? 00:12:25.765 --> 00:12:28.375 Because I've seen folks do it well in the beginning and then once 00:12:28.375 --> 00:12:30.775 they build the team, they lose it. 00:12:30.815 --> 00:12:31.775 Why does that happen? 00:12:32.155 --> 00:12:32.915 And how do you prevent it? 00:12:33.785 --> 00:12:39.385 I think one reason why they lose the momentum is that at the early 00:12:39.385 --> 00:12:44.145 stage, there's such alignment because you might have two reps 00:12:44.145 --> 00:12:46.524 and one customer success manager. 00:12:46.900 --> 00:12:49.400 And they all sit together and they're super well aligned. 00:12:49.800 --> 00:12:54.170 I think over time you can lose some of that alignment and it be in silos 00:12:54.170 --> 00:12:56.509 can be created between the teams. 00:12:56.810 --> 00:13:01.329 So I really do my best to, to remove silos. 00:13:01.370 --> 00:13:03.719 I think there's a couple of things that you could do. 00:13:03.769 --> 00:13:09.079 Um, I see the companies that are co located at this point. 00:13:09.199 --> 00:13:12.020 So you've got, you know, you go to market team all sitting 00:13:12.020 --> 00:13:13.860 together, really valuable. 00:13:14.460 --> 00:13:16.330 Not always possible in today's remote world. 00:13:16.470 --> 00:13:16.950 I get it. 00:13:17.850 --> 00:13:24.670 Um, secondly, I think if you can align, you know, you could see kind of pod 00:13:24.670 --> 00:13:29.359 structures work well where for, you know, especially if it's a bigger accounts 00:13:29.689 --> 00:13:32.459 where you've got more of an ABM strategy. 00:13:33.350 --> 00:13:34.660 Hey folks, just Mark here. 00:13:34.670 --> 00:13:36.440 My colleagues are laughing. 00:13:36.449 --> 00:13:39.290 The fact that Kyle just said pods. 00:13:39.610 --> 00:13:41.110 Pods is a little bit of my pet rock. 00:13:41.170 --> 00:13:45.920 I love pods when it comes to this type of issue of alignment. 00:13:46.200 --> 00:13:48.259 Especially with sales and customer success. 00:13:48.450 --> 00:13:52.220 Because I see a lot of teams where as you scale, the sales team is on 00:13:52.220 --> 00:13:56.159 this floor of the office and the CS team is on this floor of the office. 00:13:56.930 --> 00:13:59.870 And it gets to a point where it's like the salesperson closes a 00:13:59.870 --> 00:14:03.569 customer, they hit submit in the CRM, and then it's assigned to a CSM 00:14:03.990 --> 00:14:05.300 and they don't even know each other. 00:14:05.539 --> 00:14:06.850 They don't even talk about it. 00:14:07.159 --> 00:14:11.440 The only time the salesperson finds out which CSM got their account is when 00:14:11.440 --> 00:14:14.830 the account churns and they get their commission clawed back and they're pissed. 00:14:14.900 --> 00:14:18.730 But instead, if you create pods and you physically sit these 00:14:18.730 --> 00:14:23.950 people together, or even if you're working remotely, have most of the 00:14:23.950 --> 00:14:25.840 customers from these two salespeople. 00:14:26.300 --> 00:14:31.209 Go to these two CSMs most of them and now they're like they're talking 00:14:31.209 --> 00:14:35.479 a lot, you know, hey Matthew That customer you signed up two weeks ago. 00:14:35.479 --> 00:14:37.749 They've blown off two onboarding calls now. 00:14:37.990 --> 00:14:38.569 Oh, really? 00:14:38.610 --> 00:14:42.219 That's a shame Let me go back and talk to them, you know, I like and Matthew the 00:14:42.219 --> 00:14:48.319 CSM sees Mark Struggling on the last day of the quarter and there's a questionable 00:14:48.329 --> 00:14:49.599 customer and he's like, you know what? 00:14:49.619 --> 00:14:52.879 Let me talk to them I bet we can take them on I know you've been working 00:14:52.879 --> 00:14:56.140 your butt off and you're trying to hit the quarter You And so you get that 00:14:56.140 --> 00:15:01.470 relationship that you can't devise through the CRM process and the data 00:15:01.470 --> 00:15:03.970 and the structure that actually happens. 00:15:04.660 --> 00:15:08.790 And clearly Kyle has benefited from that, as has I in in much 00:15:08.830 --> 00:15:10.150 of the portfolio companies. 00:15:10.780 --> 00:15:11.779 All right, let's get back to Kyle 00:15:12.919 --> 00:15:14.200 So you've got a set of accounts. 00:15:14.910 --> 00:15:18.930 You've got sales and customer success managers all lined around those 00:15:18.960 --> 00:15:24.299 particular accounts versus kind of more haphazard territories can be valuable. 00:15:24.949 --> 00:15:28.860 And then lastly, I think the incentive structure is really crucial. 00:15:29.190 --> 00:15:30.959 So it's like a debate. 00:15:32.020 --> 00:15:35.000 Going back to the beginning of customer success time, in 00:15:35.000 --> 00:15:38.910 terms of who owns that expansion revenue, does, does the AE own it? 00:15:38.960 --> 00:15:40.800 Does the customer success manager own it? 00:15:41.130 --> 00:15:43.160 I've seen it work both ways. 00:15:43.200 --> 00:15:48.129 I have my personal bias to say that the account executive is going to 00:15:48.220 --> 00:15:50.710 own any net new expansion revenue. 00:15:51.089 --> 00:15:54.660 And the reason for that is to keep customer success as a 00:15:54.670 --> 00:15:56.610 trusted advisor for the customer. 00:15:56.835 --> 00:15:59.815 Really what we need to train the customer success manager to do 00:16:00.165 --> 00:16:03.785 is look for opportunities for expansion within the account. 00:16:04.115 --> 00:16:07.574 So they should be constantly looking, listening for those 00:16:07.575 --> 00:16:12.845 expansion opportunities and knowing when to pull in that account exec. 00:16:13.265 --> 00:16:18.145 And then the account exec is doing the selling in terms of the upsell 00:16:18.155 --> 00:16:21.495 or the cross sell and talking commercials with the customer. 00:16:21.760 --> 00:16:27.090 And they get comped ultimately on the commission for the net new expansion. 00:16:27.430 --> 00:16:29.619 Does pricing come into play? 00:16:29.939 --> 00:16:33.420 Are there pricing decisions that you can make that will help land and 00:16:33.420 --> 00:16:35.949 expand versus hurt land and expand? 00:16:36.879 --> 00:16:39.959 Something with land and expand that I think is valuable that we 00:16:39.959 --> 00:16:44.930 didn't hit on earlier is that I think you can really hold a customer 00:16:44.930 --> 00:16:46.479 to the value of the product. 00:16:47.105 --> 00:16:51.195 Meaning, if you get them in the door, they're experiencing your product. 00:16:51.215 --> 00:16:52.635 They're having a great experience. 00:16:52.985 --> 00:16:57.985 They're less likely to push back on price when you go and ask them to 00:16:58.485 --> 00:17:02.625 roll out the product to a new team, because they already see that value. 00:17:03.415 --> 00:17:08.345 From an initial pricing perspective, I think just making sure that you leave 00:17:08.345 --> 00:17:10.775 room for expansion down the road. 00:17:11.555 --> 00:17:14.244 Yeah, I, I like what Kyle's talking about here. 00:17:14.285 --> 00:17:17.175 Pricing is an important ingredient of this strategy. 00:17:17.175 --> 00:17:17.185 Yeah. 00:17:17.185 --> 00:17:17.194 Absolutely. 00:17:17.345 --> 00:17:21.194 And it kind of gets back to what we were talking about earlier of the pothole 00:17:21.655 --> 00:17:27.345 to over obsess with the opening ACV, annual contract value of the customer. 00:17:27.585 --> 00:17:29.664 Because yeah, that accelerates short term revenue. 00:17:29.785 --> 00:17:33.414 And yeah, it demonstrates to the market that the willingness to pay for 00:17:33.414 --> 00:17:35.004 your awesome product is really high. 00:17:35.365 --> 00:17:40.395 But in addition to creating a churn risk and uh, an ankle biter 00:17:40.395 --> 00:17:42.865 risk, you have no room to expand. 00:17:43.265 --> 00:17:45.474 So many SAS businesses. 00:17:46.135 --> 00:17:50.485 get to the end of a year long contract with a customer, and the customer has used 00:17:50.544 --> 00:17:52.715 less than 50 percent of what they bought. 00:17:52.945 --> 00:17:56.365 That is a very challenging customer attention conversation. 00:17:56.794 --> 00:18:00.995 That is a next to impossible customer expansion conversation. 00:18:01.185 --> 00:18:05.635 And so if you can keep You're opening price low and that allows 00:18:05.645 --> 00:18:10.525 you to keep the value the customer is actually perceiving today in 00:18:10.525 --> 00:18:12.245 line with what they're paying for. 00:18:12.395 --> 00:18:16.574 And that leaves opportunity for expansion and great net dollar retention and 00:18:16.574 --> 00:18:19.005 growth simply through your install base. 00:18:19.125 --> 00:18:20.999 You don't have to sell any new customers. 00:18:21.180 --> 00:18:24.320 And you're still growing by 30 to 40 percent a year. 00:18:24.659 --> 00:18:25.550 All right, let's get back to Kyle. 00:18:26.710 --> 00:18:31.710 So whatever variable you're pricing off of, whether it be seats or API 00:18:31.710 --> 00:18:35.209 calls, you know, if it's consumption or if it's seat based subscription 00:18:35.209 --> 00:18:39.319 model, I think just making sure that you leave room for expansion. 00:18:39.880 --> 00:18:41.720 And not give away the farm. 00:18:42.070 --> 00:18:44.980 If you're only selling a part of your product to begin with 00:18:49.160 --> 00:18:53.940 talking too loud, hosted by Chris Savage is brought to you by the HubSpot 00:18:53.940 --> 00:18:58.990 podcast network, the audio destination for business professionals on this 00:18:58.990 --> 00:19:01.979 podcast, Chris Savage, Wistia CEO, and. 00:19:02.170 --> 00:19:06.330 Loudest talker takes you inside the minds of entrepreneurs as they 00:19:06.330 --> 00:19:10.369 share the hilarious, informative, and most challenging aspects 00:19:10.369 --> 00:19:12.389 of building more human brands. 00:19:13.160 --> 00:19:16.719 You can hear episodes like building a reusable notebook empire with 00:19:16.719 --> 00:19:21.940 entrepreneur Joe Lemay or the AI video revolution with Wistia's own 00:19:21.970 --> 00:19:23.760 head of production, Chris Levine. 00:19:24.350 --> 00:19:27.480 Listen to talking too loud, wherever you get your podcasts. 00:19:31.929 --> 00:19:32.819 This is great, Kyle. 00:19:32.840 --> 00:19:34.509 I want to switch gears because. 00:19:35.035 --> 00:19:36.375 You're probably in the 0. 00:19:36.965 --> 00:19:42.175 001 percent of people in the world that have a experienced take on this. 00:19:42.365 --> 00:19:48.124 So I'm curious about any patterns you're seeing on unique challenges, 00:19:48.215 --> 00:19:53.104 best practices, nuances of bringing AI tech to market. 00:19:53.815 --> 00:19:59.475 That we maybe don't, is different than SAS and software and other, you know, products 00:19:59.485 --> 00:20:00.755 that we have more experience with. 00:20:01.025 --> 00:20:05.724 And you mean companies that are selling an AI product to their customer, right? 00:20:05.724 --> 00:20:05.824 Yeah. 00:20:05.825 --> 00:20:06.304 You've got a 00:20:06.304 --> 00:20:10.115 bunch of companies that are building AI products and now they're 00:20:10.115 --> 00:20:11.585 trying to bring them to market. 00:20:12.234 --> 00:20:14.935 Is there anything unique you're seeing in the marketing, the 00:20:14.935 --> 00:20:17.685 sales, the customer success motion? 00:20:18.220 --> 00:20:23.230 That we hadn't seen as much in say, like technology and software ecosystem. 00:20:23.830 --> 00:20:24.210 Yeah. 00:20:24.210 --> 00:20:27.240 So we've got a number of companies that I would consider like 00:20:27.260 --> 00:20:29.200 verticalized AI applications. 00:20:29.715 --> 00:20:33.465 You know, selling into say retail or legal. 00:20:33.765 --> 00:20:36.905 And oftentimes these industries, they're more legacy industries. 00:20:37.335 --> 00:20:41.064 I think there's excitement and there's also hesitation about 00:20:41.085 --> 00:20:46.415 AI and the excitement makes it easier to get in the door upfront. 00:20:46.855 --> 00:20:51.485 So these AI companies in terms of getting meetings, they're doing quite well. 00:20:52.105 --> 00:20:55.115 So here, here's the new, here's where the nuance happens though, 00:20:55.165 --> 00:20:56.145 and where it's different. 00:20:56.425 --> 00:21:01.915 Is that, okay, they're in the door and they're having customer conversations, but 00:21:01.915 --> 00:21:07.405 there's more hesitancy on the part of the customer to actually roll out AI because 00:21:07.425 --> 00:21:09.314 they don't quite know where to start. 00:21:09.925 --> 00:21:15.374 And especially the bigger enterprises are really scared about the, the 00:21:15.375 --> 00:21:17.554 data security and compliance piece. 00:21:18.475 --> 00:21:21.245 I've been studying this pretty closely, just, you know, Similar 00:21:21.245 --> 00:21:24.815 to Kyle, like what's different about bringing AI to market. 00:21:24.885 --> 00:21:29.155 And there are tremendous parallels to the cloud in the late nineties. 00:21:29.285 --> 00:21:31.955 And it couldn't be a better time. 00:21:31.955 --> 00:21:34.115 I think this is always true, but right now it's critical. 00:21:34.115 --> 00:21:36.814 If you're bringing AI to market, design big, start small. 00:21:36.844 --> 00:21:40.895 It's another way of what Kyle's talking about with the opening land. 00:21:41.025 --> 00:21:42.475 If I can, I'll jump to a B2C. 00:21:43.455 --> 00:21:50.685 Pretty famous example, in 1996, when a guy named Jeff Bezos quit his quant hedge 00:21:50.685 --> 00:21:53.775 fund job to start an e commerce company. 00:21:54.025 --> 00:21:57.455 And he didn't set out to start a bookstore. 00:21:57.675 --> 00:22:02.344 He quit that job because he knew that the way that all products, from 00:22:02.344 --> 00:22:05.634 groceries to furniture to clothing to books, were made in the United States. 00:22:06.245 --> 00:22:09.465 Would be changed in the next decade, but he didn't start there. 00:22:09.595 --> 00:22:13.145 He knew that we weren't ready to buy something, most things 00:22:13.245 --> 00:22:14.185 that we couldn't touch. 00:22:14.294 --> 00:22:17.554 And so he created a list of 50 products and said which one 00:22:17.554 --> 00:22:19.054 would be the best to start with. 00:22:19.304 --> 00:22:21.704 And he chose books because we know what a book is. 00:22:22.415 --> 00:22:26.185 We don't have to touch a book to know there's millions of unique titles. 00:22:26.385 --> 00:22:27.794 The gross margin is actually pretty good. 00:22:27.950 --> 00:22:31.300 And not only did it build the foundation for one of the most valuable companies 00:22:31.300 --> 00:22:35.970 in the world, but it also allowed him to build the operational moat of these 00:22:36.000 --> 00:22:41.765 decentralized delivery Infrastructure for him to capture the bigger game. 00:22:42.795 --> 00:22:44.525 And that's kind of what Kyle's getting at here. 00:22:45.015 --> 00:22:48.094 We have the big vision, but we can't sell it out of the gate. 00:22:48.095 --> 00:22:48.905 Cause we're not ready. 00:22:49.495 --> 00:22:54.574 So sell the thing we're ready for and hope that it builds the moat for us 00:22:54.574 --> 00:22:55.945 to capture the big vision as well. 00:22:56.784 --> 00:22:57.754 All right, let's get back to Kyle. 00:22:58.995 --> 00:23:04.245 So I see AI companies getting held up in procurement cycles a lot longer 00:23:04.295 --> 00:23:06.945 than a typical SAS product would. 00:23:07.135 --> 00:23:07.955 And what are the best. 00:23:08.345 --> 00:23:12.915 AI companies in terms of like the best go to market function doing 00:23:13.015 --> 00:23:17.445 to get ahead of the average and, and overcoming these obstacles. 00:23:17.704 --> 00:23:20.295 So say it's a big enterprise and there's a number of different 00:23:20.295 --> 00:23:22.404 applications they could use AI for. 00:23:22.865 --> 00:23:24.984 Let's start with the application. 00:23:24.985 --> 00:23:26.385 That's less risky. 00:23:26.845 --> 00:23:31.115 So let's get in the door there and less risky might be, it doesn't like 00:23:31.115 --> 00:23:32.945 completely overhaul their operations. 00:23:32.985 --> 00:23:34.395 They don't have to let people go. 00:23:34.945 --> 00:23:42.315 And maybe it's using a data set that's less proprietary than say, like something 00:23:42.315 --> 00:23:43.915 that's really in their secret sauce. 00:23:44.435 --> 00:23:48.455 So let's get in the door with that kind of frictionless application 00:23:48.504 --> 00:23:50.294 and then let's expand from there. 00:23:51.034 --> 00:23:52.284 Yeah, let's get the trust. 00:23:53.195 --> 00:23:53.434 All right. 00:23:53.435 --> 00:23:56.375 And then the other opportunity I have to take advantage of here, Kyle, 00:23:56.705 --> 00:24:02.495 given the overlap of go to market expertise and AI expertise is the 00:24:02.495 --> 00:24:04.745 application of AI to go to market. 00:24:06.899 --> 00:24:09.750 Have you been exploring this with your portfolio? 00:24:09.760 --> 00:24:12.520 Have you seen interesting implementations? 00:24:12.530 --> 00:24:15.019 What, what is this going to look like in a few years? 00:24:15.320 --> 00:24:16.050 Can you comment on that? 00:24:17.600 --> 00:24:20.479 It's something I've thought about a lot and we've been researching and 00:24:20.479 --> 00:24:22.600 I'm seeing some companies using AI. 00:24:23.529 --> 00:24:26.425 It's a matter of how do we, Best use it. 00:24:26.544 --> 00:24:32.925 So AI is a tool and I believe it's, you know, human in the loop plus AI. 00:24:32.975 --> 00:24:34.834 It's going to be a one plus one equals three. 00:24:35.244 --> 00:24:36.635 It's a matter of where we apply that. 00:24:37.004 --> 00:24:43.354 So generally the way I'm looking at it is through the sales cycle, because you could 00:24:43.354 --> 00:24:46.034 apply AI in a number of different areas. 00:24:46.354 --> 00:24:49.444 So I'll just give, maybe I'll give a couple of examples if that's okay. 00:24:49.915 --> 00:24:55.195 So what I'd consider building the sales foundation in terms of like. 00:24:55.685 --> 00:24:56.765 Who's our customer? 00:24:57.215 --> 00:24:58.665 What's our TAM look like? 00:24:58.915 --> 00:25:00.515 Determine who the persona is. 00:25:00.825 --> 00:25:05.235 So, there is areas where you can use AI, especially in terms of like, 00:25:05.600 --> 00:25:10.179 Analysis of the market that that gets interesting and then kind of 00:25:10.179 --> 00:25:11.830 once you determine those things. 00:25:11.830 --> 00:25:13.270 Okay, here's my ICP. 00:25:13.529 --> 00:25:14.659 Here's who we're going after. 00:25:14.989 --> 00:25:17.980 Like, then I look at, you know, top of funnel and prospecting. 00:25:18.449 --> 00:25:22.689 So I think again here, analyzing the market to understand, like, how do 00:25:22.689 --> 00:25:26.955 I get a list together of our of our, uh, My most relevant customers right 00:25:26.955 --> 00:25:29.175 now are my most relevant prospects. 00:25:29.524 --> 00:25:31.955 And then how do I personalize messaging to 00:25:31.955 --> 00:25:33.534 them here? 00:25:33.534 --> 00:25:37.094 Yeah, we're, we're flowing pretty far beyond the expand topic, but I'm 00:25:37.095 --> 00:25:40.365 loving this because I'm seeing the same stuff as Kyle, you know, it's 00:25:40.365 --> 00:25:42.954 like, we're in that first wave of. 00:25:44.479 --> 00:25:48.750 Which many would argue is a hype, you know, like, uh, like I mentioned, uh, AOL, 00:25:48.750 --> 00:25:52.119 Netscape, AltaVista, they were the winners early and they're not the winners today. 00:25:52.129 --> 00:25:53.730 So what do we have today? 00:25:53.830 --> 00:25:56.450 Is it the first wave hype or are these the true winners? 00:25:56.480 --> 00:25:56.719 I don't know. 00:25:57.205 --> 00:26:01.375 I do have an opinion that as you go across these specific use cases and go 00:26:01.375 --> 00:26:06.584 to market that Kyle's talking about, I'd be more bullish on the use cases where 00:26:06.584 --> 00:26:08.774 the incumbents do not have the data. 00:26:09.724 --> 00:26:12.675 The incumbents have the data to do AI forecasting. 00:26:13.425 --> 00:26:17.104 The incumbents have the data to do SDR copilots. 00:26:17.484 --> 00:26:19.835 The incumbents don't really have the data to do 00:26:21.915 --> 00:26:26.165 I can't think of a multi billion dollar company that has a billion hours of 00:26:26.165 --> 00:26:30.475 sales managers coaching their reps and attaches that to the performance data. 00:26:31.645 --> 00:26:33.145 So that could be a good example. 00:26:34.394 --> 00:26:35.914 Anyway, let's get back to Kyle. 00:26:37.035 --> 00:26:38.894 So there's a lot of A. 00:26:38.894 --> 00:26:39.104 I. 00:26:39.125 --> 00:26:39.265 that. 00:26:39.580 --> 00:26:44.030 We'll go out and comb a customer website and be able to pull in 00:26:44.030 --> 00:26:46.990 relevant information to build a message prospects better. 00:26:47.060 --> 00:26:49.750 There's a lot of enrichment of data that can be used. 00:26:50.069 --> 00:26:53.500 Um, even when it comes down to narrowing contacts, like a LinkedIn 00:26:53.500 --> 00:26:57.059 sales navigator, you know, they've now got a chat bot that I found really 00:26:57.059 --> 00:26:58.779 interesting in terms of filtering lists. 00:26:58.830 --> 00:27:00.060 Like it's, it's helpful. 00:27:00.170 --> 00:27:02.010 Um, as you get into deal cycles. 00:27:02.595 --> 00:27:04.845 You know, the, the deal intelligence. 00:27:04.855 --> 00:27:10.695 So, you know, we, we know A's don't like inputting data into a CRM. 00:27:11.054 --> 00:27:13.504 Ideally with AI, they shouldn't have to do much of it. 00:27:13.665 --> 00:27:18.374 So all the data is in there and then AI helps make sense of, you know, where the 00:27:18.374 --> 00:27:23.395 deal is at and what the next steps are on a deal, and then it goes to coaching 00:27:23.395 --> 00:27:27.880 reps, how does a, You know, how does a VP of sales and coach their reps in terms 00:27:27.880 --> 00:27:29.710 of, you know, what's happening in a deal. 00:27:30.379 --> 00:27:33.969 Um, and then it goes to the post sale and similar with customer success. 00:27:33.969 --> 00:27:38.109 You've got all these inputs coming in, you know, we know all the conversations 00:27:38.109 --> 00:27:43.119 that you've had and this is where AI is really powerful in terms of okay. 00:27:43.119 --> 00:27:45.170 Let's analyze all these customer conversations. 00:27:45.170 --> 00:27:49.340 Let's analyze the customer data how they're using The, the application, 00:27:49.340 --> 00:27:53.679 the solution, and let's put together health tracking and next steps for 00:27:53.709 --> 00:27:55.389 how we best manage these customers. 00:27:55.810 --> 00:28:01.980 A lot of these use cases, they, as we talked about earlier, seem to be 00:28:01.980 --> 00:28:07.029 a little more like features point solutions, opportunities that it 00:28:07.050 --> 00:28:11.650 wouldn't be that hard for the existing incumbent platforms to capture. 00:28:13.000 --> 00:28:17.250 Does that mean that the entrepreneurial opportunities are limited? 00:28:18.500 --> 00:28:25.370 Or is AI a bigger opportunity than I'm hearing you say 00:28:26.190 --> 00:28:26.360 for 00:28:26.360 --> 00:28:26.870 founders? 00:28:27.600 --> 00:28:31.710 I think with this opportunity, it goes to, you know, if you're ha if 00:28:31.710 --> 00:28:34.760 you have too many point solutions and I feel this way today about the 00:28:34.760 --> 00:28:38.280 sales tech stack, generally there's too many point solutions layered on. 00:28:38.809 --> 00:28:43.220 So I think if you can over time create the platform and I think, you know, the 00:28:43.220 --> 00:28:46.510 existing platforms, what they have is the reach and they have the audience. 00:28:46.860 --> 00:28:51.449 So, you know, if you layer on some of these AI applications to that, it's hugely 00:28:51.449 --> 00:28:56.179 powerful that said, I think a lot of innovation is going to come from startups. 00:28:56.605 --> 00:28:59.534 And, you know, a startup might be creating, you know, like we've seen 00:28:59.534 --> 00:29:04.295 a lot of startups that are creating like the virtual AI SDR or, you 00:29:04.295 --> 00:29:05.774 know, more personalized messaging. 00:29:06.285 --> 00:29:09.834 Well, you know, that might work as a point solution. 00:29:09.844 --> 00:29:13.254 It's probably better, though, integrated in with an existing CRM. 00:29:13.535 --> 00:29:17.284 So I think we're going to see a lot of acquisitions in the space where maybe 00:29:17.335 --> 00:29:18.995 the innovations coming from startups. 00:29:19.365 --> 00:29:24.515 But given that existing platforms have the reach, they're probably going to 00:29:24.525 --> 00:29:26.135 be acquiring some of this technology. 00:29:26.695 --> 00:29:33.794 Will we get to a world where buyer AI bots are buying from seller AI bots? 00:29:34.855 --> 00:29:35.044 That's 00:29:35.044 --> 00:29:36.044 very futuristic. 00:29:36.334 --> 00:29:37.225 I like that mark. 00:29:37.464 --> 00:29:39.084 Um, is it possible? 00:29:39.364 --> 00:29:43.974 Maybe, maybe I've, I think I've thought about more on the sell side. 00:29:44.835 --> 00:29:47.285 I don't know if I can answer that about the buy side. 00:29:47.555 --> 00:29:53.495 I think the sell side though, for kind of turnkey solutions, 00:29:54.075 --> 00:29:55.555 AI is going to help a lot. 00:29:56.475 --> 00:29:59.815 You know, those products that are more, they're kind of self service, but 00:29:59.845 --> 00:30:03.275 it's might be some sales assist right now, answering some quick questions. 00:30:03.275 --> 00:30:05.324 You know, it's a 5k ACV. 00:30:05.605 --> 00:30:10.915 I think those will likely be serviced by AI bots in the not too distant future. 00:30:12.375 --> 00:30:14.625 This has been quite enlightening, Kyle. 00:30:15.075 --> 00:30:19.470 As I mentioned, I, Really love it when I get to talk with someone that 00:30:19.470 --> 00:30:25.400 I haven't spoken with much, but we've spent the last couple of years exploring 00:30:25.710 --> 00:30:29.310 the corners of the entrepreneurial ecosystem in a very similar way. 00:30:29.760 --> 00:30:34.730 So it's been a great pleasure to exchange notes and learn and grow in 00:30:34.730 --> 00:30:36.580 conviction on some of the patterns. 00:30:37.030 --> 00:30:38.130 That I've been seeing as well. 00:30:38.460 --> 00:30:40.470 Thank you for coming on and dropping knowledge count. 00:30:40.710 --> 00:30:41.830 Hey, super fun, Mark. 00:30:42.060 --> 00:30:42.420 Thanks man. 00:30:49.140 --> 00:30:49.480 All right. 00:30:49.520 --> 00:30:50.860 That does it for me, folks. 00:30:50.860 --> 00:30:54.360 I'd like to thank our show runner, Matthew Brown editing support 00:30:54.360 --> 00:30:56.100 comes from pizza shark productions. 00:30:56.420 --> 00:30:59.710 Of course, I want to thank HubSpot for startups and the HubSpot podcast 00:30:59.720 --> 00:31:01.550 network for keeping the audio on. 00:31:01.860 --> 00:31:02.670 And by the way. 00:31:03.980 --> 00:31:07.770 I'm a huge fan of feedback, and so get this, if you're listening on Spotify 00:31:07.770 --> 00:31:12.690 right now, check your phone, see that Q& A field, that's a direct line to me and 00:31:12.690 --> 00:31:14.280 our show, so let us know what you think. 00:31:14.840 --> 00:31:16.100 Alright, I'll see you next week.