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Last week the CEO of Cognism ($87M Series C) posted about how from 2018-2022 they grew their SDR team from 5 to 95 reps and hit $45M ARR. That's insanely impressive. BUT... if I was an early-stage founder reading that post my question would be, "What's going to work the NEXT four years?" 👇 Why? Because the Golden Age of SaaS (2007-2023) is over. The ability of founders to raise HUGE stacks of cash and hire HUGE teams is not coming back. That model (aka Predictable Revenue) assumed response rates that were 2x what they are now. That model assumed you could fundraise your way to your next level of growth. Here's the truth about SDR teams and startups today: 1. Their response rates are 1/2 of what they were 12 months ago 2. They only playbook they know is based on MORE (activity, people, etc) 3. Which will DEFINITELY make the whole picture worse over the NEXT 12mo 4. So most leaders are scratching their heads, looking for a plan that makes more sense And here’s the reality of raising money for those same startups… 1. They will not be able to raise the funding they need to bankroll headcount 2. They can no longer invest in growth (and software), neither can most customers 3. As a result, CAC/LTV keeps inching higher every year WHILE the need to be profitable becomes even more urgent Of course, I have huge respect for James Isilay - and leaders like him - who have been massively successful in building top-notch people machines. People (and your ability to hire those people) are necessary to build huge companies. Personally, my people process sucks! I’m sure I have a lot to learn from James on that. But if you’re a startup doing $5M ARR, know you're not alone. I’m talking to dozens of early stage founders who are disenchanted by the current SDR model. Because sales is math. And the SDR math isn’t working like it used to.
I think we have to meet prospects where they are earlier in the funnel, meaning we have to find the communities and online forums where they are engaging with their peers and asking for recommendations and feedback. This isn’t new but it seems to becoming a more important part of the education phase of the buyer journey now. Organizations are losing sales without even realizing they were in a sales cycle because of the community based conversations ocurring at a higher rate. This also makes current customers and their sentiment even more important. Current and former clients can either be part of your sales force or part of your competitors. The old antiqued way of sales and managing a funnel is becoming a thing of the past. Thorough Voice of the Customer analysis can help companies identify the ecosystem sentiment and trends in conversations.
What we have been sharing with our ABX clients is the opportunity today represents - rather than backfilling an SDR who likely was promoted (or left the org), use technology (specifically AI) to augment or do some of the pre-qualification work at less than half the cost of headcount instead. Kind of like self-serve checkout at supermarkets - 10 years ago nobody took that self-serve approach, today, every supermarket and Costco is doing it. We're at the early days of this AI transition. AI won't ever fully replace SDRs but it could certainly backfill and augment what it is they do to make who is left more productive and efficient.
100%! SDR armies, AI email and more diluted human response rates. Companies have to adjust every 2-6 years on tactics because we live in a fluid system. Investors and operators wanting 10yrs of consistent growth have to measure the timing and signals of method saturation caused by them and market. Then deploy the next strategy. No point to necessarily jump strategies either. In general the more defensible strategies work longer (cost more but it is something the money can go into more effectively than headcount price/value). Organic community branding has more defensibility and is actually quite leverable.
Nice post Adam Robinson - and I think you’re right regarding the next four years being completely different. Macroeconomic environments are certainly going to influence spend on ‘nice to have’ saas products, although ‘must haves’ demand is likely to remain the same, albeit more price sensitivity. But, I think James’ point still sticks about SDR being pivotal. It’s great leadership, business strategy and collaboration across teams that enables SDR teams to excel. In environments where I’ve worked where it was clear what our messaging should be around, our outbound strategy and a good product, I’m yet to see an SDR team not exceed. In my one experience where an SDR team hasn’t succeeded it was because of product + poor direction/leadership - we couldn’t even explain consistently at c suite level what our products main selling points were. Truly believe when hired well SDRs have this get up + go, their time is dedicated purely to outbounding relevant ICPs, and no focus on anything past a demo in the sales cycle, it’s a team that can generate bigger pipeline than any other area of the business. Growing headcount in-line with revenue growth and not ahead of it is vital though👍
I think predictable revenue model works if you have an infinite pool of prospects, and the seller controls what information the buyer has acces to. As it did when the model first came around. I think from here on out building relationships and bridges so to speak is more valuable than getting a decision ASAP from prospects. It's just really difficult to measure that. Instead of "going for the kill", i think the shift will be to educate the right audience, and build relationships with them, and strike when the time is right. Not strike constantly, and if results are lacking, strike even more.
Our SDR is booking 5 meetings per day on avg. Cost wise it’s about 2 SDRs if we had to apply for companies (our cost + their internal sdr). Just have someone running outbound and the SDR handling the responses. Get 80-100 meetings and convert 15%+ you are in the game.
the reality of raising money: VCs expect hyper growth but the challenges of scaling GTM (more competition, over-saturated channels, fickle customers) won’t change any time soon. Should LPs of venture funds expect a longer time horizon and lower returns? Perhaps venture will become a less attractive asset class with the evolution of GTM. If so, that means raising money will become even harder.
You know what, you’re right. Golden time might be over. But look: ‘Their response rates are 1/2 of what they were 12 months ago’- and why is that? Lacking of understanding the timing. This leads to lack in relevancy. Amd we all know what is the end if you’re not relevant. ‘They only playbook they know is based on MORE (activity, people, etc)’- nothing against it, but I prefer speed, being faster. And that you can do only if you’re (sdr) in control of situations and relevant activities. More is not always the best base. Hawing ‘the thing’ with hiring and managing the right people makes all the difference in sales math ✌🏻
Adam Robinson I've seen it and experienced it. At some point, everyone got access to pretty much the same sales intelligence and lead gen tools, and in some cases mistook proficiency in using these services as being good with sales and marketing. As we all are aware, goods and services were being marketed and sold for centuries before the internet and apps came along. How did they do it? Laser focused on understanding customer pain points, being great at communicating value, knowing when the purchasing window is open, and fostering person-to-person relationships. It might mean that you have a smaller funnel to work with, but I know higher quality in these areas means higher conversion rates.
Crafting Go-To-Market Strategies for B2B Firms (Pre-Seed to Series A). I refine processes, recruit, train, and develop your marketing and sales teams, turning insights into actionable plans for tangible results 🎯
7moAbsolutely, the game has changed. The old SDR model, based on the idea of ‘Predictable Revenue,’ doesn’t hold in today’s environment. Now it’s about adaptable revenue. What worked in the past four years won’t necessarily work in the next four. The playbook needs rewriting, and it starts with understanding your customer better than anyone else. You have to meet them where they are, not where you want them to be. That means a holistic approach to marketing and sales that integrates organic and paid channels, listens to customer feedback, and iterates quickly. SDRs aren’t obsolete, but their role has to evolve. We need to arm them with better data and most important a better understanding of the customer. Then, and only then, can we expect better outcomes.