Category Archives: AI

Video of My Appearance with Jason Lemkin on SaaStr Workshop Wednesdays

Posted on November 6, 2024 | Leave a comment

Last Wednesday I had the pleasure of sitting down for a 50-minute chat with SaaStr founder Jason Lemkin as part of their Workshop Wednesdays program.

Our ostensible topic was What Really Matters in SaaS in 2025, but we ended up having a wide ranging and fast-paced conversation about many things, including:

  • Will 2025 be the year of IPOs for PE-backed companies?
  • What metrics are PE sponsors looking for in mid-market software acquisitions?
  • What’s happened historically to the IPO bar, i.e., the minimum size you need to go public, and where is it today?
  • Are PE firms looking for fixer-uppers or already-fixed businesses?
  • Jason’s rule of 20/30/0 = to get PE interest, you need $20M in ARR, 30%+ growth, and 0% cash flow
  • How to get a strategic multiple from a PE firm?
  • A discussion of Andy Wilson‘s successful exit at Logickull where Jason was an investor and I was an advisor.
  • What will be the impact of AI on SaaS budgets? (Here, we discuss some data from the Battery report on State of Enterprise Technology Spending.)
  • How to target and win “experimental AI budget” (that is out there and in no short supply)?
  • How some customer success orgs lost the plot, and became too focused on process (e.g., QBRs) and not enough on sales and renewals.
  • My rule of 30: that expansion ARR should be 30% of new ARR, roughly. Too high and you’re milking the base, and too low and you’re ignoring it
  • Why I love the healthy tension between sales and customer success when they are separated
  • What a “slug” or “zombie” company should do if you’re $15M and growing at 15%
  • Should companies lead or follow on pricing models? (We both firmly believe in using the same pricing model as the leaders in your sector unless you are a pricing model disruptor.)

Here’s the video. Thanks to Jason for a great conversation.

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Posted in AI, Churn, Customer Success, IPO, Private Equity, VC

The Impact of AI on SaaS Metrics: Video Now Available

Posted on October 24, 2024 | 1 comment

Just a quick post to highlight that the good people of Benchmarkit, host of SaaS Metrics Palooza 24, have posted the video of my presentation, The Impact of AI on SaaS metrics. The slides are here.

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Posted in AI, Metrics, SaaS, Startups, VC

Slides from SaaS Metrics Palooza 2024: The Impact of AI on SaaS Metrics

Posted on October 8, 2024 | 1 comment

Just a quick post to share my slides from today’s presentation at SaaS Metrics Palooza 2024, entitled The Impact of AI on SaaS Metrics.

The short summary is:

  • The concept of ARR is already challenged by monthly-varying pricing, e.g., usage-based pricing.
  • AI will exacerbate that problem, bringing new forms of value-based pricing, e.g, unit-of-work or outcome-based pricing.
  • There are two schools of thought on dealing with this: (1) split the ARR baby into baseline and variable, then analyze the baseline as if nothing has changed, and (2) spend is truth, where we substitute trailing spend for ARR. I’m in the second camp.
  • AI will, gasp, require us to think about cost, something we don’t really like to do in the software business and something we’ve historically been able to kind of ignore.
  • All the heavy lifting is going to move to the pricing model.

In short, to know ARR we used to read contracts. In the future, we’re going to read invoices, instead.

Yes, for internal reporting we will do a lot of pricing model analysis and examination of the base/variable split. But for external reporting, the big six SaaS metrics all depend on ARR and going forward that won’t change. We’ll just use some proxy for ARR, as many quietly do already today.

Like a duck, nothing will change much on the surface, but they’ll be a lot of activity underneath. And the metrics won’t mean quite the same thing as they once did. For example, ARR and NRR will become less forward looking and work less well as leading indicators.

I’ve embedded the slides below.

You can download a PDF of the slides here.

Thanks for coming!

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Posted in AI, Metrics, SaaS

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Come to My Session at SaaS Metrics Palooza: The Impact of AI on SaaS Metrics

Posted on September 26, 2024 | 4 comments

While I was unable to make SaaStr Annual this year, I am pleased to announce that I will back at SaaS Metrics Palooza, an entirely virtual conference (where I don’t need to walk on my recovering knee) focused entirely on SaaS metrics, and hosted by my SaaS Talk co-host Ray Rike.

I’m speaking this year on The Impact of AI on SaaS Metrics at 9:00 AM Pacific on 10/8/24.

I picked this topic because I wanted to force myself to learn more about it (the reason I write many Kellblog posts) and that process seems to have worked. I started out asking how will SaaS metrics change because of AI? That led me quickly to pricing models. And that led me all the way back to the existing weaknesses in SaaS metrics created by violations of the simple SaaS model (e.g., usage-based pricing, or anything else that drives variation in monthly spend).

Here’s what we’ll cover:

  • How we got here: a brief, salient history of SaaS metrics
  • When SaaS metrics break — e.g., when monthly spend varies or contracts are prepaid
  • How ARR has become the Achilles’ Heel of SaaS metrics, a big problem given that virtually all top SaaS metrics depend on ARR
  • How proxies for ARR have emerged as a result
  • How and why public companies don’t generally report ARR, and how analysts use Implied ARR instead
  • The four impacts of AI on SaaS metrics, specifically (1) rethinking ARR, (2) the need to consider cost (he says, gasping), (3) rethinking pricing model drivers, and (4) how the heavy lifting will move to the pricing model
  • A quick case study on Piper, the impressive AI SDR from Qualified, how she is priced, and some nuances in estimating the value she delivers when you “hire” her.

The presentation will feature a brief moment of melancholy, a reflection back on the history of software gross margins.

The best aside will be when I present my three rules of pricing.

You can register to attend SaaS Metrics Palooza here. My session is at 9:00 AM Pacific time on Tuesday, October 8th. I will do a separate post after the presentation with a link to the video and a link to the slides.

I hope to see you there and thanks for attending!

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Posted in AI, Metrics, SaaS

Back to Finance: Why I’m Joining the Board of Vic.ai

Posted on September 18, 2024 | 2 comments

You can’t run a financial planning company for six years and not develop a certain affection for working with the office of the CFO. It doesn’t hurt when, despite your exterior marketing shell, there’s an inner finance person down there underneath.

Since selling Host Analytics five years ago, I’ve tried to stay in touch with my finance roots. I’ve done some advisory work on the FP&A side of the house (e.g., advising the rocketship that is Pigment) and kept in touch with up-and-comers like Mosaic and Causal. I’ve worked with CPQ disruptor CacheFlow. I’ve kept an eye on next-gen spreadsheets like Rows and invested in a sense-maker called Decipad. But, other than being lucky enough to make an investment in FloQast, I’ve not done much on the other side of the house: the land of accounting and controllers. Until now, that is.

I’m pleased to announce that I’m joining the board of directors of Vic.ai, a company focused on bringing the benefits of AI to the accounting department, selling solutions used by hundreds of firms worldwide. Vic.ai has raised over $110M in VC financing from top-tier investors including Cowboy Ventures, Notable Capital, and Iconiq Growth.

Here are some of these reasons why I’ve decided to join the board:

  • Founder/CEO chemistry. The independent director role is all about working with the CEO on the challenges of building and scaling a company. In the past few months, I’ve spent quite a bit of time with Alex and am certain that we’ll enjoy working together to accomplish great things.
  • Working with Alex is like teaching the 301 class, not the 101 class. He’s already a successful entrepreneur, having built and sold his first company in 2014 after nearly a decade’s work. So it’s a more challenging and demanding job than usual. He keeps me on my toes.
  • I like marketing and selling to finance teams. They’re busy people. They’re not the most experienced buyers (unlike marketing or IT they don’t buy a lot of stuff). They’re a staff function so priorities can change overnight. They don’t like fluff. Finance is the show-me state of corporate functions. That makes marketing and sales somewhat more challenging, but more rewarding once you nail it.
  • I like what Vic.ai does. The product solves practical problems for busy people who know they need to be experimenting with and learning about how AI can help them improve operational efficiency. I think the product-market fit is outstanding.
  • The benefits are real and tangible. With due respect to my Future of Work friends, we’re not selling intangibles like stronger culture or improved collaboration. We’re selling improved cash flow, time saved, money saved, and errors reduced. Hard benefits. Yum.
  • The VC investors are great. It’s been great to meet Ted and Will from Iconiq, Jeff from Notable, and Jillian from Cowboy. While I have worked with some of their partners in the past, I’ve not yet worked with them and am super excited to do so. It’s also great to reconnect with Greg from Costanoa with whom I worked closely for years at Alation.

I don’t know the whole team executive well yet, but have been psyched to meet the CMO Mark and the CRO Ben, and any Kellblog reader will know I have one message for them: sales & marketing is a three-legged race, so let’s perfect the art of working together.

Finally, I also look forward to working with cofounder Kristoffer and to helping him and Alex take Vic.ai to the next level.

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Posted in AI, Boards, Finance, Startups

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