October '23: Birth of a Salesman

Hello and welcome to the October newsletter.

In this edition, Akshat and our MBA intern Jack Heller explore how AI is redefining B2B sales. Drawing on interviews with COOs, sales leads, account managers, and VPs of growth at various venture-backed B2B SaaS companies, they break down the typical resource allocation across sales activities, where AI will have the most impact, and what founders and products need to succeed in this space.

I had the pleasure of speaking with the Kindred team earlier this month about our work on portfolio construction and how data can inform everything from the ideal portfolio size to whether or not you should follow-on. It was a really great discussion, and I got some excellent – and tough! – questions from the team.

Also, we've got a new section this time, sharing a few interesting bits from around the industry over the last month.

Enjoy.

Mattias and the Moonfire team.

🌓🔥

Here's a quick roundup of interesting stuff we saw this month:

• Air Street Capital released their State of AI Report for this year – here are the key takeaways.
• AI has been a 'notable exception' to the general drop in UK venture funding, according to data from KPMG.
• GitHub Copilot is the first generative AI product to publicly claim they’ve passed $100m ARR — enough to stand alone as a publicly listed company.
• Gaming investment and M&As are set to increase in 2024, according to a report from Drake Star Partners.
• The biggest commonality across the most successful investors? Most of them moved multiple times in their childhood – different homes, countries, and schools.

Redefining B2B sales: AI’s impact on prospecting, selling and admin

The job of a B2B SaaS company’s Chief Revenue Officer – all things sales, support, and retention – has long been, and still is, human-driven and unnecessarily cumbersome. Despite typically being a company’s most resource-intensive function and critical to growth, large portions of the workflow remain redundant, manual and inefficient. We believe AI will increasingly automate this function, making it cheaper and more effective over the next five to 10 years.

Let’s take a look at the current state of B2B sales, where AI will be most impactful, some of the startups making it happen – and what we think will give their founders and products success.

The status quo of B2B sales

Consider from first principles where the money is spent today within the sales org – this can tell us where resources are not optimally allocated.

Using David Sacks’s headcount guidance on a typical Series B/C SaaS startup, industry salary benchmarks (see bottom row), and inputs from numerous salespeople interviews (the table %s), we can impute resource $ allocation across activities for an “average” venture-backed SaaS company.

Prospecting, actual selling, and admin/internal work are the most costly:

These major workflows can then be broken down by the main activities throughout a sales lead’s journey – from initial prospecting, to close, then to onboarding and retention. This flow is simplified, but it conveys how complex and multifaceted the B2B sales cycle can be:

Where AI can make a difference

Many of these activities are on their way to being automated, or have been for a while. Think Gong for recording and transcribing sales calls, and Outreach for automating basic outbound emails.

Recent progress in commercialised AI can not only automate these processes, but make them more effective, particularly where they are: 1) possible to codify, 2) repeatable, 3) data driven, and 4) not bespoke, high-stake customer interactions.

Now let’s re-imagine these workflows, where green = “could be automated/improved with AI”:

Let's break down the three most costly parts of the workflow from above: prospecting, selling, and sales admin & internal.

For each, we’ll look at: 1) how current workflows would change in a totally AI-equipped world, 2) example startups in the space that are building AI-enabled solutions, and 3) what successful B2B tooling companies have historically done right in these areas...

– Akshat & Jack 🌓🔥

The Origins Podcast: Robert Sapolsky: The Illusion of Free Will

Physicist Lawrence Krauss chats with behavioural scientist Robert Sapolsky about his new book Determined and its conclusion: free will is an illusion.

They also cover how Sapolsky got into science, how his 30 years working with primates impacted his view on humans, and a lot more.

His Stanford lectures on human behavioural biology are worth watching, too.

'Superlinear Returns' by Paul Graham

A good essay from Paul Graham on the power of superlinear returns: what it is, where to find it, and how to take advantage of it. In short, learn and be curious, choose your work wisely, focusing on areas with exponential growth – and be lucky.

It also includes a great one-paragraph summary of his ‘How to Do Great Work’ essay, which is worth a (re-)read in its entirety.

That’s all for this month.

Until next time, all the best,

Mattias and the Moonfire team

🌓🔥