How Much More Efficient Should a SaaS Startup Be When Using AI?
If we assume some basic productivity gains in a typical SaaS company from AI in the next 12-24 months, how much more profitable will the business be?
Sales development, content marketing, & software engineering strike me as the workstreams that will benefit immediately.
|Team||Team Productivity Gain||% of Company||Overall Gain|
See assumptions here1
This thought experiment highlights a few ideas to validate :
- AI initiatives focused on cost-reduction should start with engineering. AI’s contribution to engineering productivity is 5x+ greater than other teams because of the scale of the gain & the company’s team composition.
- A quantum leap of productivity in less common workstreams doesn’t materially change the financial profile of the company (though it may for the department). Workstreams within SaaS companies are specialized : content marketing, a valuable GTM strategy for many businesses, represents a low-single digit percentage of the employee population.
- AI startups building next-generation offerings should prioritize common workflows shared across a significant fraction of the employee population or workflows for highly paid employees.
This 2x2 matrix captures these ideas. Startups should focus on AI for Execs (perhaps why legal has been a heavily funded category) & AI for common workstreams (code autocompletion).
There will be exceptions, especially where a user base is predominantly individual users or the willingness to pay for the software outweighs the productivity gains.
A mental model like this should guide both software procurement on the buyer side & product management on the vendor side especially in an procurement environment where every software vendor must justify their cost-savings or revenue increase.
1 BDRs are often mapped to AEs at 1:1 ratio & if we assume BDRs account for 25% of sales headcount (the remainder includes AE, sales operations, post-sales, & management). Assume a 15% productivity improvement that results in a 1.5% improvement across the company.
Marketing has many different disciplines of which content marketing is one. Assume content marketers represent 5% of the company & the team sees a 30%% increase in productivity, the marketing team will improve overall productivity 1.5%.
Software engineering sees the greatest benefit. Comprising 40% of the company & producing 25% more output (Github says 50% of all code is now machine-generated), the startup should see a 10% overall improvement.