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In 2018 at Saastr, Jason Lemkin & I talked about private equity becoming an increasingly aggressive buyer of venture-backed software companies.

Last year, private equity firms inhaled $29 billion dollars’ worth of startups - a twenty-year record and 50% more than the previous peak.

The high-water mark underscored the importance of private equity sponsors as an exit avenue for startups in black Sharpie marker. In 2021, PE buyouts constituted more than 20% of venture-backed M&A by dollars, doubling in the past decade.

I wish I had a chart of the bid/ask spread in venture capital today.

The bid/ask spread in VC is the difference between the post-money valuation between a VC (the bidder) & a company (seller).

In the past few years, the spread has been tight. The market is liquid. Many startups sell shares to buyers at mutually attractive prices. Like the old stock trading floors with brokers yelling at each other, but in our era, we negotiate over Zoom coffees instead.

Yesterday, Office Hours welcomed Lars Nilsson, VP Sales Development from Snowflake to talk about his learnings across 5 companies he helped take public.

Throughout the hour, Lars provided insightful perspectives on how to build sales organizations. These the five most memorable takeaways for me.

1. In early-stage companies, founders sell for the first three to four quarters. Then, many founders opt to hire an AE. Hiring a sales or business-development representative (SDR/BDR) can be the better choice. Incoming account executives will want to see a significant lead volume before joining, especially when selling into the enterprise.

2. Teams often overlook storytelling as a critical part of effective lead generation. Fear-of-missing-out or the inspiration of a potential future, stories equip champions inside customer organizations to sell the product through the buying process. Founders validate the effectiveness of their stories when hiring SDRs better. SDRs call ten-times as many prospects as AEs do. Much the better to iterate with greater speed and confidence.

3. As the company grows, building the sales development team becomes the most productive source of pipeline particularly for enterprise-grade technical products. Hire for hunger. Then surround the new SDR/BDR with three pillars: strong training materials, a manager who cares about the employee’s success, and a peer to accelerate learning.

4. At Snowflake, sales development lives within the marketing team. Lars manages his team through a single metric, meetings. Getting to an account late, a few days or a week after they’ve signed with a competitor accrues to the meeting metric (see why in the video).

5. Last, exiting unlikely sales processes saves the company’s resources and boosts team morale. Closed - no decision is the worst outcome of an engagement.

Before the Second World War, King George journaled the end of Neville Chamberlain’s term as prime minister:

“I accepted his resignation, & told him how grossly unfairly I thought he had been treated, & that I was terribly sorry that all this controversy had happened. … I sent for Winston & asked him to form a Government. This he accepted & told me he had not thought this was the reason for my having sent for him.”

Salesforce is worth $113 billion. 1% of $113 billion is $1.13 billion. ServiceNow is worth $34B and Workday is worth $33B. 3% of $33-34B is $1B. Atlassian is worth $20.5B. 5% of $20.5B is $1B. Why am I doing all this simple math you might ask?

We have reached a point in SaaS where a small fraction of an incumbent is a billion-dollar company. If you start a business tomorrow that is able to cleave 1% of revenue from Salesforce, you will have built a billion-dollar business.

Let me tell you a tale of two software sales processes.

Take 1: An ambitious account executive engages a sales prospect and hustles to sell the customer a mega contract that consumes nearly the entirety of a budget. Big commission check, high fives, president’s club, feeling fine.

Nine months into the contract, the customer realizes they have over-provisioned. The buyer’s eyes were too big for their appetite. Time for a crash diet - a 60% reduction in seats. The customer loses confidence in the account executive, feels misaligned, and blushes under the challenging questions from the procurement team.

Pop any venture firm’s website into the wayback machine, peruse the bios from the late 90s, and you’ll see statements like “I invest in Internet companies.” Or Web2.0 or SoLoMo. At the time, it made sense. But not anymore.

Why isn’t time kind to these types of proclamations?

Novel infrastructure often enables new software. We refer to each wave by its architecture advance: internet, mobile, cloud, data lake, single-page apps, containers, serverless.

On July 13th at 10am Pacific, Office Hours welcomes Lars Nilsson, VP of Global Sales Development at Snowflake.

Having worked at five startups which went public - Snowflake, Cloudera, ArcSight, Riverbed and Portal Software, Lars is an expert in sales. He’s lived through many different go-to-market models and structures, through economic cycles.

With all the changes in the broader macro-environment, sales leaders may be wondering how to prepare for lengthening sales cycles, pricing pressure in conversations, and an internal focus on efficiency. During this session, we’ll cover those topics and others.

Last week, I installed Github’s Copilot, a machine learning tool that helps engineers write software. I often code in R, Go, Ruby, markdown, bash and other languages to automate some task or update my CRM, so I was excited.

I typed in def get_tweets_for_user(username) in ruby. Copilot completed the entire function in less than 5 seconds, like a GMail smart reply but for programming. I entered my API credentials, executed the program, and it ran. 5 minutes’ work compressed to a tab-key-press and a copy/paste.

Funnel optimization for web3 companies will become critical to their success. Token grants cost 4-7x than traditional customer acquisition techniques.

Other techniques, like incentivized referral, improve the economics but still tally 19 month payback periods. A year-and-a-half might be fine for a SaaS company selling a $50k to $100k ARR product, but long-term viability demands achieving 3-6 month paybacks of modern web2 consumer companies.

Why are the payback periods so high? Many web3 consumer experiences ask users to complete a Tough Mudder to use the product. For example: