On this week’s episode of Topline, we cover a range of subjects. We give 2024 market predictions as core CPI is the lowest it has been since March 2021, discuss the future of CS (or lack thereof), and share our thoughts on OpenAI’s Demo Day.
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Let's dive into this episode's key topics…
"I see M&A in your future..."
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- The future is looking better – as of October, Core CPI was at 3.2%, a decrease from September's 3.6%, which the market has been responding to already.
- Early 2023, many startups had to make significant changes due to the economy giving them 12-18 months of runway which has now quickly turned into six months causing a surge of companies with good technology will be in need of soft landings.
- Larger tech companies may need to absorb these struggling startups as part of a strategy to broaden and enhance their product offerings in an attempt to get growth trajectories back on path.
- Example: On past episodes we’ve discussed Outreach and SalesLoft having net negative quarters. Diversifying their product offerings becomes crucial in overcoming diminishing revenue as they are challenged in their current motion.
- However, the markets don't flip overnight. The next few months are going to be tricky.
Advice on Pursuing M&A
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- When considering M&A potential, it's crucial to remember that the desire to sell does not automatically guarantee buyers. It's important to understand that companies are bought, not sold.
- The second thing is to be diligence-ready, ensuring all of your data and calculations are correct. There is no room for variability in your calculations if you are trying to sell.
- You also need a plan B because the only thing that makes any deal happen is leverage. When you need the deal to happen, you're pushing it away.
- Listen to AJ’s story of selling TrendKite to Cision without an investment banker here.
(This Could Be) The End of Customer Success as We Know It
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- The Snowflake CRO in a podcast recently expressed that he does not believe in the necessity of a CS team, dismissing all CS personnel. Freeing up the budget was then directed into four main areas – hiring more salespeople, more sales engineers, professional services personnel, and creating a business value engineering team. Also giving salespeople a renewal target.
- For QuotaPath, CS is a backstop and is often mentioned in their high scoring NPS comments. But expectation for the CS team to facilitate user success within a platform might indicate a product opportunity.
- Scaling organizations in today's world requires addressing mistakes rather than covering them up with CS due to cost constraints. This need to prioritize cost reduction makes for a compelling case to introduce automation and AI into more areas of the business, which we’ve already seen the automation of SDR activities.
- Customer support plays a crucial role as the backbone of organizations, driving value delivery and supporting customers. But at the core, the point is value delivery regardless if the people in these positions are identified as “Customer Success”.
- CS must evolve in its definition and appearance. Catalyst's Kevin Chu and Edward Chu emphasize customer-led growth, highlighting the need for change in the makeup of CS organizations and leaders. It suggests a shift towards a sales-like approach.
- In Snowflake’s case, a professional services team helps articulate and deliver the inherent value of a product and is paid for separately rather than bundled with the service.
- One last thing to consider is the impact on gross margins. Despite the budget cuts which may have initially improved gross margins, AI-related expenditures could bring a company’s margins down to around 50-60%, presenting a potential concern for investors assessing valuation.
OpenAI’s Build-a-Bot Workshop
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- OpenAI has set the standard for agenda setting in the AI space, with its product-market fit being researched and discovered over the last 12 months.
- OpenAI held a Dev Day where released a new model, better pricing, and much more, including GPTs, which are basically no-code ways to create contextually aware chatbots that would become available on the App Store.
- These releases will cause numerous pivots in the tech sector, as companies will likely need to rethink their business strategies due to OpenAI's comprehensive functionalities.
- Sales Talent Agency is already planning on leveraging the new GPTs as they are unable to connect with 95% of the clients that reach out to them. The idea is to build a bot that fills this gap – providing resources and guidance on job hunting, interview preparation, etc. While the interactions with this bot won't be as impactful as connecting with a recruiter, it will offer some level of support that wasn’t previously available.