{"id":297968,"date":"2024-03-26T06:05:08","date_gmt":"2024-03-26T13:05:08","guid":{"rendered":"https:\/\/www.saastr.com\/?p=297968"},"modified":"2024-03-25T09:28:30","modified_gmt":"2024-03-25T16:28:30","slug":"everything-founders-should-know-about-ai-pricing-and-funding-with-saastr-ceo-and-founder-jason-lemkin","status":"publish","type":"post","link":"https:\/\/www.saastr.com\/everything-founders-should-know-about-ai-pricing-and-funding-with-saastr-ceo-and-founder-jason-lemkin\/","title":{"rendered":"Everything Founders Should Know About AI, Pricing, and Funding with SaaStr CEO and Founder Jason Lemkin\u00a0"},"content":{"rendered":"<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At last week\u2019s Workshop Wednesday, we brought back one of our most highly requested sessions: an AMA (Ask Me Anything) with SaaStr founder and CEO Jason Lemkin. In it, we cover the SaaS community&#8217;s most pressing questions about <a href=\"https:\/\/www.saastr.com\/category\/topics\/ai\/\" target=\"_blank\" rel=\"noopener\">Artificial Intelligence<\/a> (AI), pricing, efficiency, and funding.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Before diving into your questions, you\u2019ll want to head over to the link below and sign up for an exciting event coming up this week. On Wednesday, March 27th, SaaStr is hosting AI Day, <\/span><a href=\"https:\/\/www.saastrai.com\/#:~:text=SaaStr%20AI%20Day%20is%20a,for%20the%20inaugural%20AI%20Day.\"><span style=\"font-weight: 400;\">you can sign up for free at this link.\u00a0<\/span><\/a><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The biggest thing on many of our minds is what the future of AI will be in B2B. Some founders fight against AI, and those companies are losing deals to competitors who may have issues but are still AI first.\u00a0<\/span><\/p>\n<p><iframe title=\"YouTube video player\" data-src=\"https:\/\/www.youtube.com\/embed\/ZyQKr0DwaTQ?si=xGUiwMWiJOnPh7xh\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n<h2><span style=\"font-weight: 400;\">Q: What Are You Most Excited About with AI?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"><a href=\"https:\/\/www.saastr.com\/attention-sales-reps-ai-is-coming-for-your-job-for-real\/\" target=\"_blank\" rel=\"noopener\">AI is coming for sales<\/a> and marketing, and Jason is a super fan of AI in marketing. Why? Because hundreds of the best founders are radically ripping through post-sales AI, and now it\u2019s time for marketing.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">\u201cMost folks get it, but it took me a while to see the 80% thing,\u201d Jason says. Let\u2019s look at an example to illustrate what he means.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At SaaStr, we do tons of video, maybe 500 hours a year or more. An app called <a href=\"https:\/\/www.opus.pro\/new-landing?utm_source=google&amp;utm_medium=cpc&amp;utm_campaign=Opus_Clip_Brand_ppc&amp;utm_content=OpusClip_Exact_ad_group&amp;utm_term=opus%2Bclip&amp;gad_source=1&amp;gclid=Cj0KCQjwwYSwBhDcARIsAOyL0fiaFn_QSqKXsT3XPt6doXH1n8C_8C8IhNhFijvlAbcOK-AQC0vKGBkaAgR1EALw_wcB\" target=\"_blank\" rel=\"noopener\">Opus Clip<\/a> came along, and you give it a URL to a SaaStr video, and it gives you 20 clips. Are they as good as what an agency can do? No.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">But here\u2019s the aha moment. Agency clips do twice as well as the ones from Opus, <\/span><b><i>but <\/i><\/b><span style=\"font-weight: 400;\">we get 100x more and don\u2019t need an agency. You get 100x more and don\u2019t need an agency, and it does 80% as well as an agency that is sometimes late. You can spend $100\/month on AI instead of $5k-$10k\/month with an agency.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It\u2019s disruptive. Doing 80% as good as a human when you\u2019re already doing it may not be worth it. But doing 80% of what you can\u2019t get done\u2026 that\u2019s huge. 20% isn\u2019t good enough, so if a bot can take that 20% to 80%, that\u2019s a big deal. Why wouldn\u2019t you do it?\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: What Role Will Employees Play For AI?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Trust is a big deal with customer support. One SaaStr fan asked what role company employees play with AI and providing accuracy to customers. \u201c95% of the folks I talk to don\u2019t understand the product themselves,\u201d Jason says. \u201cWhen I get a good cold email from an SDR, I ask what they could really do for SaaStr, and they have no idea. AI is better than that.\u201d\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Many folks in CS don\u2019t want to hear that their outbound emails are horrific or that they don\u2019t follow up. CSMs have been turned into upsell or ambush agents, at least outside of the top performers.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">We don\u2019t need mediocre CSMs making $100k a year who don\u2019t know the product or take forever to get back to you. It\u2019s challenging to find super high-quality folks unless you\u2019re in B2C, where customer support is sales. As a founder, you need to be more involved in functional areas like sales support and success.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Two things are fueling this change in CS with AI.\u00a0<\/span><\/p>\n<ol style=\"font-weight: 400;\">\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It\u2019s tough for folks to staff these functions.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You have to be so much more efficient.\u00a0<\/span><\/li>\n<\/ol>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The average public SaaS company is marching toward $400k in revenue per employee. Today, we have to be 4x more efficient than a few years ago, so you probably need half as many people as you do, and AI is the only way to bridge the gap.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: What Do You Think AI Will Do to the Next Generation of Innovators and Disruptors? Will It Affect Entry Level Jobs?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">\u201cWe\u2019ll see,\u201d Jason says. Many tech veterans don\u2019t want to work anymore, and we can\u2019t afford folks who want to work 10 hours a week and make six figures. Will the next generation want to put in the work? \u201cI hope so,\u201d he continues.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In B2B, we will be stuck with AI because there\u2019s no one to work at our companies. You can find some pirates and romantics, and you might have to use AI.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">What about budget? Is there budget for AI? At the CIO\u2019s office, there\u2019s a certain amount of budget for experimentation, but not that much. Folks are still doing app layoffs. Today, AI budget is more centered around getting rid of people and getting more efficient.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you can tap into that, you can tap into budget that may not exist in your category. It\u2019s a little brutal, but if folks want to get rid of half their contact center that are people and replace it with software, you\u2019d probably get budget for $50k.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: What Teams Should Be Involved to Fully Leverage AI and Get in Front of the Wave?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Jason would challenge each department to go out and find one app that will make the company more efficient. Give everyone x amount of money to go find the best one. Is the CTO involved in these decisions? No, they don\u2019t need to be involved when you\u2019re using one or two seats of whatever software.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Inspire them to do some tire-kicking, see what their ideas are, and if it doesn\u2019t work, kill it. You can\u2019t replace everything with AI today, but the progress since last September has been so high that you have to be on top of it in a competitive landscape.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">\u201cIf you fight this wave, you\u2019ll lose. If nothing else, find the gem of truth in AI in your segment and expose it to your customers.\u201d\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Is SaaS dead right now? Not literally, but is the energy there for any SaaS product that isn\u2019t AI? App contraction is still happening, and AI is absorbing all of the energy in the industry. Of course, vertical SaaS will always be differentiated, but if you\u2019re anything remotely horizontal, there isn\u2019t energy unless you\u2019re bringing AI to the table.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: Where Is The Best Place to Start When Implementing AI Into Your Product?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you\u2019re not implementing AI into your product and haven\u2019t embraced what\u2019s happening, you should copy the competition so you don\u2019t lose deals. Build a mediocre version of something because feature parody matters in SaaS.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You can lose deals to feature gaps, and Jason has seen rampant loss of business due to not having feature parody. If you have a critical feature gap, you\u2019ll lose a lot of deals right now, even if the AI in your competition isn\u2019t perfect.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Today, folks seem to be launching fewer features, ratcheting prices, and digging into the existing customer base. \u201cIf you don\u2019t have pseudo AI parody, I\u2019ll bet on the vendor that has some type of AI,\u201d Jason shares.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: What\u2019s The Best Advice for Overcoming Aggressive Renewals and Huge Price Increases?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">\u201cPrice increases are where folks go when they don\u2019t know how to innovate,\u201d Jason says. When you\u2019re mature, raising prices by $1 might make sense. If you\u2019re at $100M or $200M of revenue and your growth is facing a decline into the single digits, pricing stuff is super important.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">But if you want to grow fast, you want to innovate and take care of those customers and the energy that goes into these pricing games, especially for new CROs and revenue teams.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Jason shares that he would love to see more focus on logo retention and GRR and fight this toxic trend of CS reporting to sales. Sales should be focused on closing new customers as much as possible because that\u2019s what will make your business succeed over the long term.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">CROs focus way too much energy on post-sales to the detriment of the long-term success of founders. You\u2019re much better off having a great VP of Sales to close customers and make them happy.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The only way to win in B2B is to materially increase customer count. Whether you raise prices or not, if you don\u2019t increase customer count, you\u2019ll quietly go into terminal decline. If your customer count is still growing 20-30-40% each year, even when NRR is down, or things are harder, you will have a bright future.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: Do You Think This AI Trend Will Impact Funding?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Will later-stage rounds disappear because people get more efficient and need less money? Many people are raising just one round and taking off. It\u2019s not so much an AI trend but an efficiency one. People may raise a round or round and a half, and that\u2019s it until very late stage. That\u2019s what Viva did, and they\u2019re at $35B.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A round and a half is enough for an 80% gross margin business with high NRR and good word of mouth. All the great software companies are built on 80% word of mouth.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you get that early virality, even a light amount of it, and you get enough of that engine going and are efficient, you can do a lot. We will likely see more of this trend. In 2021, anyone growing decently was funded. That\u2019s why there were so many unicorns.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">That\u2019s not true today. But what is happening is maybe 10-20% of folks are growing at 2021 rates or faster, and they\u2019re being flooded with capital. In 2021, there were more places to put it, but if you\u2019re a top 5% startup, ideally AI first, you\u2019ll be flooded with more capital than any startup should have.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">And funds aren\u2019t just coming from new folks, but existing investors with bigger funds. So, some will stop raising a round or two, and others will reach a level of scale where they\u2019ll have to be very disciplined.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Growth capital won\u2019t dry up because it has to go somewhere. It\u2019s always hard to raise capital, but if you\u2019re in the box where valuation, growth, and timing work, you\u2019ll do fine. If you\u2019re outside that box, it\u2019s brutal.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Q: What Do You Recommend the ARR Per Employee for a Startup of $2M ARR to be Seen as Efficient?\u00a0<\/span><\/h2>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">\u201cThis is a great and terrible question,\u201d Jason says. Founders across the board are misinterpreting advice from VCs and social media. \u201cNo one wants a startup at $2M to be profitable or efficient. It\u2019s too early.\u201d\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">No one cares if you\u2019re profitable or efficient early. It doesn\u2019t matter until you\u2019re at scale. Folks can\u2019t raise as much capital these days, but you don\u2019t get credit as a startup for being profitable but not growing.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You still have to grow as fast as ever. In many cases, you have to be even more efficient with less capital. You will get no VC funding for being profitable. You do, however, have to get from 1 to $200M in revenue in 10 years or less. So, put it on a spreadsheet.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you\u2019re at $2M growing 20%, how will you get to $200M in 7 more years? You\u2019re not. No one will fund you because they can\u2019t make money in venture, and it\u2019s very hard to make money in venture.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you get $100M in 10 years, that\u2019s pretty good. Say growth slows, and you sell for $800M; that\u2019s pretty amazing. Say the VC owns 10%. That\u2019s $80M. The fund is $300M. How much of the fund is returned? You barely returned a quarter of the fund, even with a billion-dollar exit.\u00a0<\/span><\/p>\n<p style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You need an A+ team, disruption, cutting-edge technology, triple-digit growth, and efficiency. Your job just got harder, and the pressure isn\u2019t off for being profitable.\u00a0<\/span><\/p>\n<p><iframe title=\"YouTube video player\" data-src=\"https:\/\/www.youtube.com\/embed\/ZyQKr0DwaTQ?si=xGUiwMWiJOnPh7xh\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SaaStr CEO and Founder Jason Lemkin covers the SaaS community&#8217;s most pressing questions about Artificial Intelligence, pricing, efficiency, and funding in SaaS.<\/p>\n","protected":false},"author":13,"featured_media":298008,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_selected_social_profile":[]},"categories":[24898,31,29,68,122,3522,20,24894],"tags":[],"class_list":["post-297968","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ai","category-blog-posts","category-early","category-featured-posts","category-featured-videos","category-leadership","category-videos","category-workshop-wednesdays"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2024\/03\/YT-Thumbnail-Workshop-Wednesday-Speaker-Screenshot-11.png?fit=1000%2C563&quality=70&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5oib2-1fvW","jetpack_sharing_enabled":true,"fifu_image_url":"https:\/\/www.saastr.com\/wp-content\/uploads\/2024\/03\/YT-Thumbnail-Workshop-Wednesday-Speaker-Screenshot-11.png","_links":{"self":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/297968","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/comments?post=297968"}],"version-history":[{"count":0,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/297968\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media\/298008"}],"wp:attachment":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media?parent=297968"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/categories?post=297968"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/tags?post=297968"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}