(64) Cultivating an efficient GTM engine (with Sam Jacobs, Founder & CEO of Pavilion) |TRF Podcast - YouTube https://www.youtube.com/watch?v=z3gLp0x3Wy4

Transcript: (00:05) I have a question what's what's up with the what's what is the background is that the company logo that's it yeah that's it that's it cool it was the only way I could get budget for a neon sign no it looks like you're in a Japanese nightclub and I'm into it it looks nefarious it looks looks like you're up to no good it looks like a jacuzza thing I'm just gonna Circle back to what Sam said he likes it so The Branding yeah exact point on point um you know I think that was the (00:38) introduction yeah I already started thinking Segway how we're gonna Stitch this together now it's on point no so uh we have a guest on the show today it's uh Sam Jacobs CEO and found of Pavilion welcome Sam thanks for having me I'm excited to be here wonderful we are equally excited as well because we're gonna talk about cultivating the qtm engine today uh I know uh this is something you focus quite extensively about you even have a conference coming up pretty soon called the GTM 23 in Nashville it's in October right yep (01:10) October 10th through 12th and uh I mean you I think you must love meeting up with folks because you also went down the road with Jaco I've seen some pictures of you running um so you've you've been busy getting a lot around I I've been to a lot of places uh particularly this year so I last week I was in Toronto the week before that I was in Seattle that's where Jocko and I went for a run together he uh I said we need a picture and there was a nice young lady running by us and when I'm (01:40) running and somebody tries to stop me I get very upset because I'm like this is my private time I'm not stopping to give you directions but this nice young lady stopped and she took pictures of us running and she said actually got to redo it so like we did a couple takes um so yeah Jocko has that effect on people uh Thursday I'm going to Charlotte then I'm going to Boston for inbound then I'm going to La for the all-in summit then I'm going to um Denver Atlanta Austin Seattle and then back to and then Nashville and then (02:10) I'm going to Singapore Sydney and Auckland New Zealand wow and we could be squeezed in Just Between all of that all of that we caught some Jacob just on the plane from one place to the next one question so when we talked with Jocko um he was talking about the Revival almost of face to face uh now with AI and all of this crazy Outreach and all this technology stuff and is that some part of the thinking here for you to be uh you know on the road you know meet with people and you know jump in a jet and actually see them is that part of (02:42) the motivation actually 100 that's um you know the Pavilion the company is uh there's a lot of things that we try to do but but at the core at the foundation of what we try to do is we try to bring people together and the reality is that um generative Ai and a lot of Technology will replace a lot of our business behaviors but the thing that it will not replace is the sense of in-person connection that you get from breaking bread and having a meal and meeting people in person and that's something that we've all been doing as humans for (03:17) 30 000 years if not longer and it's it's the one thing that computers cannot replace the sense or at least yet you know maybe with a headset with oculus and you know we can all like be at a have avatars and be rabbits and you know furries uh doing business on the moon but for now um there's a there's a deep sense of connection that happens when you spend time with people in person and um and we are rebuilt you know we've made a a bunch of mistakes and had a bunch of challenges as we've grown over the last (03:49) couple of years and perhaps the biggest is that uh really beginning in 2022 we sort of underappreciated the importance of in-person connection and so we got rid of the sense of geographic chapters which were the organizing principles for all of the different cities around the world where Pavilion members lived and we're bringing them back now and we're gonna we're gonna have a Copenhagen chapter of course and we've got Matt Redden from the CEO of comsor and a bunch of other folks to participate and (04:16) so this is part also part of the trip is getting people excited about bringing back local community because we do a lot of digital stuff we have Pavilion University we have over 100 courses in schools and workshops that people can participate in we've got over a thousand documents in our knowledge Hub so if you need a Compensation Plan or you need a go to market plan or you need a 30 60 90 day plan all of that is possible and all of that is possible with technology but the thing that drove people to join (04:45) Pavilion in the first place wasn't any of those things it was the sense of there's a group of people that are in my city that care about my career and that are going to help me and we're all aligned by a common set of values around go to market so that's that's part of the motivation I'm really happy about this local chapter reversal I really like to see that and I'm signing up I'm on my way you know it's it's about to happen I mean it takes 10 seconds buddy yeah yeah yeah (05:13) um so the um uh so while Pavilion as a community obviously this is you know it's online and they're kind of those local chapters there's also Pavilion the company behind right yeah and it's a little bit of a detour from from our topic that we uh that we're going to talk about in a second but uh um I think Pavilion as a company is remote as well are there are there any learnings that um that are spilling over into Pavilion the company and how you run that with this whole remote versus in person or how do you (05:41) how or maybe you differentiate differentiate between those two things no I I mean of course they're different things Pavilion the community is different than Pavilion the company but yes there are there are so many learnings there are so many learnings and you know I write a lot on LinkedIn and um I say this a lot but the reality is that everything I'm sharing on LinkedIn is a painful lesson that I've learned recently right it's not that like oh I I'm trying I'm trying not to present myself as some I'm not some Mystic from (06:11) the mountain that saw that sees the future I am learning hard lessons every day about how to run Pavilion the company and this year this past year frankly has been the hardest year of the entire time that I've done it and that's and and you know so one big learning is of course like we're all part of the market and when things were going really really well in 2020 and 2021 that was because we were part of the market and when you know hoppin's raising 100 million dollars or 200 million dollars and (06:39) um you know Dooley's raising 100 million dollars on you know very small revenue and when all of those companies are raising tremendous amounts of money and they share it with us our our results look very good at when those companies go out of business or pull their marketing budgets back our results look very different and so um and we are fully remote and that has been uh there's a lot of benefits and a lot of challenges and um and there's also you know there's an ongoing conversation for all leaders which is you know what (07:08) we talk about and you guys should both come on our uh the podcast that I run Top Line but we talk about culture a lot and whether and what what is the role that culture plays in the growth of an organization and um and what is culture and is culture something that you focus on intentionally or is it the byproduct of good execution and um that's a pavilion the company has been wrestling with those challenges ourselves we had a reorganization earlier in the year we were 60 people now we're 40 people so you know we um (07:40) cut head count and you know we're doing quite well in a lot of different dimensions but it's been a challenging it's been challenging to run the company and it's also challenging to run the company because you know I wrote a book called kind folks Finish First and it's about kindness and um if there's anything that sets you up to be the target it's you know writing a book about kindness I was with um a bunch of insight employees over the weekend and you know gainsight built their brand on their first most (08:11) important value is human first and they've been you know one of the best places to work for a long time and they are also going through some challenges and they are grappling with what does it mean to be human first when you're also focused on profitability and ebitda and you're not focused on feeling good and and that's the same challenge that we struggle with AT Pavilion which is you still need accountability you know you still need to drive results in the earth it's still a business if it's not a (08:37) business that would be very different if it was a non-profit I'd just be on the road raising money the whole time but but it is a business and that means that kindness has to evolve in terms of its definition it can't it doesn't just mean being nice it's it has to mean running the business well I think those are um those are some really deep thoughts that I actually need to kind of process a little bit there's a question of this so I know exactly what I want to ask it I mean we can take it so many directions (09:04) very high level I could be very surface if you want you know I think what what I've taken away just from the first couple of minutes of talking is so you're out talking with a bunch of people and you yourself are sharing your learnings which you know sometimes their successes but also fade us which sometimes which when you get the biggest learnings at the end of the day right and so you and given your physician I think you're able to help a lot of people through this show in curating you know some thoughts on how to actually (09:35) build an efficient go to market engine especially especially right now at this time and what I'm really curious about what are with all the people you talk about uh talk with about building GTM engines what are the things that keep you know coming up again and again that are signs that this is actually what you need in order for for you to have an efficient engine well um I do talk to a lot of people and the reason I guess the there's a couple ways to interpret that question the the reason that efficiency is important (10:05) right we can start with that why is it important it's important because the capital markets are not available or open to companies that are inefficient and you can even see you know we uh the the companies that are going public right there's three big IPOs that are coming this fall uh very soon right one of them is armed the other is um instacart and the third is clavio and clavio had uh was unprofitable last year and growing very heavily and this year they've moved to I think 10 if not more profit margins and (10:34) are now generating cash and ours and their growth rate went from like 53 to 42 but still at 585 million in ARR they're doing incredibly well so the first thing is that there's just not a lot of you know as my friend would say there's no bid on the ask of unprofitable companies right there's not a lot of appetite from institutional investors to fund unprofitable companies with no visibility on being profitable at any level right uh at my level there's still a venture market for you know we're (11:05) we're on our way to 20 million in ARR so we're effectively a growth stage company I guess a small growth stage company but even at our level you know there you need to be growing very very rapidly uh if you still want to be unprofitable and um and growing on and growing rapidly while being slightly unprofitable is the same thing that's still efficiency right it's growing nominally while being unprofitable there's just no appetite for it so that means that if if you're running your business that way you're (11:32) going to go out of business right one way or the other unless you change so this is a change uh that is of a necessity even more than it is um you know a choice and it doesn't really matter actually for for now um although it might be should but it really doesn't matter how much is on your balance sheet I have friends that have 40 50 million dollars of cash on the balance sheet for their businesses but they still are getting questions about gross margin and ebitda from their board because it's just (12:00) it's a requirement to continue to pursue a higher valuation so so that's why it's important right now so then what's the second well so what's the learning and how are people making this transition they're making so here's what I hear outbound doesn't work the way that it used to work that's for sure right and everybody is worried that LinkedIn inboxes and email and cold calls are less and less effective and they will only become less effective of course there's an inverse correlation to you (12:28) know conversion rate to volume right so as generative AI I haven't seen it happen yet but you can imagine that outrage and sales Loft and Apollo will start saying click a button and you don't even need to write the email we'll write the email right we'll and and we'll write the LinkedIn message and all of a sudden maybe there will be two to three times as much email in LinkedIn in mail volume as there is today I don't know if that's going to happen because people are also aren't (12:54) completely stupid and so they'll everybody will see this coming but the point is that traditional channels aren't working there's a couple things that aren't working right large teams of sdrs uh that are that are using canned or generic messaging uh to drive meetings to average sellers that's not working right most this is uh from our sales benchmarking report that we did with ebsta only 28 of B2B reps are hidden quota right now so that's that's a failure of that entire motion so what are people doing (13:25) in uh in response to that well one of the things over the last couple of months that has been improving is actually sales efficiency what does that mean that means that we're firing the team or we're firing underperformers and we're sending good leads to a smaller number of people that are converting them at higher rates so one of the things that's working is just smaller number of reps and and people understanding that the way to get to your number isn't just to hire more reps it could be to include to hire (13:54) fewer reps and increase the quota of the smaller number of reps and say your calendars are going to be full we're just going to fill you up with as many meetings as you can handle and that is going to be the way and even if you get into the accelerators it's still better for me than hiring three or four additional reps who because what people are realizing is that every single time I send a good lead to an average it's not even just close rate it's average deal size it's ACV right if you if if (14:20) Michel closes at 15K and it wins at 30 percent and I send a deal to the same lead to somebody that closes at 15 and 10K the expected value of that is 1500 versus you know um uh three times as much basically right and so every time it's not even it's that I'm losing money it's that I'm losing money and so so one thing is smaller teams smaller more effective teams the second is everybody's experimenting it doesn't mean that everybody's figured it out but everybody is experimenting with different go to (14:52) market motions and trying to see what else might work and so what does that mean that means uh partner motions community-led motions product LED motions right everybody's trying to figure out what is what is the path to um to the customer that has a higher close rate that builds trust that is cheap and even Pavilion is doing that right Pavilion is doing that when we went from 60 to 40 people a lot of that was our outbound sales team because we real so and that doesn't mean that anybody was doing anything wrong it just (15:23) means that to drive efficiency I want to put my best leads in the hands of my best sellers I have a question on this actually so I I saw you write a lot about uh this this Mirage that people still have I believe that hiring more AES equals more Revenue I mean I think some of that is is in my perspective a bit you know CFO Finance driven's like hey we need so much AR by the end of the year divided by quota gives us you know 50 reps that we need to hire and so forth right do you see people waking up to this uh to this mistake or what's (15:54) what's your you know what's your take on the market there yeah I do think people are waking up to it and I think it's by by necessity and I think um they're learning a couple things again the first thing that they need to understand is that like exactly to your point the way that you build the financial model has a big impact on how you run the business and if you build the model where the key input is hiring more people and that's what makes you more money then yeah you're going to hire more people so one of the things (16:20) people are learning is to basically triangulate their revenue Target uh in a few different ways one of the the the first way would be let me figure out my historical results if I have them and let me figure out the cost per opportunity and the cost per close deal and let me assume that those costs are going to remain fixed if not slightly increased to get to whatever Revenue number I want to hit this year and that's going to give me a pile of money and that pile of money can be allocated fungibly across sales and (16:45) marketing so one of the things that I'm trying to teach people is that marketing is a cheaper tends to be a cheaper investment than sales right I would say that the other thing especially if you've had Jocko on here or Pablo but especially Jocko is that you know why are we talking about GTM why are we talking about GTM we're talking about GTM because um focusing just on sales is is is killing these companies is really killing them and why is that it's because all of the pre-sale funnel is fully architected right we know how many (17:16) leads we get we know how many what our win rate is we know what our average deal sizes we know what our deal cycle length is but does every single company have a member Health score that that articulates time to Value post onboarding does every single company really understand here's the percent of my customers today that move from green to yellow and therefore need an intervention they need they need me to call them they need me to reach out to them they need to use a different part of the product that they haven't been (17:42) using because all of this leads to retention and retention Jocko will tell you better than me the thing that will drive your business over time is net revenue retention but it's not even never it is simply retention it is that it you cannot grow if you have high churn you cannot grow and it doesn't it and only the youngest earliest Founders are I was a VP of sales years ago you know I've been doing this a long time and when I first got to a VP of sales I was one of those people that was so excited about new business (18:12) and so excited because you know ARR goes up immediately whereas like taking care of a customer really doesn't do anything for my number it just sort of stays there it's not as exciting but the reality is that there I don't even want to deal anymore if it won't renew you know and and it's and that's the education that's happening across the industry that it doesn't there and there's a lot of Ripple effects a lot of Ripple effects and for example one of them is contract structure because there's a lot of (18:39) people that have been masking either transactional purchasing Behavior or um non-recurring purchasing a lot of people's ARR right A lot of people say are is just not true it's not true because it's got it's got planned cancellations of people that aren't even using the product and it just hasn't shown up if you have a customer that said I'm going to cancel in October and you're keeping them in ARR until October that doesn't mean that the number is real today and and fake tomorrow so I think you're totally right (19:09) right we see this also with our customers the the newbies funnel is usually really well thought through and you know all the stages and you know from leads mql let's say SQL and the different you know pipeline stages and so forth and then on the customer side uh so we call the customer modeling it's close one to renewed you know or maybe you have an implementation statement step in between why why do you think that actually is you know and even on this very conceptual level of how people think about the funnel (19:38) um it's leading heavily to the new build side which then also means a lot of focus a lot of money a lot of budget will go to that side a lot of brain power will go to that side um why do you think it's so lopsided I think it's just a lot more fun to close a new business deal than it is to close a renewal and I I think it's something to do with human psychology I think it's something about our dopamine receptors and how again if you're a 10 million an error you close a hundred thousand (20:06) dollar deal you're a 10.1 just like that you're a 10 million in RR and you renew a hundred thousand custom a hundred thousand dollar customer you're at 10 million you're flat and it doesn't feel as exciting you know I think it's also like who hits the gong well yeah let's do what about what about you know CX [Laughter] and so kind of stepping you know one level up and you um I I think I think you recently also maybe um did a show on and Top Line on on this topic which is actually around alignment (20:45) um and you know you have the whole GTM I think sangram talks about you don't have a sales problem you know a marketing problem you don't have a CS probably a GTM problem um tell us a little bit more about that right why why do you believe it's alignment why is it so important to run an efficient shop at the end of the day well it's what we were just talking about which is that um you have to you have to have a conception you know to uh not to be like too profound and not to be too abstract but you have to conceptualize what's (21:12) happening with your customer uh in a way where everybody can speak the same language where everybody has the same set of data that for the reason that it's important is because if you don't have the same data and you don't have the same conception of the customer then you will as we've just talked about gravitate towards new business as the remedy to all of your problems and it's even happening in my it's happening there's a conversation today in my company that that is very similar to the con the type of (21:42) conversation that we're having right now so why is alignment important it's important because alignment is the only thing that puts the right emphasis on renewal as The Logical outcome of of doing the thing that makes the customer actually um you know valuable to you and to them right and what is what does that mean it means that selling a deal is not useful to the customer right it's it's only useful to you renewing the deal demonstrates that the customer agrees with you that the solution you provided (22:14) is valuable and that's why I'm saying it's it is um it's a bit of an abstraction because the point is we're trying to build things that are actually valuable to people right and there's no and that's kind of where we get twisted because with a lack of alignment you're solving inevitably for your value but not their value and over the short term and sometimes it's very short right it's like over two days before the quarter ends that number looks good but over the medium and long term the only way to (22:42) build a sustainable long-term business is to deliver ongoing value to your customers that's the point that's for me the point of clavio of the of their S1 which is that if you look at you know their ACV is five thousand dollars they have a hundred and thirty four thousand customers and yet they have 114 net revenue retention 114 net revenue retention on SMB deals like that is absolutely amazing is absolutely and what it what does it mean what does it mean when you read that thing because sometimes I was (23:12) reading the S1 and it was like what the hell are they talking about data layers and applique and I'm not a technical person here's what it means it means that their clavio helps their customers make money that's what it means that's what it means it works whatever it's supposed to do it works it sends you a text message at the right time and fundamentally we have to get back to that idea and that's what Jocko talks about if you want recurring Revenue you need to deliver a recurring impact and (23:35) your customers will tell you if you're delivering recurring impact and if they're if they're saying that there's high chair and they're saying you're not delivering cost recurring impact and that's what you have to do if you want to build a big business and that's why alignment's important I'm also just one of the things we like to do every now and then is get a bit more practical as well with with this stuff and especially alignment I think is it's one of the subjects that gets a lot of coverage (24:00) um but what do you do at the end of the day if you have a VP marketing interview P cells that aren't agreeing right because part part of this alignment exercise also happened in you know when you're down and executing so I'm curious how you see that with the different teams and folks you talk with also his point maybe you know a VP sales that um is not delivering customers to the vpcs that they can renew right I mean there might be maybe maybe the all the focus on you know sales or marketing alignment is starting to be a moot point (24:29) it's actually going to be more about uh newbies and existing business alignment I don't know maybe I'm for sure no I'm not I I will again alignment doesn't just mean two departments it means probably four or five departments it means product market sales marketing customer success and maybe rev Ops so you know what do you do if they disagree well I mean I think that's some level of constructive tension is important I think incentives the first thing we need is a common data layer right like the (24:56) first thing we need is like you nobody can have their own set of data that's different from you know you can't have an ARR number that's different from my error number you can't have a churn rate that's different from my churn rate we all have to be using the same data and agree that it's the right data so that's thing number one and we need to have the same terminology and the same the same funnel you know Jocko calls it a bow tie but the point is we're all using the same methodology we're all talk so at (25:21) least at least we can have a conversation that starts from an agreed set of facts that that I think is the most important thing and then I guess when it comes to disagreement about maybe it's what's the right way to build pipeline well I think that's the purpose of you know healthy debate and then you need a decision making process where again but referencing data the thing that I think what you know when I personally gotten in trouble it's because and I get these questions a lot how do you convince a CEO that marketing (25:48) is more important than sales or or to make some of these changes or not to hire so many account Executives well one of the ways to definitely not convince the CEO is to um is to use emotion right and to get angry or to make it about personality it's not about personality it's about an objective view of the facts that's what I would say and I and and if I'm the CEO overseeing or trying to broker a conversation between sales marketing CS that isn't productive I'm going to go to the facts and then I'm (26:19) going to try and then there's probably an incentive structure that hopefully drives a little bit of alignment so that might be that um there's a that some meaningful portion of their bonus or their quote unquote commission you know one of the best ways to push a VP of sales out of alignment is to pay the monthly commissions yeah you know like well then you're gonna get what you pay for which is month and especially monthly commissions on new business if you want to pay for monthly New Visions uh commissions on (26:47) new business you're going to get lots of shitty deals and if you pay on aggregate retention or you pay on all of the executive team aligned against an ARR Target which obviously includes both new business and retention and then from there you Cascade down the metrics of the funnel to the individual department heads so you say okay yet yes the executive team is comped on ARR in total but the director CS owns retention the director of demand gen owns new business ARR this is the number there needs to be accountability I think that's where it (27:20) starts and then it's like oh well we should go to this trade show no we shouldn't okay like that's where there's never going to be perfect agreement on those kinds of conversations but I think if you have the same set of data you have a high chance of getting to the right answer so we'll have a bunch of revolves and zero folks uh listening and especially for you know the the rev-ups conversation right so when you talk about data and Alignment it it almost lends itself a little bit to this topic (27:45) so what's your what's your perspective on Revenue operations helping with data which is the right so alignment which is to a degree derived from uh from data and so forth what's your what's your perspective on that yeah I I have rev Ops is critical I mean I what I would like I said there I'm not there's a world where every department has their own per uh operations person and they report to the head of that department and I think that's probably a mistake I I don't have an opinion on should (28:19) revvops report to finance but I can understand why some people would want that what I know is that you can't have I want one source of data I don't you're not allowed to have a Churn number that's different from my insurance number we have the same Churn number that's the most important thing and that's why and I would say that in this aligned world the profile of the leader uh is different and might come from revops more than it ever has it might be that the chief Revenue officer or the (28:47) chief commercial officer originally comes from rev Ops in a way that wasn't seen as acceptable before because they never carried a bag or they were never an account executive but the person that understands how all the different pieces of the business fit together which often is also the CFO that person tends to be more valuable than just a person that can rally the troops to hit a specific number that's actually pretty interesting also because we've talked with a few folks about this area where (29:14) you know there's a lot of thoughts around this this particular topic where we we chatted with Chris welcome for example his point was it's really hard to weigh in on the go to market when you don't have the Practical experience but then you know we recently talked with uh VP Revenue operations at uh HubSpot who said well you know I'm a curious person I'd like to go and learn so I will build up that experience well I think your point is like maybe leadership can come from revamp as opposed to just the (29:43) functional area and and that's where yeah I the you need somebody that can that can yes you need to be able to lead a group of people and motivate a group of people but what you really need is somebody that understands how the business works so one of the things you said earlier Sam around What specifically happened with uh building an efficient goes to Market is people create smaller teams and outbound you know isn't working why do you think actually we we got there was it because we were greedy and had to (30:11) grow really fast so we just accepted that the efficiency wasn't all that attractive and we built this Beast of an engine how do you think we got here yeah okay yeah next question uh interest money was free yeah and um and and I've been thinking a lot about this because you know the first thing you can say is like well money was free and everybody pursued growth at any cost okay but but what let's how what were we what were all three of us what was our mindset two years ago and how did we have because humans are very status (30:45) driven right and we're comparing ourselves all the time and so how did we compare success what was success two years ago first one one indicator of success was how much money you raised right and it was that the more money you raised that was an indication that you were that you were better in some way and if somebody raised 50 million dollars from HubSpot Ventures and I only raised 25 million dollars and I would feel threatened and then the the fear part of our brains says I better get as much of the market as possible because if I let (31:16) them get as much of the market then they will grab the whole Market and I will wake up one day and not have any opportunity to grow I will be starved out of you know there will be no oxygen left in the room and that that created an you know an arms race a funding race where everybody was Raising as much money as possible and thinking that if they didn't get to every use case and every Persona and every industry vertical first and we did this too by the way we did this uh and I can give you a very specific example which is that we were (31:48) an executive only community and we were partnered with this company called sales impact Academy and they were doing training for sales teams and they were and I'm friends with the founder now but we were sort of competitive and I felt like well I know what he's doing because he's using all of the Pavilion members to teach his classes and I don't need why do I need to go through him I can build that business too literally that was my I can build that business and I did build that business very expensively (32:19) and and um and then and you know neither he nor I knew diddly squat about training and enablement as an industry category but here's what I'll tell you uh it's in a we were we were peacetime uh decision makers right because the money was free and so and and everybody needed to attract and retain great sales talent and that meant that they needed to invest in training and enablement solutions like ours whether or not they worked whether or not we were actually very good at what we did and meanwhile (32:50) so that pulled us in an entirely New Direction right that and that we were we were and as much as I lecture like we did the wrong thing right we got distracted because there was money available and we said we're going to be a sales training solution for sdrs and account Executives and we're going to be a training solution and a development platform for VPS of sales and all of the VPS is not all of them but many said well what are you really trying to do here are you trying to be who are you for I thought this was like my special (33:16) Club to be a badass CEO or VPS sales and now it feels like you want to be an SDR training platform and I don't really want to go to like a cocktail party with sdrs I'm trying to like meet other people at my stage of growth and meanwhile to deliver and and what is the under why did we do that I mean again this is sort of like a bis but this is a bit case study and all of this excess right why did we do that well we did it because we I was not thinking from values or from first principles I was thinking this the the training business (33:46) is a B2B business and that B2B business will renew at 70 or 80 percent and it will um and it'll have 100 125 net revenue retention and meanwhile the executive business is much more like a b2c business it's going to have two three percent monthly churn and so I'm in a trade executive revenue for B2B revenue and I'm going to build a more valuable company and uh what actually happened turns out the training business doesn't renew better it renews worse and it renews worse because it doesn't work that well (34:18) as we all know watching a bunch of videos doesn't make somebody an expert at doing that thing and it diverted our focus and it was expensive and so all of the economics that were supposed to be better actually turned out to be worse and that's why today we are really triple focused on Executive community and moving slowly out of uh you know build being a training platform for sdrs so I mean and this is you know you can you can decide whether or not you want to answer that question but I feel some of those decisions actually came around (34:49) or after you raised the 20 million right so I think I think this is when you started to open the doors to sdrs and you know did all I don't know all the details by the way but was this basically also part of the uh the business case in order to raise that that money to kind of say like Hey we're going to expand the tab we're going to have all of those roles in here we're going to charge all of the money we're going to add this other thing was that part of your thinking actually to um uh you know to raise those funds (35:14) it sort of like all happened at the same time but you're not wrong that it and and the other why did we change the name from revenue Collective to Pavilion well it was because like oh this idea works for sales people why can't it work for HR leaders and legal people and anybody and so I'm going to build the largest community of Professionals in the world and sounds nice but the and it might be nice one day right but like the whole thing was like hey dude you know at the time we raised the money we were at four million ARR (35:48) like why don't you sell all the sales people first why not just sell all the sales people first before before you do the thing for HR because you don't know anything about HR and you're probably not going to be very good at it so let's just and I had this conversation this year right in January of this year I'm driving down the Long Island Expressway in New York and I'm talking to my friend Andrea Kyle who is a CMO now she's a cro but she's a long time CMO of electric and signposts (36:14) and a bunch of other businesses and she said tell me about your Tam and I said I think there's about 60 to 80 000 VPS of sales marketing Cs revops and CEOs and founders of B2B SAS businesses 0 to 50 million ARR in North America um because there's about 15 000 companies figure four people per company and uh and she's like and how many do you have I'm like we have about four thousand and she's like so why are you doing anything other than getting the next four thousand and I'm like yeah I (36:42) don't know which I wish I'd spoken to you two years ago you know previously so your your VP of sales originally originally uh quotes um and um and then kind of previously you said like hey marketing is the best way almost you know one of the most efficient ways to grow the company how did that how did that change come about actually how did you go from um and you know how did you how did you get to that point of realizing hey that's actually that's the the most efficient growth lever to to Poland (37:12) that's that's the money should be pulling I've always I've uh that came that was um I've believed that for a long time I believe that for a long time I wrote the first time I like meaningfully put content out on LinkedIn was in 2017 and um here I can post it it's called the wrong way to scale people should look it up uh Sam Jacobs let's see if it um and when did I write a June 29 2017. (37:40) so I was working at The Muse and it was because I'd worked at this company axial and livestock and I just made this mistake at livestream where they had all of these leads and um I and I was like oh look at all of these leads and I can explain why they were not leads but they I didn't think that through so I was like look at all of these leads I can hire like 15 sales people and just triple the business and so we hired all of these sales people and the business didn't move it didn't move at all why (38:10) didn't it move they weren't really leads they were people canceling and then re-signing up monthly subscriptions because they were using the product for one single event and then canceling it afterwards and the idea that this was ARR in the first place was like a total myth it was not ARR it was one-time purchases that were presented as ARR because it was better to present things as they are and so that's when I I wrote that article to say hey stop hiring all these sales people and for the and you (38:38) know I ran Pavilion full-time from 2018 to 2021 we didn't start building a sales team until really the end of 2021 and and after we raised the money and then we were pursuing this B2B opportunity the whole we'd grown from word of mouth and from high net promoter score the entire the entire time of our whole existence and it was only in the last two years that I'd gotten turned around you know turned around and and did raising the money turn me around yeah it did turn me around a little bit and I went from you (39:10) know everybody went from hey isn't it nice that I get to have a company to maybe I'll be a billionaire you know like should I buy a private plane like maybe I why does Richard Branson get an island and I don't have an island I want an island and that you know it was a sickness and I'm recovering from that sickness so I think one of the interesting things here is also like you you now that you talked about sales it just got me thinking in mission to go to market you also have certain motions running or need to build (39:39) new motions and in particular with the shift we've seen as of late so he said people are you know scaling back the teams and have smaller teams usually it's because they knew something was wrong or broken right so how like what are some of the signals you you've picked up on that hey this motion is just not working is there some wisdom there to share potentially now for the listeners sure well quote attainment rate I mean what you know like let's just look at your there's certain businesses that it (40:07) does work for right and I and I'm sure there are businesses that are growing I think cyber security is growing really nicely right now in this economy and companies like thorough pass or Vonta are doing great but your your metrics will tell you if things are working or not working right so you know and I have uh the the data would be you know first of all here's the data that we've seen right uh close rates are uh sales cycle length is up 30 percent right average deal size is down close rates are down and only 30 percent (40:39) I think the number is 28 of reps are hitting quota so again if people modeled that great but most people didn't model that right so that would indicate something's not working right the other way to like figure out if your go to market motion is working is like let's I call it the calendar test right open up the calendar of your reps they should be having three let's say three is a lot three outside meetings a day right 15 during the week right that's a busy rep that's a pretty busy rep (41:12) a mildly busy wrap 10 meetings a week right how many meetings and you know don't no no daily huddle no going to the doctor no blocked for deep thought you know how many customers are they doesn't have to be new business it doesn't have to be net New Opportunities right it could just be like how many times are they talking to people that don't work at your company for the job that they're supposed to do which is bring in more money and if it's less than 10 times per week then don't hire any more people you (41:39) don't have anything to give them and I've seen so many so anyway that's we we know that that's the symptom that's the indication that things aren't working is falling win rates and um and I think but again there's certain people that are good in this environment and that's the difference between peace time and wartime or between if you don't want those metaphors uh you know good hard and easy right and there's people that can succeed when things are easy and there's fewer people that can (42:05) succeed when things are hard and that's okay and that doesn't mean anybody's a bad person and I the last thing I would say though to your point and to sangram's point because he'll say every new motion is that's a new investment it's not so easy to snap your fingers and say I'm going to do plg now or I'm going to do community-led growth now or I'm going to do Partnerships now um so you just have to be you have to understand that if you're making a new investment you're not going to have (42:33) predictability around that investment for some period of time because it's new it's different and it and it is an experiment and you're all and that again is problematic for people because that means that you have excess Capital to fund experiments that are going to hopefully lead to some more productive uses of capital but anybody thinking that we're just going to go to plg and it's going to be awesome and I think um I think uh inside partners and I'm not sure I was probably you know winning by Design as well I (43:02) think they're just you know released some research on plg actually spending a lot on sales and marketing compared to sales there's there's a whole new kind of worms to unpack but you know if if we take a step back and and try and uh look forward for a second right so I mean there's um number one I think a couple of holdouts are still thinking hey this is just a dip we're gonna go back to the heydays and you know the majority is coming around here there was a correction and that's kind of how we (43:29) need to live now um first of all I think I can guess in which Camp you are but what do you think will be the result of this right will we all be uh trying to do um you know community-led growth and go back to events and and send you know a direct mail well what do you what do you think is going to happen the next couple of years to to all of those go to market motions you know how is that whole transformation gonna gonna end up uh Landing in the end in the end to the next five years I don't know I don't (43:58) think it's going to go back to the way it was because I don't I just don't the first answer your question is I have no idea the second question is um the world of large sales teams for mediocre products I do think is over I think great products clavio will have a large sales team big Enterprise companies that can close seven figure deals where they have they understand the economics of why they need sellers in every zip code those companies and there are companies out there they will have sales teams (44:35) but I think most companies here here's what I really think I think most companies will become smaller and there will be many more companies and and I and I don't have any here's what I mean I have seen more people more of my friends my friends more of my friends who are non-technical more of them have started their own businesses in the last 12 months than at any time in the last 15 years now there's a bunch of confounding factors I'm old we're all my friends are getting older right so like (45:08) it's time for us to start businesses but even you know uh there's a guy named Mark Colleen's he was the CMO of air meet he just started his own company this guy Andrew newborn uh who was the SDR at Outreach who's funny and kind of irreverent he started his own company my friend Mike Hoffman started this company called past site my point is with General generative AI means that you can the the chat CPT the open AI API is natural language you don't need to write python you don't need to code in python or reactor and or (45:38) JavaScript you don't need to know any of that stuff to talk to the openai API right programming and Engineering will become natural language which means that anybody can do it which means that and I don't know what that means for the Venture Capital industry because what I really think and to this is to the point of insight Partners cutting their targets for their new fund as well as I think tiger also cut their their I don't know that I don't know the how this will all I think Jason calacanus and Seed (46:04) stage investors and early stage investors will have a lot of checks to write but I think that the Tam for those companies will be much smaller because they're just going to be a smaller number of people running what are meaningful businesses I think Justin Wells started all of this when you know he started creating content on LinkedIn but but for him solopreneurship means like how to coach people to create content and I think there's going to be far far more use cases in the future for solopreneurs to (46:29) build uh there's a world where I could run my whole business with probably like five people and just be a LinkedIn influencer talking about go to market Without Really Ever you know practicing any of the things that I talk about so all of that's a long-winded way of saying that I don't think that we're going back to the world of dot hundreds and hundreds of sales people at 20 million ARR companies that that have 80 net revenue retention and where only half the people are hitting quota I think that world is probably (46:56) gone for a long firm for a long time that doesn't mean company formation is gone I think company formation is going to go way up I think the world is far more interesting and I think that generative AI plus a lot of the advances I I still think there's so many technological advancements that are going to drive human productivity that I'm still incredibly bullish on the market right like on on on human productivity outpacing other deceller you know deflationary forces right on on the world getting better for more people (47:28) I even with climate change and in fact climate change will will trigger all of these amazing new companies to be started around you know and you're in Denmark so you know like obviously farming and food production uh with much lower you know much lower inputs and but also carbon sequestration I think we're gonna we're going to adapt to climate change it's going to be a really painful 50 to 50 to 100 years but I think we're going to emerge and yeah the world will be geo-engineered and you know like we'll (47:55) be messing with the atmosphere and doing weird stuff to it but I think all of that is productivity for the human race um so what does all of that mean that means that like I think that was a fantastic view into the next five to 500 years Sam you know the main thing we need I'll leave you with this uh silly combat the main thing we need is more babies that is yeah five five kids between the two of us yeah all right well you're doing I haven't started yet so I'm but I'm gonna have everybody in the I so my hot take (48:35) my hot take which I said on top line is that in the future you'll be able to order babies that will be grown in labs and that's some Jacobs I'm not against this this is great Sam yes thank you so much thank you so much for being here thanks so much for talking about GTM and some of those details but also kind of broadening this a little bit out I think this was uh fantastic thank you for spending the time with us thanks for having me I appreciate it [Music]