SaaSletter - Battery Ventures On AI Gains

Plus a new SaaS Employment Index + curated content

Matt Harney

Nov 10, 2023

Battery Ventures “State of The Open Cloud 2023”

Full Battery slide deck here with my extended excerpts threaded here.

For the newsletter, I will focus on their excellent AI automation gains coverage.

I particularly appreciated their quantification of the AI gains (see my highlights in red):

… and then translating into a pro forma GTM org chart:

Interestingly, the Battery AI-Led GTM efficiency analysis relates perfectly to Sapphire Venture’s Non-AE Bloat talk at SaaStr 2023:

Sapphire: Non-AE spend grew from 70% in 2018 to 90% in 2023 - meaning lots of headcount growth outside of quota-carrying account executives
Battery: Shows AE headcount flat while AI automation gains lowers headcount across all non-AE roles (from 80 FTEs to 50 FTEs in their framework)
Sapphire + Battery = Some GTM Bloat Gets Trimmed By AI

Another AI quantification I appreciated - how improved developer productivity will lead to new products and features:

I too think that AI-led gains in the R&D function will be re-invested in product instead of improving R&D P&L margins.

Helpfully, Battery laid out a pro forma P&L post AI (example: Rule of 40 going from 35% to 53%):

Historical SaaS Benchmarks On “SaaS Talk” Podcast

We were honored to have our Historical SaaS Benchmarks meta-research covered extensively by

Ray Rike

and Dave Kellogg on their “SaaS Talk” podcast.

As context, we aggregated the Pacific Crest/KeyBanc benchmark reports from 2010 to 2022 to create a historical, longitudinal data set.

Episode Links: Apple | Spotify | “SaaS Talk” Website With Video

October 2023 SaaS Employment Index

Our latest October 2023 SaaS Employment Index (reminder: tracks headcount changes for 3,500+ private, US-HQed software companies) continues to show incrementally declining layoffs and very small gains in hiring. Nonetheless, it is a more “red” than “green” environment.

OpenView 2023 SaaS Benchmarks

OpenView released their annual SaaS benchmarking report (n=700+ with the core of their sample in the $1m ARR - $20m ARR range; data through Q2 2023). My excerpts are here.

Improved ARR per FTE (see above) was arguably the most notable data point.

Curated Content

Higher *October* quota attainment in forward-looking roles (SDRs and SE’s) were the most notable and bullish data points from RepVue’s latest (see above). Account executive quota achievement was more mixed. My RepVue recap is here.

Keith Bender from Pear VC on “The vertical software data gold mine”

More for the economics majors and framework lovers, 2 Substacks:

Thomas Robb
’s interview diving deep into Morgan Stanley’s SaaS X-Ray framework (i.e. steady state, mature SaaS margins)
and
Akash Bajwa
on “Software Market Genes: Market share stability, pricing power, and disruptive innovations”

Gartner Digital Markets Q3 Update

Gartner’s Digital Markets segment revenue growth is another indicator I’m watching since it captures both buyer interest (i.e. traffic on sites like Capterra) and software vendor spend (i.e. their cost per click bids + budgets on Capterra).

For Q3 2023, GDM was down 10% YoY… but “only” down 3% from Q2 2023. So stabilizing, but certainly not a greenshoot for those hoping SaaS vendor CMOs are putting more GTM budget to work.

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