AI to ROI – Details, episodes & analysis

In the second episode of AI to ROI: The Big Story, Ray Rike and Peter Buchanan analyze the critical transformation required for traditional SaaS companies to become AI-first organizations. With the SaaS industry generating $273 billion annually, the hosts warn that incumbents are under "two-front" attack: internal refactoring of legacy systems and external disruption from hyper-efficient AI-native startups.

Key Highlights of the Episode:

• The "SaaS to AI" Pivot: Ray compares the current shift to the on-premise-to-SaaS transition of 20 years ago, noting that today’s change requires a fundamental rewrite of an operating culture rather than just adding "AI veils" like prompt engines

• The Rise of AI-Native Efficiency: Peter highlights companies like Lovable and Cursor, which have achieved hundreds of millions (or billions) in valuation in under a year with minimal staff, challenging the traditional SaaS model of linear employee growth

• The Shift in Financial Metrics: The hosts discuss the new economic reality: forgetting 80% gross margins in favor of a 50-65% range to account for high token and inference costs. Success will depend on the "COGS to CAC" model, offsetting higher infrastructure costs with dramatically lower customer acquisition costs via AI automation

• A Roadmap for Success: To fight back, SaaS incumbents must re-architect around outcomes rather than features. This includes leveraging their "crown jewel data" and status as systems of record to build decision intelligence layers that AI-native startups lack

• The HubSpot Success Story: Ray details how HubSpot successfully scrapped its 2023 roadmap within weeks of ChatGPT’s launch, shipping AI-native products in under 90 days and moving toward a "Results-as-a-Service" future

• Advice for Leaders and Employees: Ray suggests that CEOs must re-engineer every department to be AI-first, while employees should commit to learning new AI tools every month to remain employable in an increasingly automated landscape.

Listen to the full episode for a deep dive into how to avoid becoming an "orphan" SaaS company in the age of Agentic AI.

You can read the newsletter edition covering this topic by clicking here.

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In this episode of the AI to ROI podcast, host Ray sits down with Drew Laxton, CFO at Outreach, to explore the profound transformation of sales technology and financial metrics in the age of AI. Drew shares the strategic reasoning behind his return to Outreach, driven by a conviction that the company is uniquely positioned to lead the next era of agentic AI and automated revenue workflows.

The conversation goes beyond the hype, offering a masterclass in how finance leaders must adapt to a software landscape that is moving from seat-based subscriptions to consumption-driven models. Drew provides an inside look at how Outreach is re-engineering its own financial playbook to account for the high compute costs and non-linear revenue growth associated with AI.

Key discussion points include:

• The "Personal Productivity" vs. "Financial ROI" Debate: Why the initial wave of AI efficiency must eventually translate into higher quotas and lower OpEx to satisfy the board.
• Maintaining Margins in an AI-Native World: A deep dive into the "triumvirate" of Product, Engineering, and Finance that manages gross margins as compute costs replace traditional SaaS overhead.
• The Metric Recalibration: Why traditional SaaS snowballs don't work for AI, and how Outreach is using "spend-as-truth" to normalize data for NRR and CAC calculations.
• Agentic AI in Action: How Outreach's "revenue agents" are replacing manual prospecting with autonomous, data-tuned interactions that learn from previous customer engagement.

Some Key Insights and Quotes pulled from the conversation with Drew:

On the "Boring" Wins of AI: While many look for revolutionary shifts, Drew emphasizes the value in automating the mundane:

"A lot of the AI tools that I’ve seen so far... there's kind of boring outcomes that are very impactful... like our QA process within the coding side has very much streamlined."

On the Changing Economics of SaaS: Drew acknowledges that AI-native products fundamentally alter the 80%+ gross margin expectations of the past decade:

"We do need to bring gross margin into our understanding of SaaS tools because it's just not the same... You've got to be more efficient on the go-to-market side to make the economics work."

On the Rise of Consumption Pricing: The shift to variable pricing means the "snowball" metric of the past is no longer sufficient:

"What is your ARR has become a lot more challenging question than it used to be... consumption is not linear on these products. It’s kind of zero, very little, and then a lot."

On the Importance of Usage Over Revenue: In a variable world, product utilization becomes the primary indicator of a healthy business:

"Product utilization... becomes a core signal to retention. It's not just revenue anymore, it's utilization month by month... spend is truth."

Advice for Aspiring CFOs: For those looking to reach the C-suite in the AI era, Drew suggests one primary trait:

"Be curious. Just be curious about everything... Ask questions, get time with the CFO or the leaders of the various organizations... wanting to understand their business has only benefited me."

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Melissa Howatson is the CFO of Vena Solutions, a $100M+ ARR cloud-based financial planning and analysis (FP&A) platform that helps companies streamline budgeting, forecasting, reporting, and financial modeling, with a strong emphasis on Excel integration.

During the episode, we covered multiple topics with Melissa including:

• Latest trends in B2B SaaS FP&A
• AI in Finance - the importance of change management
• Metrics that Matter at > $100M ARR
• Measuring the Impact of a podcast

The 30-minute conversation hit upon multiple key trending topics including: 1) how FP&A is evolving as a strategic business partner to the other key functions; 2) why the CFO needs to lead a culture of experimentation with AI; 3) how EBITDA increases in importance as a company scales and; 4) how to measure the impact of a company sponsored podcast!

If you are an aspiring CFO, or a CFO looking to scale your company beyond $100M ARR or are interested in how a world-class CFO came to be this conversation has something for you!!!

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The Alexander Group works with many of the leading companies in the B2B SaaS industry, and I was recently joined by Ted Grossman, their co-lead of the technology industry practice, and Davis Giedt, Director of Research and Analytics.

Based upon Ted and Davis' unique insights and understanding of B2B SaaS due to the discussions and data from over one hundred customers, coupled with their historic Sales Compensation research and benchmarks with has become an industry standard.

My first question was how has the use of SaaS metrics evolved. Ted's perspective is the core metrics have not changed that much over the past few years - rather it is the weight that is placed on specific metrics, especially growth vs profitability. As an example in 2021 and the first half of 2022, the weight was much higher on growth rate versus profitability metrics. One example is the Rule of 40 has increased in importance as measured by R-Squared by 3x over the last 6 months. As such "Margin + Growth" is much more balanced in 2023.

Ted highlighted "expense to revenue" as a top priority at the macro level. This is also a very easy metric to benchmark against the industry. Then you can dive down into more granular revenue growth efficiency metrics such as "Profitability by Sales rep. Other things like the CAC Payback Period which measures the amount of time to pay back the acquisition of a new customer. Net and Gross Retention Rates are also high-priority metrics to understand the efficacy of retaining and expanding revenue with existing customers.

What about the importance of changing the mix of revenue growth from new customers versus existing customers? The story varies in every company and depends on company-specific attributes such as do they have multiple products, or do they have a product that can expand usage to additional users, departments, or business units within an existing customer.

When I asked Davis the "top" metrics he prefers, they included:

• Sales and Marketing expense to revenue which tests for every dollar invested in revenue growth, how much is returned on both a new and top-line revenue basis. Davis shared a 35% - 40% S&M expense to revenue as a good benchmark for growth companies

• Cost of Growth, sometimes known as the SaaS Magic number measures the top-line revenue growth versus

Sales and Marketing investment, which has a range of .5 (poor), .75 - 1 (good), and > 1 (best)

• CLTV:CAC measures the amount of Gross Profit (or Revenue minus Cost of Goods Sold) generated against the revenue a new customer generates over the life of a customer. A CLTV:CAC ratio of 3x is good, though has been increasing over the past 2-3 years. CLTV:CAC ratio is a long-term ROI measurement

Next, we discussed the topic of "consistency of metric calculation" when using industry benchmarks. Davis highlighted that for their clients they use one standard metric calculation formula to ensure when they are benchmarking it is an apples-to-apples comparison. One specific example was if you are trying to measure the efficiency of growing new customer ARR versus existing customer growth ARR, things like a "time study" may need to be conducted to properly allocate expenses to the pursuit of each growth ARR type.

If you are a B2B SaaS company leader, the discussion with Ted and Davis provides some unique insights and perspectives that only come with the unique visibility they have across hundreds of leading B2B companies.

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Matt Wolach is the founder of Xsellus and host of the Scale your SaaS podcast. Matt is one of those guests that have taken over a year to be on the Metrics that Measure Up podcast. Matt has hosted over 250 episodes of "Scale your SaaS" and was one of the inspirations for this podcast.

The first question I asked Matt was about the common attributes that successful SaaS founders exhibited. By being a podcast host, Matt found he often learned more than he shares. However, one of the common themes of the most successful founders was the amount of time they invest in getting to know and understand their potential customers. Those discussions to dive into the mind of their potential customers was a key to success, and Matt recommends the goal should be to have about 50 of those discussions, versus the 3-5 that far too many founders conduct.

What are the top three challenges that Matt sees early-stage companies face:

1) Lead generation/Pipeline which often early-stage companies over-index on one or two channels. Matt recommends finding 4 - 5 channels that work, and then continuously optimize each channel. Matt says there are 18 ways to generate leads in a B2B Saa company, including commonly missed lead sources such as a defined lead referral process with current customers. Other missed lead sources such as influencers and affiliate programs are undervalued.

2) Ability to close qualified leads is another inconsistent competency of many early-stage companies, which is especially dangerous if significant money is being invested in Marketing and lead generation activities. Matt suggests fixing the qualified lead to Closed-Won process before investing more in additional lead generation.

3) Lead form/demo form to demo completed is surprisingly a big leak for many early-stage companies. Matt shared the story that one of his new customers did not even measure the number of people requesting to be contacted or have a demo. 

The inbound demo request-to-demo completed ratio is a critical conversion rate that far too many companies do not measure. Matt said that an average of 42% of people who request a meeting or demo actually end up having a meeting with the vendor - meaning 58% of high-intent leads are not actually being followed up with timely.

What metric does Matt like for B2B Saas companies in the $1M - $5M ARR range? Matt said the Customer Lifetime Value to Customer Acquisition Cost Ratio (CLTV:CAC Ratio) is one of his favorite metrics. Essentially with the industry standards that Matt shared a 3:1 CLTV:CAC ratio is a good goal, it means that for every dollar you invest in Sales and Marketing, $3 of gross profit is generated. The latest RevOps Squared benchmarks show that a 4:1 CLTV:CAC Ratio is the new benchmark.

If you are an early-stage B2B SaaS company, this conversation with Matt Wolach, the founder of Xsellus is a great listen.

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Eric Christopher, the founder, and CEO of Zylo is sitting on top of one of the industry's largest SaaS spend data repositories and thus benchmarks, a key reason I knew I needed to have Eric as a guest on the podcast.

What was the catalyst for founding Zylo? It started with Eric's experience as a revenue leader in two social media platform companies. Eric realized that by introducing new solutions directly to the Marketing department, it was becoming difficult for companies to manage and govern SaaS spend.

"A business idea with complexity is worth pursuing" - the words an advisor shared with Eric which was part of the motivation to founding Zylo! 

Since anyone in a company can be a buyer of a SaaS solution, coupled with the existence of thousands of vendors with very different features and pricing, buying a SaaS product is complex. Moreover, measuring the value is very difficult and often, ill-defined.

How does Eric define SaaS Spend Management? "Helping companies manage, measure and maximize value from every SaaS application purchased". 

The lifecycle of a SaaS solution starts with understanding how to receive the best price, and then how to optimize the value received. Questions to ask include, are employees using the product, are they receiving value, and how does the value compare to other solutions with similar functionality? 

Zylo uses a "value framework" that starts with understanding every application being used through a discovery process. Next, is being able to manage adoption and usage, which may be as much about maximizing value versus reducing costs. Next, identify opportunities for cost avoidance, while considering the renewal process to know the best terms based on the current utilization rates. Finally, gaining visibility into the existence and usage of every SaaS product in a company materially increases the ability to have the governance and controls in place to purchase, utilize, renew, and purchase the right products in the future.

One surprising aspect of SaaS sprawl is that many organizations do not know what SaaS solutions are being used by their employees and the associated expenses! The best SaaS Spend management programs start with the ability to conduct "discovery" to identify all the SaaS tools being used in a company....but when is it the right time to consider implementing a SaaS Spend Management solution?

Eric highlighted that when you are hitting $1M - $2M in annual SaaS spend is one milestone. Another milestone is that at 500 employees if you do not have a SaaS Spend Management program in place - alarms should be sounding. ...however, Eric shared that it is never too early to introduce a more structured SaaS purchasing, management, and governance process.

Zylo is sitting on a treasure trove of "SaaS Spend Management" data from over $30B in annual SaaS spending across industries including a few of the below :

• SaaS spend by employee has increased by 50% over the last 2 years
• SaaS spend has been increasing by over 20% per year for several years
• Total SaaS spend is underreported by 50% due to decentralized purchasing 
• The average company has over 300 "paid" SaaS subscriptions
• This increases to > 1,000 in Enterprise companies

Interestingly, the cost of the SaaS spend may not be the primary opportunity for many companies, it may be minimizing the risk of not managing and governing the flow of data outside of the company!

Several new trends in SaaS spend will be disclosed in the Zylo Benchmark report being published on April 4th, 2023!

If you are interested in the evolution of purchasing and managing SaaS spend in your company, this product with Eric is a great listen!

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In 2023 many SaaS companies are searching for what market(s) are going to drive their next phase of growth - and international markets, especially English-speaking countries are often considered by U.S. B2B SaaS companies.

Rick Pizzoli, moved to Europe over 25 years ago to launch the European presence for U.S. based software companies. Based upon that experience, Rick and Sales Force Europe has helped over 500 companies enter and/or expand their presence beyond the United States or a single country in Europe.

Rick shared that the majority of U.S. companies first start to consider entering the European market in the $5M - $10M ARR range. European companies begin to expand beyond their home country a little earlier, often in the $2M - $3M ARR range due to the more limited breadth of each country in Europe.

Understanding your positioning, messaging, value proposition, and efficiency of your "home market" customer acquisition motion as measured by metrics are critical foundational elements to planning for an entry into a new country. If a company has not captured and documented the keys to success in its home country, it will be impossible to be successful in a new country.

Another key factor to consider when entering into the European market is do you have a "lighthouse" account in a country you can build upon, and/or do you have a product that is localized for countries beyond English speaking? Rick's perspective is conducting market research to determine the "best" initial country is a better strategy than just saying let's just go to the United Kingdom, as it is the most like the US market and they speak English. At the same time, the UK market, especially in London is probably the most competitive market to enter, as so many U.S. based companies use the same "we similar" mentality.

Bringing on local talent that understands the local market, has relationships in the local market, and can translate the "messaging and positioning" that works well in the U.S. to the local European country. There are nuances of the "talent profile" that works in one country versus another, which suggests having a local team with local leadership will yield a faster return on investment than parachuting in one or two resources from the home country.

One key to success is seeding the market awareness and engagement with top-of-funnel activities beginning with a digital marketing strategy 3-6 months before having a local, on-the-ground presence. Having local Sales Development resources in place for at least 3 months before having a local Account Executive will also increase the productivity of those first 1-2 AEs. Having a local presence shows a true "commitment" to the local market and will make the majority of in-country buyers more comfortable with purchasing from a recent entrant to the local market.

Should a company start with a single or at least two resources when first entering into a new country? Two resources are always better, and could also allow for additional language skills for the second target country that is being considered in a pan-European presence. It also eliminates the "resource" vs "market" specific challenges.

If you are considering or just beginning the evaluation process to expand your U.S. or single European country B2B SaaS company into or across Europe, this conversation with Rick Pizzoli and Sales Force Europe is highly informative.

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SaaS Spend Management is an emerging and rapidly evolving category - yet Ryan Neu, Co-Founder, and CEO of Vendr has a unique vision for how the category needs to evolve.

Ryan has a background in public accounting, and then transitioned to software sales, including a role in the early days at Hubspot. During his career selling, he realized that selling great products is hard, takes too much time and the distribution is quite inefficient - thus the catalyst to founding Vendr in 2018.

Vendr was created as a new way to buy and sell software....and it is the "SELL" comment that is unique amongst SaaS Spend Management 

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If you have ever been frustrated with the forecasting process and accuracy at your company - this episode is for you!

Guy Rubin is the founder and CEO of ebsta, a leading provider of Revenue Intelligence - the next generation of forecast management.

Guy founded ebsta to automate the logging of sales rep activity directly into their Customer Relationship Management (CRM) like Salesforce and Hubspot. Over 50,000 companies have used ebsta in this environment which is when the breakthrough happened to begin scoring target buyer relationships - essentially a "relationship score".

The strength of relationships is a key factor in an opportunity's probability to convert into a new customer....and thus making the revenue forecast more accurate. More on that later in the episode.

Back to the core problem, ebsta has been solving for years - having timely and accurate account, contact, and opportunity data in their CRM. Since most of this data is captured in their email, and/or calendar. By using technology to capture every email, event, and meeting with an account or opportunity, it can be automatically imported into the CRM. Then, a company can use AI to determine the frequency of communications with an opportunity and begin to create an "opportunity score" based on the recency, frequency, and level of activities with specific opportunities.

What about including insights from "conversational intelligence" platforms? This is another signal that ebsta uses to evolve the "engagement score", but Guy highlighted that CI is only one signal that informs their platform.

Intent data is another signal that ebsta uses to inform and evolve their engagement and thus opportunity score. In a recent research report that ebsta published, one of the challenges is to determine what is the actual impact of intent data on the opportunity "win rate". In this report, ebsta was able to identify the level of influence that intent data has on win rates.

Forecast accuracy is a challenge for every company. Initially, Guy felt the "ebsta" internal forecasts were superior to those of a "bottoms-up" process that begins with the AE or front-line sales manager. Those customers still require the ability to include the sales "bottoms-up" forecast, the ebsta automated forecast is typically within a +/- 5% error of margin - which is superior to the 69% of companies that miss the forecast by +/- 10% or greater.

If you are involved in your company's "forecasting process" this conversation with Guy provides great insights and ideas to enhance your forecast accuracy!!!

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Friday, March 10th, 2023 - a moment in B2B Technology and Start-Up ecosystem history that many will never forget and hopefully provides a foundation for learning the risks and rewards of venture-backed, early-stage entrepreneurship.

Todd Gardner founded SaaS Capital in 2007, the industry's first "recurring revenue credit facility". Before names like Salesforce, Workday, and Snowflake were well-known names, Todd experienced the financial crisis of 2008 and experienced firsthand the impact of a systemic banking issue including the meltdown of his financial partners.

Our goal for this episode of the podcast is to provide practical insights and advice that SaaS founders, CEOs, and CFOs can apply to decrease the risks associated with their financial related decisions and banking decisions.

We started with the basic, summary facts surrounding the collapse of Silicon Valley Bank (SVB):

December 31, 2022, SVB financial disclosure:

 - $209 B in total assets

- $175.4B in total deposits

March 8th: SVB disclosed a $1.8B loss on the fire sale of $21B in long-term assets

March 8th - 10th: ~ $42B in deposit withdraws were made by SVB customers

Friday, March 10th: SVB was declared insolvent and closed by U.S regulators

Sunday, March 12th: U.S. government including the FDIC, US Treasury, and Federal Reserve announced that all deposits (100%) would be backstopped - made good because SVB had more than enough assets to cover the outstanding liabilities, primarily customer deposits. Essentially the US government is managing the risk which is primarily a "time-based" issue versus a balance sheet issue.

Todd next provided an industry backdrop that lead to the run on SVB. Due to the accelerated ramp of venture capital investing in 2020 - 2021, the deposits on hand at SVB doubles. As standard bank operating practice, SVB invested a significant portion of those deposits in long-term bonds and treasuries, which had a low return due to the low-interest rates of the moment.

During the second half of 2022, interest rates began to increase dramatically, and the result was that the value of the long-term bonds decreased in value. Simultaneously many customers were moving their deposits at SVB into higher interest-rate instruments outside of SVB - forcing SVB to sell some long-term assets to support the decrease in deposits.

Due to the above macroeconomic interest rate dynamics, coupled with the short-term issues created by a handful of Venture Capital firms quietly recommending their portfolio companies move their deposits out of SVB.

We next discussed the "financial ecosystem" that has been the foundation that fueled the amazing growth of the technology industry which includes:

 - Over half of the technology start-ups banked with SVB

 - Over half of Venture Capital firms in technology banked with SVB for Capital Call - Line of Credit

Having the primary source of assets and liabilities from the same industry ultimately becomes a material issue for SVB.

The above is a backdrop to the insights and advice that Todd shared for how this experience can inform future financial and banking decisions by SaaS founders, CEOs, and CFOs which include:

#1: Diversify banking relationships including checking, savings, and credit facilities    

      - have at least 2 banks and/or treasury based money-market account

#2: Understand the banking relationships that your payables and payroll firms use

#3. Maintain fiscal discipline throughout the start-up journey to change the narrative from "cash runway" to ongoing operating profit as early as possible

If you are interested in learning more about the Silicon Valley Bank collapse and what it means to the financial strategy of SaaS CEOs and CFOs going forward, this conversation with Todd is a great listen.

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