Attention Sales Reps: AI is Coming For Your Job

There’s one thing I think it’s really important for sales reps to understand:

AI is coming for your job.

You can laugh, and say ChatGPT is never going to replace an enterprise AE.

But that’s less the point.

AI has already come for post-sales and the contact center. We’re already getting to a point where every contact center wants to automate 50%+ of interactions with AI and automation. That’s radical change, in just 18 months really. From 0%-10% to 50% as the goal.

And that means 50% less humans.

Next up is sales. Yes, here it’s only just begun. Adding AI to existing sales tools doesn’t replace humans.

But it’s going to be the goal. A lot of energy and money will be putting into cutting down the number of human reps, and automating more.

Will it all work? Maybe not. But maybe more at the low end than we think.

So Jamin Ball of Altimeter had a great summary of public company NRR here.

On the one hand, NRR has fallen every quarter since Q4’22, and is now materially lower than Q1’20 (pre-Covid). That’s not great.

On the other hand, it’s still over 110% across the board.

That means at a higher level, the engine of 100%+ NRR for almost all public SaaS companies is still working.  Even 110% NRR is magical.  It’s just not quite as magical as 120%.

You can see it for example in Snowflake’s latest numbers. NRR there has fallen from jaw-dropping (170%) to merely epic (130%).

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This is the scenario when the trade-off is the most acute.

Imagine you are selling a $100,000+ product and you yourself as CEO/founders have limited knowledge selling to the customer base. You’ll be very tempted to hire someone with a seemingly magical rolodex.

What doesn’t work for sure is hiring someone with (x) no domain expertise who also (y) has also only sold small (e.g, $10k) deals.

That’s a Double No.

But as the deals get bigger, the value of domain expertise in the early part of a reps tenure does go up.

Because reps with a lot of industry experience in bigger deals don’t always quite have the rolodex they claim — but they often can bring you at least 1 or 2 strong leads.

At $1k a year, so what? But at $250k a year, those two ringers can more than justify the hire.

• So my vote is to try both in the early days, if the ACV is large. Hire the best AE you can find with deep industry experience and see if she can quickly bring in 1–2 strong, qualified opportunities from her network. Even if she isn’t great for your company at this stage … those 1–2 deals may be.
• And also hire the best AE you can find just with general experience at your price point. You’ll end up hiring a “better” rep here because you won’t cut her or him slack for the domain expertise.

See who does better. Maybe both perform.

It’s a real issue that isn’t discussed enough. And while it mainly impacts ex-employees, it also impacts angel and seed investors who are often blocked from selling as well. Personally, I’ve lost here.

Ok but you asked Why. Why do scale-ups and startups do this? Why do they block folks from selling shares, when someone wants to buy them, seemingly fair and square?

#1. Controlling the Ball / Captable

This is the part folks won’t like, but it’s the truth. No CEO, CFO, etc. wants a loose cap table full of folks they don’t know. Employees and investors, you know. Random transfers offshore (which is common)? It’s rarely an upgrade. You get folks demanding information, meetings with management, and more. Keeping the cap table as tight as practical does not benefit some folks on it — but it does make a startup easier to run. Often, much easier. This is a real issue.

#2. Costs — Hard and Soft

It can cost $5k-$10k to process a transfer. The transferor doesn’t care, but the transferee often does, and until you have a true process and systems here, typically Silicon Valley law firms can charge $5k, $10k, even $20k or more sometimes. Multple transfers really add up. Also the soft costs are real. The transferee often constantly ask for more information from the company, want to make changes to the docs, etc.

#3. Unfair to Current Employees

OK this one is subtle and it takes a while to see it in practice, but often the secondary markets are very thin. The net effect is that ex-employees are able to sell in random 1 off deals, but current employees working their arses off aren’t. This truly is common. CEOs and board members may not see this as fair, and it often doesn’t feel fair to current folks.

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The ideal flow is:

• You (founder-CEO) close the first batch of customers, say the first 10 or 20. If you don’t, you’ll never really know how it’s done. Or be able to help anyone else, really.
• Then, once you know how to do it yourself, you hire 2 sales reps. Not just 1, or you won’t know why they do well, or don’t. You need to run an A/B test. More on that here: When You Hire Your First Sales Rep — Just Make Sure You Hire Two | SaaStr
• After you have 2 reps hitting quota, you hire a head of sales. This is generally after $1m-$2m in ARR. Because then their #1 job is hiring reps 3–300, and getting them to hit quota. But if your hire the VP of Sales before that, you are asking them to figure out product-market fit. Not to accelerate an engine that’s working, albeit at a very small scale.

Sometimes, you can get away with hiring a great head of sales as your first sales hire — especially if you have a freemium product that already has revenue going. Or if the CEO has gotten the company pretty far (say that same $1m-$2m ARR).

But 99% of heads of sales will do better if there are already a few reps proving it can be done. Then, their job is to do it better, again and again. And again.  Not figuring it out from scratch.   That’s not their job.

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