TRANSCRIPT

Dan Darcy – Qualified
Thank you all for joining us today where Dave Kellogg and I are gonna be discussing how go to market leaders can really unlock additional AI budget. Now for all of you who don't know Dave, Dave is an exec in residence for Baldrige and Capital, and he's a former SaaS executive and and someone I've met through when he was at Salesforce for many years. Dave is also involved in consulting for companies who are looking at AISDRs, and I'm pumped to hear how, Dave, you're advising them on securing budgets. So, Dave, thank you for joining us today.

Dave Kellogg – Balderton Capital
Yeah. Thanks for having me, Dan. It's great to be here.

Dan Darcy – Qualified
So since we're just running this off, like, since we're running a budget focused session today, let's just start and give folks a little framework. What are some of the differences between how CROs, CMOs, and CFOs really think about the budget?

Dave Kellogg – Balderton Capital
That's a great great question, Dan, because it all starts there. You know, sellers and CROs, they tend to think about sales capacity. They're always worried about how much sales capacity I do I have, how much quota can I carry, And, you know, twelve and the twelve sellers means six SEs, four SDRs, and two managers? Right?

So it's very it may be one alliance this person. So it's kind of ratio driven headcount based budgeting. Marketers think of things differently. Marketers tend to think of budgets in buckets.

A very common bucketing is people, programs, infrastructure. Right? And they might shoot for forty forty twenty or more commonly forty five forty five ten in terms of percentages across those buckets.

CFOs think about it yet again differently. They they think of expense categories like operating expense and CapEx like investment, but they keep a really close eye on headcount, for two reasons. One, that to fight empire building, something they're always worried about. And second, it's kind of a gross productivity measure because many investors look at metrics productivity metrics like ARR per head. So so there's really three different ways to look at that.

Dan Darcy – Qualified
I mean, obviously, it's no surprise that different execs really think about how to approach that problem differently.

And and that's why I mean, so why does all the trouble start there? Like, how how does thinking that making things difficult for people like, how does that make it difficult for people who are running SDR programs?

Dave Kellogg – Balderton Capital
Sure. The the best example of this is actually is in the past, which is it used to be really hard to start an SDR program because you were fighting the CFO. Right? Because the CFO doesn't wanna see headcount go up.

They don't wanna see a lot of people at low salary get hired. Right? They'd see SAP turnover would go up. Right?

SDR is a high turnover position. So so in general, on the metrics the CFO cared about, SDR has made everything, like, worse. Right? Except, of course, for opportunity generation, which is super important.

Right? So that historically was an example. But today, it means we're gonna break established ways of thinking. Like, many companies wrestle with filling in the blank here.

SDRs are an extension of blank. Sales or marketing. Right? And if you move them from one to the other as many people do, it's gonna throw off historical ratios.

Or, you know, if SDRs are in marketing, which of the three buckets are they? Are they people? Are they programs if you outsource it? Or are they infrastructure?

Or is the software to drive it infrastructure? Well, what bucket do I put it in? And how does that throw off historical comparisons?

Right? And breaking these established trends and ratios, right, but this doesn't compare to last year is hard because CFOs just like to look at the trends. So you're kind of starting in a hole if you move something around.

So the last thing that makes this tricky is that AI SDRs generally substitute people expense for infrastructure expense. Right? So they reduce people and increase infrastructure. So if you were to, for example, hold your SDR team at four instead of growing it to eight next year, well, the good news is no one's gonna accuse you of empire building.

The other good news is you've freed up four hundred k. Right? So it's four heads at eighty k each, call the hundred k fully loaded. So there's four hundred k that you won't be spending.

Right? So so that's kind of your investment ceiling for an AISDR. And say your AISDR cost two hundred k, well, you could get accused of being toy happy because they, look at that CMO putting all that money into infrastructure and software. They love their MarTech boy.

Right? And people are gonna come hit you with that, and they may say, well, why aren't you spending more money in demand gen generating programs? Yeah. Yeah.

Of course, SDRs are really the last mile of demand gen.

Dan Darcy – Qualified
Yeah. Totally. And so you're just saying I mean, you're you're saying that justifying an AISDR is just really hard because you're upsetting the the budgeting Apple card and getting all those folks aligned.

Dave Kellogg – Balderton Capital
Exactly right. Because they each have their way of looking at it, and you're gonna upset it. And you're gonna break historical comparisons. And, look, if you're not in corporate finance, if you're not into corporate finance, this may all seem crazy because you're like, hey.

Just cash comes in and cash goes out. But that's just not the way it works. Right? If you're gonna learn to play the game, you need to learn to play it right.

Right? We need to learn how to play the budgeting game. And the budgeting game cares about headcount, which in this case is good because headcount will be staying flat or going down. So that's easier.

It's harder to make headcount go up. The budgeting game cares about ratios and trends. In this case, infrastructure is gonna go up. Right?

Not programs, and people wanna see programs go up. And it cares about ROI.

Dan Darcy – Qualified
So you just I mean, so ROI. Obviously so we've talked about, obviously, the headcount, the ratios, and trends, but we've yet to talk about ROI. Tell me a little bit more about that.

Dave Kellogg – Balderton Capital
So so first, as you may know, I lived in France for five years. So as I can say, ROI was king. Right?

The French word. So ROI is king. Everyone cares about ROI.

And the issue is I don't actually think ROI is the right place to start.

You can build a three year ROI model, and I'm sure vendors like you guys help people do that. And and you look at the cost you're taking out, and you look at the cost of the software, and you get direct costs and indirect costs, and kind of any MBA or financial planning analysis person can help you build one of those models.

But but I actually prefer not to start there. I like to build that model and then keep it in my back pocket. I like to start by just looking at the impact on the plan.

Dave Kellogg – Balderton Capital
For example, say last year, we generated four hundred opportunities with a demand gen budget, I'm gonna say inclusive of SDRs, of one point six million dollars. Mhmm. And we had a twenty percent off duty close rate and a fifty k ASP.

And that means that we generated opties of a cost per optie of four thousand dollars each and a pipe to spend ratio of one we used to Salesforce as you will recall, of of twelve point five. Right? I like to say, look, if you let me buy this AISDR, sure, we can show you the IROI model the ROI model, but if you let us make this investment, me as CMO, here's what I'm gonna sign up for for next year. I'm gonna generate six hundred optees at two point two five million in demand gen budget. And thanks to some other tweaks in opti to close and ASP, I believe we're gonna end up with a cost per opportunity, more than I believe we're gonna end up with, I am willing to sign up for a cost per opportunity of thirty seven fifty and a pipe to spend of sixteen.

And that's really what I call kind of the punchline approach. That's the punchline. If you let me spend this money, here's what I'm gonna do for you next year, and it's gonna be more efficient than we were last year.

Dan Darcy – Qualified
So, I mean, I mean, tell me a little bit more around, you know, why you like this approach more than the the traditional, like, ROI model. Sure.

Dave Kellogg – Balderton Capital
Because I think you're kinda giving the audience what they wanna hear. You know? Yeah. Most budgeting sessions, they're built ultimately for kind of the CEO, the CFO, and the board.

Right? In the end, the board needs to approve the budget. So everything wants to be pretty high level. And ROI model is kinda low level.

Right? It's it's it's detailed. It's good to have it. Right? You have to do your homework.

You need to have it in your pocket. But when you're talking in a budget review meeting, the CFO and CEO, they just they want the punchline. Right? It it just you know, I ran a planning company for six years, and I helped a lot of people with financial plans.

And Yeah. Want the punchline. What does this mean for the business? And the answer simple.

Last year, we generated four hundred optis at a cost per opti of four k. Next year, with this tool, I'm gonna sign up for six hundred optis at three point seven five k. That's the impact on the business.

Dan Darcy – Qualified
Yeah. Yeah. I mean, I like, it's it's obviously calming because I think we're all used to as you called it out, used to just showing the ROI model approach because that's just something that we're used to. And, of course, the ROI model is gonna work out that it's like, hey.

You should buy it. Right? So getting to the punchline is is is really the right approach. So so after we present that punchline approach to the customer and they do like what they see, what happens then?

Dave Kellogg – Balderton Capital
Yeah. So if it works, if you kinda close the sale on on the, on the argument by saying, hey. Wait a minute. They can sign up to generate more optis at three point seven five k instead of four k?

I'm interested in that. If they believe you, they immediately switch to risk mode. It's just like a sales cycle. Like, when somebody buys a house, they're really excited about the house, and then when they get serious, they get nervous.

Right? Like, what about termites? What about flood zone? What about plumbing? Right? And you'll know you're winning the argument for the budget because they're gonna flip and say, how do you know this is gonna work?

It's it's gonna be, how are you sure we should do it? What do you still need to sign up for? Is there a ROI? And then when they bite, it's how do you know this is gonna work?

So because they're in risk mode. They just flipped like a home buyer. And and that's when you need to talk about the diligence, the other homework you've done, the customer references you've talked to who are doing the same ideally, the same thing in the same industry at the same scale. Right?

They're solving the same problem you're gonna solve. The vendor reputation, what's the pedigree, where do they come from, how big are they, who's their investors, what's their technology, and then project plan. Right? These are all about risk.

Right? One is, does this vendor know how to solve this problem? Have they done it before? References.

Number two, is this vendor someone you we should work with? Right? Reputation, pedigree, investors, tech.

Number three, is this project gonna work? Right? It might be maybe they could solve this problem. Maybe it's a great vendor.

But what about me? Do we have a project plan in place to make this thing successful? Who are the consultants who are gonna work on deploying this at my company?

Dan Darcy – Qualified
So because when somebody flips to risk, you wanna come back with basically, there's no better answer than we are in the middle of the fairway for this vendor strategy.

They do this all day long. We're not trying to push the envelope on scale. We're not trying to push right nothing makes a conservative CFO happier than knowing, oh, they've done this before. We've done our homework not only in the ROI model, but we've checked references.

The vendor seems reputable, and we've got a plan with kind of credible consultants in place to make sure this thing is successful.

Dan Darcy – Qualified
I mean, you gotta I'm sure sales folks love when they hear those buying signals of asking for that, and I love how you called it out where they switch to risk. The profile switches to risk and and and understanding all those buying signals. So, obviously, let's let's fast forward. I know we've unlocked the budget a little bit here.

You know? Then next is obviously the success plan. You know? What are you seeing out there in terms of the preferred deployment model of AISRs these days as the for the companies that you're consulting with?

Because I'm I'm curious. You know? It's like, if they're switching to risk at that point, you know, in the in the previous question, you know, like, then they're obviously thinking about, okay. Well, how do I deploy these AISDRs?

How are you looking at it?

Dave Kellogg – Balderton Capital
So people are actually the the one companies I'm working with are pretty aggressive.

Probably more so than I'd be. I'm a fairly conservative guy.

But but the people I've done have kinda gone both feet in.

You know, you could, in theory, do a regional experiment, like, do east only or North America only or a vertical experiment. Let's try it in this industry. I've not seen people do that, but those are classic containment or kind of risk mitigation strategies, limit the scope. Let's try this thing, but not everywhere.

Another thing people do is the old inbound outbound split. Right? And they say, okay. Let let's get rid of our inbound team and or preferably move the inbound SDRs to outbound, and let's give all the inbound to the AISDR.

That seems to be almost the default strategy, and and what we're trying to do is push the higher value added work up the ladder to units, leading the low leaving the lower value added work to AI.

Dave Kellogg – Balderton Capital
I like that model, but I like to put a twist on it, which is in my preferred model. We send basically high value inbound. So either ABM accounts, account based marketing accounts, and or strategic target accounts, right, with good titles. So, like, directors and VPs at target two hundred accounts all go directly to the sales rep, as they should anyway. Right? You you would bypass a human SDR just like you'd bypass an AI SDR in that case.

So once you kind of skim off the stuff you really wanna hand directly to sales, which creates a bigger porting bur burden, right, to make sure they're following up on it, which is the the downside of humans.

AI is better at making sure stuff happens on the process than humans are. Everything else goes to the AISDR.

You can almost think of it as an AI driven nurture for non strategic accounts or for non strategic contacts at strategic accounts. I like that model. I think it's the right balance for today.

Dan Darcy – Qualified
Well, hey, Dave. I think we're coming to the end here. Any last nuggets of wisdom that you wanna share with our audience on unlocking budget for ASDRs overall?

Dave Kellogg – Balderton Capital
You know, the only thing we didn't cover was was the the low hanging fruit of, hey. Make sure if there is top down AI budget, go grab it.

Dan Darcy – Qualified
Yeah. True. It has to go without seeing I mean, that's usually that's usually the easy one. It's like, I've got money to spend, so here you are.

Dave Kellogg – Balderton Capital
Yeah. Don't forget it. The look. I know boards are putting pressure on CEOs. We're putting pressures on c level c level execs to go adopt AI tools.

So if that money's there, go grab some. Other than that, we gotta do this the old fashioned way, which is gonna be the combination of a detailed ROI model, which I argue you keep in your pocket through the process. Only when you need it do you pull it out.

And the way you pitch this is by looking at the overall impact on the plan that you're committing to and just saying, if you let us buy this tool, we commit to deliver this many optis at this much cost. And once you do that, you know you'll have the audience if they start asking you risk questions.

Dan Darcy – Qualified
I love it. Well, hey, Dave. I mean, that's all we have time for today. I mean, if you wanna hear more from Dave, please follow his blog at Kellblog, k e l l b l o g, dot com, or just follow Dave Kellogg on LinkedIn. But, Dave, thank you so much again for joining me and for an awesome discussion around budgeting for AISDRs.

Dave Kellogg – Balderton Capital
Thanks so much for having me, Dan. Alright. Take care.