B2B Sales SaaS: Moving Past the Standalone CRM
Business automation software is no longer seen solely as a tool to cut costs, but also to drive increases in revenue. Targeting sales processes for automation is a natural place for organizations to drive increased productivity from revenue-driving headcount. B2B Sales SaaS products enable Sales organizations to more rapidly transform their digital operations, moving from a headcount-driven model to a more scalable digitally-enabled one.
Mid-market and Enterprise companies spend $3k-$5k per year per rep on Sales technologies. More companies than ever are looking to technology to supplement and replace sales headcount, with 66% of companies spending more than $150 per month per salesperson in 2019 (up from only 34% in 2017). And more than 50% of this spend is on products other than CRM. With 13 million sales reps in the US alone, that means that there is a $35 billion opportunity in non-CRM Sales SaaS.
Sales SaaS typically cost from $15 per user per month to $100+ per user per month. For sales teams with over 100 employees, fairly typical for mid-market firms, average ACV ranges for Sales SaaS are typically healthy ($20k to $100k+).
Why else do I like Sales SaaS for investment? There are multiple potential decision makers (Sales leaders, Sales/Revenue Operations leaders, Sales Enablement leaders) involved in buying B2B Sales SaaS, meaning that startups in this space have multiple angles to sell the product. And purchases can be easily justified by potential customers because there are revenue-driving headcount attached to Sales SaaS products. It is easier to communicate a measurable return on investment (ROI) when championing the product internally.
Why are firms spending so much on Sales technologies?
Simple. Salespeople make money for their firm when they are talking to potential customers. But sales reps only spend 1/3 of their time selling (Salesforce State of Sales, 2019), meaning their bandwidth for revenue-driving activity is limited by anything else they are asked to do throughout the day. Examples of these activities include researching companies, finding contacts at those companies, preparing quotes and proposals, and seeking contract approvals. It’s one of the reasons Sales Operations and Revenue Operations teams are in vogue.
But does it have to be this way? According to McKinsey, 30% of sales tasks can be automated, though only 26% of these tasks have been automated to date. Change is coming. 84% of Sales Ops professionals report that digital transformation has accelerated during COVID (Salesforce State of Sales, 2021). Despite a seemingly crowded competitive landscape in Sales SaaS, there are still untapped ways to make sales teams more efficient.
The Market: Crowded, but Compelling
There is a lot of VC money in Sales SaaS technologies. VCs invested $5.5 billion in Sales SaaS in 2021. Despite the concentration of VC money, there is a wide variety of tools in the space across which to spread this investment:
- There are technologies to help Sales Development Reps, SDRs, who qualify leads, to make phone calls, manage their outreach cadences (Sales Engagement, Chatbots), and research prospects (Prospecting Data Enrichment).
- There are tools specifically for Account Executives, AEs, who sell deals, to help them forecast their opportunities (Forecasting) and map out the stakeholders in the buying decision (Account Planning).
- There are tools to help with helping with training sales teams, from Content and Learning Management Systems, to live-coaching based on Conversational Intelligence.
- There are tools used by Sales Operations teams for planning and operational needs.
- There are tools for Sales-related roles, such as Presales Engineers or Customer Success Managers.
See below for a more detailed breakdown of top players and the total amounts invested across 8 of the top Sales SaaS technologies:
These product categories have had different levels of investments and exits, so I’ve graphed them below to summarize the maturity of each technology:
Exit Strategies
IPO and acquisition have both shown to be viable exit strategies in the past.
- Data enrichment tool ZoomInfo’s IPO was valued at $8.2 billion
- CRM Freshworks IPOed last year at a valuation of $10.1 billion
- Investment firm Vista Equity has spent over $5 billion acquiring Sales SaaS over the past 5 years(Salesloft, Drift, Pipedrive, Xactly)
Of course, standalone Sales SaaS companies do not exist in a vacuum. Sales SaaS products often integrate with CRM partners, who can develop competing functionality within their CRM product directly. These larger CRM partners also serve as potential acquirers for Sales SaaS. Adopting a strategy of “just sell to Salesforce” is also a valid exit strategy.
- CRM giant Salesforce has spent over $62 billion acquiring 69 companies since 2006
How to Invest (An Operator’s Take)
So, what’s the best way to take advantage of the opportunity in Sales SaaS?
I’ve put together a simple checklist, based off my experience managing 10+ Sales SaaS products and evaluating dozens more.
1. You need to be able to sell the product
2. Your product needs to be differentiated in a competitive market
3. High ACV: This company can be a winner with low market share in their specific segment
I go into more detail in the table below.
Sales SaaS products should be solve a real pain and be easy to use. But this is a B2B buying decision. Invest in products with easy-to-explain and credible ROI claims.
Investors in early stage Sales SaaS should avoid saturated product categories. Later-stage VC-backed competitors will be hard to overcome, especially if they’ve already scaled their team. And look for real differentiation in the products you invest in. Don’t be one of 3 identical products!
And finally, investors should understand that B2B SaaS is rarely a winner-take-all market. Even Salesforce only has a 20% market share. Investors should look for companies that will command high ACV contracts, so that success can be had without high share.
Key Takeaways
- B2B Sales SaaS is a $35 billion market
- More companies are spending on Sales SaaS than ever before, because…
- …Salespeople spend 2/3 of their time not selling…
- …but despite this, 74% of automatable Sales tasks are still manual
- Sales SaaS products drives measurable ROI for potential B2B customers
- Heavy VC investment in Sales SaaS
- It’s a segmented market with opportunities for new technologies
- Coopetition with CRM partners
- High ACV
- IPO and Acquisition are both viable exit strategies
- Invest like an operator
Despite a competitive VC landscape, B2B Sales SaaS offers a host of opportunity for investment for VCs. The 300,000 Mid-market and 40,000 Enterprise firms across the US employ millions of salespeople, and they want to make them more efficient. By focusing on the pain points experienced by modern sales team, clever founders and investors can still find new opportunities in the space. I plan to share some companies I like for investment in the coming weeks. Stay tuned!
