00:00 - Ray Rike

OK. Welcome to the next session here at SaaS Metrics Palooza. And I have a returning speaker here, Alka Tandan, who's the Chief Financial Officer at Gainsight. Welcome, Alka.

00:15 - Alka Tandan

Thank you. It's so good to see you, and it's just so good to be back.

00:20 - Ray Rike

So we have 30 minutes here, sitting on our respective couches here in this virtual fireside chat. So we're having a real challenging time in 2023. So why don't we kind of start with Gainsight. You're really the leader in customer success. You've made a few strategic moves to expand your product portfolio. But just kind of summarize your own experiences and any things that you've kind of done to try to address the reality of the external markets.

00:51 - Alka Tandan

Yeah, so I'll start a little bit with just Gainsight and my role here. So I've been at Gainsight for about a little over four years now, and it's been quite a ride. Just have the biggest respect for Nick, our CEO. I'm his biggest fan, as you know very well as well. And was just really attracted to the company and its mission of really supporting customers and companies supporting their customers through sort of the life journey. And of course, leader in the market, we have by far the largest market share. And also just really, really was taken by the company's sort of values and the leadership of human first leadership that sort of Nick has served champion across the industry. And so for me, just kind of on all fronts, it was just it was such a great fit. And it's been quite a ride. I actually started here as head of FP&A and had been CFO for about a little bit like about a year and a half now. And it's been quite a year and a half. As you said, I served about three months and is when sort of the market started turning. And it's been a little bit of a bumpy ride since. So I think we are probably in line with a lot of other SaaS companies. We were fast growing in the last couple of years and sort of enjoying that ride. And that's kind of where the markets were also sort of, but they were kind of asking of their investments as well. And so things have changed a little bit, as we all know in the last year and a half, when we look at valuations in particular, what we see our investors are really asking for a more balanced approach to their, particularly their P&L. Growth is still important, but profitability is important as well. And so we've also taken some actions and gotten a lot more conscious with particular expenses. So we still focus on growth and we'll talk more about that, but it's a lot more selective. It's a lot less, I would say experimentation. And we've gotten really, particularly in my role, we've gotten really particular about how we're spending our dollars, being a lot more careful about ROI as well. And I would say, now of course this is coming from my perspective, but I would say some of the actions have not been such a bad thing. We've just got re-disciplined even more. We already have that discipline where we were actually sold to Vista like December 2020. And so they were great at bringing a lot of that discipline, but I think we just even hunker down a little bit more. And I think a lot of people would say that. And so in that way, I think some of the efficiency gains out of it have been kind of a good thing.

03:51 - Ray Rike

Well, let's talk a little bit more about that because we were talking while we were prepping for this session a little bit about how balanced growth is getting treated with a premium from the public markets, where kind of double digit free cashflow, like 10 to 20% is kind of the sweet spot, but we still kind of like to see that 25 to 30% and above growth. Have you actually been able to make progress on your profitability, even in these more challenging times?

04:18 - Alka Tandan

We have. I like to say we had a little bit of a jumpstart because we partnered with Vista back in December 2020. And so we were, we'll be about three, yeah, we'll be three years this December. So we had already been on this efficiency path. We were already looking at different ways of like, how we could serve strategically, change in more of the business. So things like move more to India, for example, we've got a great center of excellence at India that's done very well for us. Move to a one seller model where, you know, where our sellers were before, where they were sort of focused on specific products, move them to sort of where they're selling all the products and, you know, the platform. So we had all these like levers that we were planning on. And I think what the economy did was basically we just pulled those levers a lot faster and moved on them a lot more quickly. So, you know, because of that, and because we also just took some really early action just on expenses. So we started reducing travel. We started slowing down headcount, you know, I would say way back in September, 2022. We've actually gone from an unprofitable company to this year to being profitable, which is amazing. Makes our investors happy, but you know, it makes all of us happy because it sort of helps with the evaluation. And it also just makes us, I think, just more secure as a company that we're actually making money. So I think there's a psychological security there also, even when I'm sort of talking to employees. So it's been a great financial story for us, despite, you know, what's kind of going on in the markets.

06:01 - Ray Rike

Yeah. A lot of people look at Salesforce when the activist investors came in, they really looked at sales and marketing expenses as a percent of revenue. And there was an amazing what Mark and the team did there. So do you being part of a private equity kind of portfolio, are those benchmarks that are important to you looking at what my percent of revenue is for G&A or R&D and sales and marketing? And how do you think that'll trend next year? Are you looking to keep it level? We try to pull back more. What's your vision for how you're gonna plan next year using that one?

06:32 - Alka Tandan

Yeah, no, we absolutely look at them. And so, you know, we have the benefit of, you know, Vista has about 90 companies, you know, going on 100. So we get regular benchmarking data from them. And, you know, of course, you know, we analyze the data to make sure that it fits. So, you know, our revenue size and, you know, our profitability size and where we are in the life cycle, or they even have data like in the life cycle of this stuff. You know, if you're in year two and three, you know, you know, kind of where are you at and where are you progressing? So, and, but we don't stop there. You know, we also sort of look at our public company comps as well. And we look at sort of we benchmark against those. So I, you know, when you have, I'm a big fan of looking at various sets of data because usually sort of a picture sort of emerges from there. So, you know, yeah, I wouldn't say, you know, sales and marketing, like, I mean, I'd love to hear what you have to say, but I think the best companies are, you know, 20%. But, you know, when you're private, you could probably go a little bit sort of higher as well. I think for us, as we go next year, we are sort of focused on like, can we get to sort of that 20%, that 20% and, but we are allowing ourselves a little bit. So that's like for where we are sort of currently. If we can increase our percentage of growth, we might allow for a little bit more expansion there. But, you know, I'm sort of, especially my role, I'm sort of like looking for like, well, what's the plan to get us like the higher growth first? And then sure, then we might be able to expand. That might make sense. Cause the investors still want growth, even though that they prefer profitability as well. So, yeah.

08:13 - Ray Rike

And it's the balanced approach, right? They still want to see that 25 to 30%. Well, let's talk about metrics. Cause one of the themes I've seen in 2023 is, can I get more out of our existing customers from an expansion perspective? Cause there's some efficiency, growth efficiency there, but sometimes it requires product extension or expansion, even strategic acquisition. Is that kind of part of your strategy for growth is more expansion from your existing customer base?

08:45 - Alka Tandan

Well, first of all, this is a topic that we love because this is what our product helps, you know, customers sort of do. So, you know, part, big part of the customer success mission is not only to keep your customers, but also to sort of grow them. And I think that's exactly what we saw when we went into this market, is that everyone, it was sort of new bookings and new sales were slowing. So everyone turned to serve their customers. And, you know, it's always a little, it's always a little kind of, you know, funny because, well, you know, we should have always been focused on that, right? Cause it is the most efficient way to grow the business. But I think it did get a little bit, didn't get lost. It was always there, but there was a re-emphasis on it. So it was great news for us and just sort of, you know, our product and sort of our industry. And then in addition, we also have the same sort of mandate, you know? And so, like I talked about, one of the things that we did strategically was move to sort of a one set seller model. We had one product maybe like five years ago. And since then we've grown to four products. We actually recently just did an acquisition just back in July, a customer education product. So it was time for us to move to a place where we were sort of a one seller, where every seller knew every single product. We also did that in the customer success side so that, you know, the CS team, every CSM knows every product too, just so they know the customer better and they can be better strategic partners that way. And instead of just kind of, instead of, you know, handing them off to somebody else. So this is a more seamless experience for the customer, both on sales as well as the CSM side. And so that is absolutely like something that like we've been focused on internally as well, increasing and, you know, makes the customer more sticky. There's also the whole messaging around vendor consolidation that, you know, we, it's a big, big theme right now too, where everyone, including us, you know, are trying to go to fewer vendors. And so, yes, Gainsight is sort of, you know, customer success company, but really what we're trying to do is try to basically own the post-sales journey. And there's really no other customer that, our company that's really doing that. So we've got our customer success product, we've got a product experience product that we bought a couple of years ago. We've just, I mentioned the customer education product and about two years ago, we bought a community product as well. So, and I anticipate that we'll sort of continue to grow in that way as well.

11:23 - Ray Rike

So we are at SaaS Metrics Palooza, so I'm going to try to double click on a couple more metrics. Yeah. That total ARR growth, the split between new logo and existing customer expansion, have you seen that increase fairly maturely this year based upon those strategic moves you made? And is that a goal you use for 24?

11:45 - Alka Tandan

Yeah. Seeing particularly like a process, so it's, you know, increase. Now, the thing about this year though, is that everyone's also sort of slashing budget. So, you know, some of it has been bad and been balanced and we're also, you know, seed based. So, you know, we have seen sort of the opposite effect also in general that, you know, that there has been some sort of downsell as well. Luckily, you know, versus some of my other very esteemed companies, people haven't really reduced, you know, CS teams. I mean, because it's been such an emphasis. So we, in net net, it's been a positive for us. So I would say, you know, as we break ARR down, you know, our churn, you know, we've actually held pretty strong in our overall GRR, you know, upsell slash cross sell, particularly as we've expanded products has been really good for us. And then yes, there has been some sort of downsell just in, you know, in terms of some people need to slash budgets. And so, you know, we of course work with them, work with companies and try to find the best solutions for them, you know, where they are right now.

12:58 - Ray Rike

So everyone talks about net revenue recession, right? Because it's GRR plus your expansion. Is that a top kind of guiding metric for you at Gainsight? Is NRR something that everyone knows where your goals are and kind of align their own objectives to that?

13:15 - Alka Tandan

You know, it's always interesting because I feel like depending upon the year, we sort of go back and forth between GRR and NRR. For me, I want to see both, you know, I mean, I like to sort of see both, but I think, yes, I think NRR ties pretty specifically to our just, you know, our company goals and is a more accurate picture of like, you know, those sort of like how we're doing. So it is one I would say, we call them sort of North Star metrics. We probably have, you know, a couple, and I would call that one of the North Star metrics. It's also a great metric because it ties in so many different teams and frankly, so many different execs to just all sort of like, you know, align together. So I think there's something about the organizational behavior piece as well. But yeah, I think we're all, you know, I think that is a metric across the board that has been a little bit difficult for everybody this year. But yes, we track it nonetheless, you know. And again, depending upon, you know, there are, of course, there are certain companies that have, you know, that are based on total employee count. You know, for us, it's just a team account, but those that are based on total employee count have had a little bit of a tough time, particularly in the sort of NRR. We haven't, we've stayed steady, I'll say that. We've stayed steady.

14:38 - Ray Rike

Well, you brought up employee count, even though you were talking about that from a pricing revenue side. One of the themes I've seen this year in private and public companies is an increased focus on ARR per FTE. Is that something that you and your board of directors and investors are really focusing on? And do you think that'll continue to even get more priority in 2024?

15:01 - Alka Tandan

Absolutely focused on it, you know. And definitely our investors have mentioned it as well. And so we're just going into our planning process. So it's something that I want, I definitely want to look at, you know, as a whole. But, and as well as, you know, to go into actually each of the, you know, expense categories as well, you know, for sales and for like GNA. We're also a little bit, you know, well, like many companies, we've got center of excellence is outside of the US. So we've got about, you know, 800 people in India, for example. So I would just, I would, you know, have everyone sort of think about as they're calculating that metrics, that's the way we do it. We do do it in total, but we also sort of take a look at, okay, what do we think, you know, a certain FTE in terms of like utilization is in a sense of excellence versus a US employee. And because, you know, we do find, depending upon the function, it can actually be a prevalent, it could be one-to-one, like R&D would be one-to-one. And in other groups, it may not be one-to-one. And so we actually kind of drill down one more, and that's how we kind of come up with our, you know, revenue for ARR.

16:10 - Ray Rike

But- Adjusted ARR?

16:12 - Alka Tandan

Adjusted, adjusted. Yes, adjusted, there you go. Yeah, so, yeah. So no, I think it is, I think it's important, of course, in our business, number of employees is our biggest cost. And so I think keeping an eye on that is something certainly that, you know, we should continue to do, and we will do during planning.

16:34 - Ray Rike

Being part of the Vista Equity portfolio, right? Productivity is probably always front and center. So can you tell me a little bit, it's really telling the audience, what are two or three kind of productivity improvement priorities that you're walking into 2024 with? Is it like quota performance, quota per rep? Is it ARR per CSM? What are you looking at?

17:00 - Alka Tandan

Yeah. Yeah, so this is always, I think definitely in this environment, there's a renewed focus on sort of, particularly like sales productivity and sales and marketing productivity. And it sounds right when interest rates are what the highest they've been in 21 years, every dollar is gotten just that much more expensive. So, and it has become much more difficult to get those new dollars. So, you know, I think what we're seeing across the board, even when I talk to some of my colleagues is longer sales cycles, is just taking longer time to get those deals done. So it makes complete sense. So how we're approaching it is a couple of different ways. We actually have now more products, you know, than we did. We've got, you know, increased by, you know, 33% as of July. So we will probably expect to increase quotas across the board because there's just more to sell. And we are looking at, you're catching me like right as we're going into planning, but some of the things that I do plan on looking at is also looking at territories and perhaps, you know, merging territories, you know, with our current sales team. And so in that way also, we would increase quotas as well. But like, I think re-looking at territories is also super important. And then I think the other thing that we're doing is just also looking at just ratios. So do the ratio still make sense? You know, SC to AE, SDRs to AE, or do we need to sort of like, just basically rebalance those as well? And maybe now, especially since we moved to less of a one seller model, we'll be about like a year in. I think we can probably re-look at those ratios as well and in terms of efficiency and see if we can gain something there.

18:52 - Ray Rike

Is that, and you're lucky, you have 90 plus portfolio companies at Vista. When you look at like the ratios, like AE to SDR or CSM to account or AR, do you kind of have a chance to benchmark with some of your other portfolio companies or how do you kind of say, oh, that's where we should be as a company?

19:13 - Alka Tandan

I definitely, we ask for benchmarks and Vista has them. Although it's funny with CSM, they'll always ask us because we're the CSM company. But you know, and so I'm a bad benchmark fan. And then we also have to search always, I think, dig a little one level deep and just make sure we're comparing apples to apples. So I always ask for total benchmarks, but then I'll also ask for companies that are like our size of revenue and also growing and see what that subset looks like as well. So, but more information is better, obviously. And so it does help us see if we're super off balance, you know, somewhere and then we can sort of dig in and buy. And then, you know, we also have the benefit of being able to literally call up. I can call up the CFO and ask a little bit more about a specific metric or work with our Vista team as well, who's always very generous with their time. So yes, definitely do that.

20:12 - Ray Rike

One of the, so our audience, probably less than 10% are in a private equity owned company. And you were at games like pre-Vista and you've been there for a couple of years post-vac. Yeah. So two or three amazing lessons that you've learned from being part of the Vista portfolio that you're like, this really helped me grow as a CFO and help me run business even more efficiently. Anything jump out at you, Alka?

20:40 - Alka Tandan

Well, first of all, you know, Vista has been great partners and they've been great supporters of me. And so I will always forever be grateful. And they, you know, they were very supportive for me sort of in this role. So for me, it's just been constant growth in terms of like my career responsibility. And so I am so appreciated. I mean, you know, and they continue to be, you know, in terms of the business, I personally just, I actually, you know, now remember, I'm a finance person and they're finance people. So, you know, we tend to agree on a lot of things. We actually laugh that we're all the same Enneagram, which tends to be five. So, you know, I actually, it was interesting from pre-Vista, I would always sort of laugh that, you know, finance would always usually go like, laugh sort of in the board meetings. And now I'm usually like first and front and center. So there was a re-emphasis on metrics and, you know, which is why we're all here and numbers that actually we didn't have, you know, for as much. It was a much more, let's just grow, grow, grow, grow, grow. So I personally appreciated that, that we were kind of like reorienting sort of that way. So that's definitely, you know, one big lesson. You know, I think, you know, right now we've been so focused on profitability and a recent lesson that, you know, that we just got was, let's not forget about growth. It's still at the end of the day, you know, if you're a no growing company, which we aren't, but you know, if you are and you're profitable, you know, you're still not valued very well. And so they're really great at just like, like don't, you know, keep your eye on the ball. It's still about growing the business and yes, and profitable. And you know what, by the way, guys, you can do both. And we've seen people do sort of both. And then I would say the third thing is that, you know, they're pretty, they're masters at M&A. And so, you know, we've really been able to like learn, I mean, they've been doing this for so long. I think they have about a hundred billion in management. And so not just in how to pick the right M&A candidates, but as we all know, that integration piece is super important. And so they've been great partners in helping us integrate and give us their thoughts on integration from everything, from like, you know, stems to, you know, sales teams, you know, and how to do that like well, because I think as they say, what, like, you know, 80, 90% of M&A doesn't really reap the fruit. And so having that knowledge and they've been in business for so long and also learning across our companies has been really important.

23:29 - Ray Rike

So we're going to end this session on something a little bit different for our CFO community. And that is Nick Mehta, your CEO, always talked, even after the Vista acquisition, we're going to be a human first company. And here we are, SaaS Metrics Palooza, talking to a world-class CFO. Balance that friction that has to happen between being human first, but managing by the numbers. Is that?

23:59 - Alka Tandan

It's definitely another, you know, growth for me. I would say the last year and a half, you know, particularly when we started telling people that, you know, oh, well, you know, we're not going to travel as much and we may not have as many fun events. And so, you know, how do we keep this culture sort of going? And so, you know, Nick and I had, I remember having a conversation and I was pretty early in the role. And he's like, education out there, talk to people. And so, you know, I started doing a couple of things. So I started doing CFO office hours, which to my surprise, I was expecting 10 people to show up, you know, and then a hundred plus people in the company showed up and many people wanted the recordings. And, you know, they have been at times challenging, and also a lot of fun. And sometimes we have a lot of laughs, but it's really a time where people can come and ask their questions and they do. And it's, you know, but I use the opportunity for questions to sort of educate as much as I can on what's going on in the economy, you know, how are investors looking at us, how are investors looking at the industry as a whole and just really bring, because, you know, I'm usually out there and I have like sort of all these sort of notes and really bring it to people so they can understand, you know, it occurred to all of the entire executive team that although we may have been through a downturn or two, you know, a lot of the people in the company hadn't. And so I think using, you know, using that form has been helpful. I also do a newsletter that, you know, where I sort of talk about, again, what's going on in the company, what's going on in the economy and then I also just try to personalize myself. So usually there's a little bit about like, you know, what's sort of going on with me or like, you know, a story. And so I, you know, the best way to bring human first leadership is bringing your own humanity in. And so I think, you know, it's been, you know, it's been an interesting ride in that way as I sort of develop a relationship with employees and maybe a little bit different fashion that I've sort of done previously. And then of course we got Nick as an incredible leader as well. And we're doing something right, because, you know, we won Glassdoor's number one, best place to work. So, you know, I'd like to think we're doing, we're doing something right despite what's going on in the economy.

26:27 - Ray Rike

Yeah, you took my thunder. I was going to congratulate you for that number one. But what I really liked was number one, you have those CFO office hours, but you do this newsletter out to your employee base. Is that a quarterly newsletter or monthly?

26:44 - Alka Tandan

You know, I was very good there monthly, but it's very quickly becoming quarterly. Yeah, I'm just working on one recently. So it should be going out shortly, but I try to do it more frequently. I try to do a little bit more frequently.

26:59 - Ray Rike

So I'm going to wrap it up with, we have a lot of companies out there that aren't game site yet, right? They want to be that big hundred million dollar plus ARR. What advice would you give those VPs of finance and CFOs in our audience that want to become Gainsight? Any kind of secret sauce recommendations or advice you can give them?

27:23 - Alka Tandan

You know, eye on the prize, know yourself. I think, you know, the one thing that we do, I think really well at Gainsight is being really self-reflective and honest. And I think, you know, the executive team, you know, we're very much encouraged to serve like honest debate as well, and also bringing up issues. So I actually think for me, it's really sort of these softer, sort of what I call them sort of softer skills of being honest with each other, bringing up the problems, communicating, particularly like at sort of executive level, as well as the VP of finance level, because you guys are sort of really leading the company. Because if that's there, I have found time and time again, you can get past most obstacles. It's only when those things break down that then you're a little bit in trouble. So I would say I put a huge emphasis on that. And I think that's why even in an economy, the way we're at, we were able to go from an unprofitable to profitable company. We were able to sort of expand our products and really use this time to really become better. But I think it starts with that sort of type of honest debate, that comfort level, and that honest communication. In addition to of course, having the metrics, et cetera, and all that stuff. But if you're not able to really talk about them openly and honestly and bring up the problems, then you know, it's a tool, but it still needs to be used well.

28:59 - Ray Rike

Human Connections can trump metrics, and I can't believe I'm saying that. So thank you so much, Alka Tandan, Chief Financial Officer at Gainsight for being my guest here at SaaS Metrics Palooza 23. Really appreciate it.

29:13 - Alka Tandan

It's always so much fun with you, Ray. It's always a pleasure. Thank you for having me.