Co-authored with Craig Rosenberg.
Welcome back to Sales Tech Mayhem, where the market is blazin’ and the music is cool. The party in this market started a year or two ago and we’ve enjoyed it immensely. We paid homage in previous blog posts: 39 Observations From a Scorching Hot Tech Market, More Unicorns, Sales Enablement Mayhem and New Entrants, and 59 More Updates to Sales Tech Mayhem and Mutual Action Mania.
The music was remarkable in the first part of the evening (aka 2021) so the question as the night winds down is: will the party keep going? The answer is “yes,” even as the DJ blasts the recession air horn. Sales Tech Mayhem is transitioning to an exclusive can’t-miss after-party. In this post, we’ll break down the evolving dynamics of Mayhem, what to expect at the after-party, who’s invited and why.
Rock and Roll: 2022 Sales Tech Buying Data Was Promising
Starting off 2022, the buying data for sales tech looked like an all-night rock-and-roll show:
- 68% of sales orgs will increase sales tech spend in 2022 (2021 Gartner Sales Tech Survey).
- The average 2022 sales tech spend increase was expected to be 20.2% (2021 Gartner CSO Pulse Survey).
- Gartner predicts that by 2025, 92% of large enterprises worldwide will have adopted sales software, up from 82% in 2020 (Gartner subscription required)…
- …and forecasts that the compound annual growth rate (CAGR) will sit between 9-11% across most sales tech categories through 2025 (Gartner subscription required).
- Going into 2022, we expected these estimated numbers to be even higher.
- Sales tech has traditionally been an opportunistic purchase.
- Budgets were rising on paper.
- We were bracing for an even larger order of magnitude of buying.
The DJ Blasts the 2022 Recession Air Horn
- Everyone has read recession headlines, seen the numbers, or felt the pain.
- SaaS has been hit hard
- Revenue tech is SaaS.
- As SaaS goes, so may revenue tech.
- When we say SaaS got hit hard, it’s been brutal.
- Over the last 6 months (ending 7/19/2022), the BVP Nasdaq Emerging Cloud Index is down 33.2%.
- There is a 46% decrease in IPOs from YTD 2022 compared to the same in 2021.
- In fact, energy IPOs surpassed technology in average IPO deal size.
- Executives are getting pinched by what Gartner refers to as the “triple squeeze:” persistent inflation, scarce expensive talent and global supply challenges.
- Sales tech mayhem rose dramatically in a mayhemic tech market.
- Now it will be put to the test.
- And it’s perfectly reasonable to ask the question: “is the party over” in sales tech?
The Recession Air Horn Tames the Unicorns
- If you read Mayhem #1 and Mayhem #2, you know we enjoy tracking the unicorns.
- Unicorns play a key role in Mayhem (more on why later).
“I’m big-time into ‘corns.” – Dwayne “the Rock” Johnson’s character, Robbie, from the movie Central Intelligence
- SaaS is all about the unicorn
- But as of May 2022, there are over 1300 unicorns
- 1.5x unicorns minted every day.
- Party time.
- No new revtech unicorns in 2022 (yet).
- Lusha was the most recent revtech unicorn.
- That was November 2021.
- So… our current revtech unicorn count is still 11 unicorns.
- All the unicorns are potential alpha platforms.
- Alpha platforms roam the sales tech landscape with capital to spare.
- (Reminder: alpha platforms are hyper-aggressive vendors broadening their capabilities at a breakneck speed).
- They’re on the guest list for the after-party.
- Along with the publicly traded sales tech companies: ZoomInfo, Dun & Bradstreet.
- And the CRM vendors have entered the queue (more on that later).
The Sales Tech Mayhem After-Party
Remember the definition for sales tech mayhem: the market is rapidly moving from a wide set of categories into a narrowing list of vendors with wide portfolios of capabilities. This mayhem is likely to continue throughout 2022 and the following couple of years.
- Will mayhem live on?
- Yes, because alpha platforms enter economic turbulence with:
- Money to spare
- Big valuations to live up to
- Plenty of innovative rev tech in the market
- And buyers that still need tech
- This sets the market up for plenty of M&A
- The unicorns bulked up in 2021 and still have money to play:
- Example: Clari (revenue intelligence) acquires Wingman and enters the conversation intelligence market.
- Example: 6Sense (account-based platform) acquires Saleswhale (digital humans).
- Example: Mediafly (enablement) merges with Insightsquared (revenue intelligence) and acquires Execvision (conversation intelligence).
- Example: Demandbase (account-based platform) acquires Engagio (account-based), InsideView (revenue data), and Demandmatrix (technographics, intent data).
- Many assume a drastic drop in public SaaS valuations is translating to a drop in private startup valuations, too.
- That’s what we hear anecdotally: lower valuations and longer deal cycles, even if the data hasn’t officially shown a big drop (yet).
- “We’ve already seen the average deal size and valuation fall significantly from recent highs…We should expect further slowdown through the end of the year until market uncertainty is eliminated and the exit market becomes a better-known quantity” (Pitchbook/NVCA Venture Monitor Q22022)
- Non-revtech example: Klarna saw its valuation slashed by 85% from $45.6 billion to $6.7 billion.
- Expect more of that.
So, the math says: alpha platforms with lots of money + potential takeover targets at better prices = more mayhem
- Oh, and by the way, see those large CRM vendors over there in the queue?
- CRM vendors are lurking and making moves (Gartner subscription required).
- Example: Salesforce acquired Leveljump (enablement) and Troops.ai (seller workflow automation).
- And then there are the private equity sharks with tons of dry powder.
- Markets Group estimates $873 billion of dry powder is aligned to verticals focused on buyouts.
- Private equity firms acquired $29 billion dollars’ worth of VC backed startups in 2021 – a twenty-year record
- Private equity is already a player in revtech.
- Example: Vista invested in the end-to-end GTM suite – Drift (marketing), Salesloft (sales) and Gainsight (Customer Success).
- VCs are still funding innovation in the revtech space, too.
- “(VC) Deal count has remained elevated as the buildup of dry powder over the past few years continues to filter through the market” (Pitchbook/NVCA Venture Monitor Q22022).
- The global VC industry has more than $500 billion in dry powder available.
- So, if you thought that consolidation might lead to fewer vendors, sorry.
- There’s still so much disruption waiting for revtech.
- Below are 11 new emerging categories of revtech.
- Math: Alpha players with lots of money, CRM vendors in need of sales tech functionality, private equity looking at better valuations, VCs still funding bottoms up innovation, and (some) vendors that need an out
- Conclusion: the market is set up for M&A mayhem
Factors Driving the After-Party
- The digital transformation funding faucet is still flowing
- Gartner surveyed CEOs and 54% say they want to maintain their new digital pace, and then some (Gartner subscription required)
- 85% report increased investments in digital capabilities
- CFOs are giving the green light in support: 69% plan to increase digital technology spending (as of July 2022) (2022 Gartner CFO Recession Planning Poll).
- The gas remains on the digital transformation peddle, even in response to inflation (Gartner subscription required).
- Pipeline creation is always a challenge.
- And it’s not like economic turbulence makes pipeline creation easier; actually, it’s the opposite.
- More than 72% of sales leaders cite the improvement of pipeline creation as a high priority in 2022 (2021 Gartner CSO Pulse Survey).
- 70% of sales leaders put a high priority on aligning their stack with pipeline goals (2021 Gartner Sales Tech Survey).
- Think pipeline is important? The above stat ranks 5 percentage points higher than aligning with sales goals.
- Some of the most innovative categories in the stack are built to enable more and better pipeline.
- Expect more productivity engineering to help with pipe gen (more on that next).
- The graphic below provides an overview of the pipeline tech stack (Gartner subscription required)
- Write this down: productivity engineering.
- By 2025, productivity will be a top-five CEO strategic business priority (Gartner subscription required).
- Technology has always been applied to productivity.
- Over the past 2.5 years, tech investments tended to prioritize innovation in marketing, selling, product, and customer experience.
- Those investments did not focus on core internal operating efficiency gains.
- When we mean productivity engineering, we mean something bigger.
- A new tech focus is on breakthrough productivity to thwart inflation (Gartner subscription required).
- We’re not talking about incremental productivity you see today.
- We’re talking about fundamentally rethinking the way companies leverage humans.
- More ways to grow revenue per seller, ramp sellers faster, and increase capacity per seller.
- If you want to think big, we might just reimagine the seller-buyer dynamic altogether.
- We’re talking about getting rid of the 40-hour work week (Gartner subscription required).
- Or even becoming less dependent on sellers altogether (hello product-led, e-commerce, and buyer enablement).
- We’re talking about radically challenging workflows and processes to make sellers faster, simpler, and more agile.
- We know a better employee UX is proven to increase the likelihood of key business outcomes (Gartner subscription required).
- When purchasing sales tech, 66% of sales leaders prioritize the potential impact of tech on seller workflows (2021 Gartner Sales Tech survey).
- And the reps likely want the help: US. workers wanted AI’s assistance on an average of 4.4 tasks out of the nine suggested to them (Gartner subscription required).
- In sales, AI is already accelerating productivity by sending emails and automating mundane CRM data entry.
- We rely on machine learning to prioritize, driving productivity and outcomes.
- Not just at the frontline level.
- When markets move from frothy to sane, it’s mission critical to make data-driven decisions.
- Especially to identify the target accounts most likely to become customers, when to engage and how to engage.
- We already saw this behavior at the beginning of the pandemic, when over half of organizations indicated they reevaluated/planned to reevaluate their ICP and target markets in 2020.
- Investment in data doesn’t take a back seat, it becomes a key purchase.
- There was a lot of aggressive decision-making suited for turbulent economic times.
- Organizations built for speed were successful.
- We’ve learned companies that moved at an accelerated pace delivered better outcomes across the board (Gartner subscription required).
- In the end – the party has a different vibe but it still looks like a party.
- Companies like to make big announcements around Dreamforce so maybe the fireworks show is around the corner…
- Is the sales tech party over?
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