Salesloft acquires Drift: The Pipeline AI Powerplay

Salesloft's acquisition of Drift is another proof point in a broader trend of sales tech mayhem. This post explores the acquisition in three parts:

1. Sales Tech Mayhem (macro)
2. Why it's a Pipeline AI Powerplay
3. Where's the money, Lebowski?

This is Sales Tech Mayhem

• We're living in the time of "Sales Tech Mayhem," a period marked by rapid evolution and consolidation in the sales tech vendor market.
• Sales tech vendors are converging capabilities from multiple-point solutions into a single hub for orchestrating sales actions, redefining the CRM's front end.

• These products streamline engagement, data capture, insights generation, action recommendation, and execution, promising a seamless process akin to a beautiful flywheel.
• Between making time for an evaluation, negotiating renewals, and the switching costs of change management, the reality of consolidating complex sales tech stacks is chaotic for both buyers AND sellers

• SalesLoft's acquisition of Drift serves as a prime illustration of sales tech mayhem.

The Pipeline AI Powerplay

The SalesLoft and Drift acquisition will succeed (or fail) based on how willing go-to-market teams are to adopt new operating models centered around generating pipeline with AI and hyperautomation.

Pipeline

• Generating enough pipeline is an acute, perennial challenge for sales leaders

• Salesloft’s initial wedge came via their Cadence product, disrupting pipeline generation strategies by making it easier for sellers to make more calls and send more emails
• Drift's initial wedge came via their Chat (sorry, Conversational Marketing) product, giving GTM teams a real-time way to engage potential customers visiting their website; valuable considering the non-linear nature of B2B buying today

• As Keith Jones 🚴🏻♂️ put it, over time, the best operators figured out how to elevate Sales Engagement from technology to teammates

• The emergence of B2B chat enabled B2B marketers to provide an alternative, digital method for early-stage B2B buyers to engage with a company, and turn those interactions into sources of sales signals throughout an evaluation.

• Customers of both SalesLoft and Drift initially relied on Sales Development Reps (SDRs) to use both products simultaneously to convert prospects into pipeline

The process of using automation to activate buying signals (like ones from Drift) via sales engagement applications (tools like SalesLoft) sparked an evolution of pipeline operating models, innovative job titles, and consulting companies aimed at generating B2B pipeline. (Gartner subscription required)

• Teams called “Revenue Generation,” “Pipeline Management,” and “SDR Operations” exist now.
• They're centralized centers of excellence, combining marketing operations and prospecting excellence skills into a single team, reporting to visionary Chief Revenue Officers, Chief Marketing Officers, and Revenue Operations leaders, with one goal

• The results speak for themselves: when sales and marketing teams manage tech for demand gen and engagement together, they’re 2.7x more likely to achieve higher MQL => SQL conversion rates

• These are the teams that will understand the vision and buy an integrated Drift/Salesloft product.

"How can we get some of that AI?!?!" - A real tech CRO 🤦

• The demand for Sales AI is surging, fueled by the excitement around generative AI
• Conversational AI platforms serve as a foundational strategy for chatbot initiatives. (Gartner subscription required)

Salesloft's acquires four key capabilities from Drift: 1) a domain-specific conversational AI engine trained for B2B buyers 2) first-party AI engagement scoring 3) an AI chat channel 4) a sales video application.

• So, Drift uses conversational AI to generate signals, while Salesloft processes those signals into recommended action for sellers.
• Drift's product uses AI to transform websites into a source of signal (i.e. Account Engagement Scores) for sales teams, beyond the chat product.
• Salesloft recently released Rhythm, an AI-powered action list, designed to process signals (from sources like Drift), and then help sellers prioritize and action tasks amidst signal chaos.
• Providing enterprise GTM leaders with an AI-driven roadmap for pipeline generation, which Salesloft dubs the "AI Revenue Orchestration Platform" should appeal to GTM executives
• It's not all roses and honey. Integrating systems, data models, teams and talent is HARD: there’s still a lot of work to do

Where's the money, Lebowski?

• Vista Equity Partners made strategic investments in both Drift and Salesloft at the end of 2021, having likely paid handsome multiples to acquire those assets
• Valuations for private SaaS companies were down in 2023, and things don’t look better for 2024 (Techcrunch)
• Sales Tech is SaaS
• Both Salesloft and Drift face stiff competition; the sales tech market is mayhem and the GenAI boom is fueling more investments in conversational AI from product teams (Gartner subscription required) 

It’s reasonable to speculate Vista helped orchestrate Salesloft's acquisition of Drift to improve economies of scale, profit margins, and growth potential for the combined entity.

• Let's assume the combined annual revenue of both companies is projected between $250 million and $350 million. Reasonable scale
• For comparison, ZoomInfo (competitive with both Salesloft AND Drift), reported $293 million in revenue in 2019, IPO'd in June 2020, and saw an increase to $476 million by the end of 2020 (ZoomInfo.com)
• The market environment during ZoomInfo's IPO differs significantly from the current landscape, with many considering Klaviyo a model for success (Saastr)
• Growth is a critical factor, with the expectation that the acquisition will expedite the growth rate of the combined entity's products (see Pipeline AI powerplay section above); maybe it’s not a coincidence SalesLoft recently publicized a mega-deal with IBM
• For profitability, the "Rule of 40" is the goal, meaning the combined growth rate and profit margin should exceed 40%—we can assume Vista has a solid playbook to help the combined company get there
• All of this is speculation, and there's a lot of work to do

"Save who you can save." - Tess, The Last of Us

• I expect to see more announcements like Salesloft and Drift in 2024
• Have you heard of Zombie startups? (s/o Scott Albro for putting the term on my radar)
• Zombie startups have managed to reduce expenses over the past two years but struggle with growth, facing imminent financial and operational challenges. (New York Times)
• The harsh reality for companies stuck in Zombie mode? Investor intervention may dictate their fate, deciding which ventures are sustainable and pushing others towards closure or sale as a means of salvaging value
• I suspect there’s some tremendous sales tech and talent stuck in Zombie mode.
• Take a look at this RevTech Unicorn tracker: who's next?