Sarah Tavel, Benchmark Capital GP: Selling Work in SaaS

**Auren Hoffman** (0:02)
Welcome to World of DaaS, a show for data enthusiasts. I'm your host, Auren Hoffman, CEO of SafeGraph and GP of Flex Capital. For more conversations, videos, and transcripts, visit safegraph.com/podcasts.
Hello, fellow data nerds. My guest today is Sarah Tavel. Sarah is the general partner at Benchmark Capital, one of the top VC firms. She serves on the board of Chainalysis, Hipcamp, Medley, Rekki, and Cambly.
Sarah, welcome to World of DaaS.

**Sarah Tavel** (0:31)
Great to see you.

**Auren Hoffman** (0:32)
Great to see you as well. Now, you published a super interesting piece last year called, Sell Work, Not Software. I'd love to dive into that. What is selling work paradigm in SaaS versus selling seats?

**Sarah Tavel** (0:45)
I think it's worth taking a step back of what has most of application software been about over the last 25 years. And really that has been about this idea of increasing productivity in companies. You're selling software to an employee to improve their productivity. You're selling software to teams to kind of improve collaboration across those teams in the team to improve productivity, dashboards and management consoles to help with the management of the teams. All these things are all about improving productivity. And that has kind of created some interesting biases or dispersions in the types of businesses that get built because at the end of the day, if you're selling a productivity improvement, the value of that productivity improvement is relative to the cost of that headcount.
Improving the productivity of a level seven engineer very different than improving the productivity of a recruiter, both obviously important jobs in a company, but the compensation of those people is very different. The budgets of those teams are very different. And so you're always selling, okay, it's a 10% improvement on the cost of that headcount. And then you try to capture some of that value. You've got to get people to adopt software. That has been a very successful mode of building companies. And you look at the big application software companies today and they're all in that mindset of we're selling software to improve productivity of employees.
And it should be said, just to make the obvious explicit, you then charge on a per-seat basis, almost always. Consumption pricing has become more of a thing, but by and large, you're selling it by the seat.
The first wave of AI startups were in that same mental model. And really that came out of GitHub and what they did with Copilot of improving the productivity of engineers. And so a lot of startups saw that Copilot model and had the idea, rightfully so in many ways, to build Copilot for all these other employee types and improve their productivity.
As a VC, I think, and as a founder, I would imagine, the challenge with that Copilot model is really the incumbents are going to be the ones that are best advantaged to do that. Notion is going to build in AI. They already have distribution. Adobe, you can go down the list.

**Auren Hoffman** (3:15)
And they're smart. It's pretty easy to bring in.

**Sarah Tavel** (3:18)
It's pretty easy to bring in. And so I am always asking myself, well, where's the new surface area going to be where a startup actually is advantaged? Where is the surface area going to be where you may be overlooking a market segment because it didn't work in like the prior paradigm?
And the idea with selling work is that you're kind of getting out of that mental model of selling a 10% productivity improvement. And instead, what I think of is what is the work to be done that employees are doing and unbundling that work from the employee and seeing if there's like an atomic unit of work that actually can be automated. And then as the company, instead of selling software that you're trying to get employees in a company to adopt and start using, you're actually selling that atomic unit of the work product itself to the company.

**Auren Hoffman** (4:16)
That might be hard for some of our listeners to grasp. What would be an example of something like that?

**Sarah Tavel** (4:21)
The example I gave in this blog post that I wrote, a company that I admire a lot, is this company called Even Up. So what Even Up did, they sell to personal injury lawyers.
And what a personal injury lawyer has to do anytime they get a new case, is they basically summarize that case, all the medical records of the case, what happened into a document called a demand letter or demand package. And then they kind of submit that to the insurer, and there's a back and forth in order to figure out what the claim will settle for. Now, the software way of selling this would be, you sell a software product to the personal injury lawyers, paralegals, whatever it is. You can imagine they drag and drop medical records.