What happens when a $6.4 billion PE buyout becomes a cautionary tale for every SaaS operator, investor, and board member? In this episode, Dave "CAC" Kellogg and Ray "Growth" Rike break down Private Credit: what it is, how it works, and why it is showing up everywhere from venture rounds to leveraged buyouts. Then they walk through the Medallia deal step by step to show exactly how the model breaks.

What we covered:

Private credit 101: from venture debt to leveraged buyouts

Private credit is non-bank lending done by funds instead of banks, with a repayment-first mindset rather than a returns mindset. Capital deployment hit nearly $600 billion in 2024, up 78% from 2023, with 22 to 25% of that concentration in SaaS companies. Ray and Dave explain the difference between venture debt (lending to startups post-round) and direct lending (providing the "L" in LBO transactions), and why these structures have moved from niche to standard in software finance.

How debt is priced and why it costs what it costs

Private credit loans are floating-rate instruments priced at SOFR plus 500 to 800 basis points. In the zero-rate era that meant 6 to 9% all-in. Today it means 10 to 13%. Dave explains warrants as the "sweetener" (typically 5 to 15% of the loan amount, translating to under 2% equity ownership) and why the real economic driver is repayment, not upside. Ray frames the contrast with VC math: a lender who loses principal on one deal has no portfolio-level offset.

The terms that matter: PIK, bullets, and covenants

Pay-in-kind interest defers cash pain today by adding to the principal balance tomorrow. A $100M loan PIK-ing at 10% annually becomes $121M in two years and $133M in three. Bullet loans put the entire principal due at maturity, which for most companies means refinancing or a sale event. Dave's strongest language is reserved for covenants, which he calls the "third rail": liquidity, EBITDA, ARR growth, and coverage ratio thresholds that give lenders the right to call the loan if tripped. He argues these belong on page one of every board dashboard, every time.

The Medallia case study: when all the assumptions move against you

Thoma Bravo acquired Medallia in 2021 for $6.4 billion at 9x revenue, with roughly $1.8 billion of debt backed by Blackstone, Apollo, and KKR. The deal was underwritten on continued growth and margin expansion toward 25% free cash flow. Instead, growth slowed, base rates rose more than 400 basis points, PIK interest compounded the balance from $1.8B to $2.2B, and EBITDA of $200M fell below annual interest expense of $300M. Interest coverage dropped below 1x. Thoma Bravo's $5 billion equity investment went to zero. Lenders took the keys via debt-for-equity conversion.

Why these structures can look stable and then break fast

The Medallia deal was not unusual at entry. The problem was that PIK, rising rates, and slowing growth are individually manageable and jointly lethal. By March 2026, Blackstone was marking its first-lien Medallia debt at 60 cents on the dollar. Ray notes that between 2015 and 2025, more than 1,900 software companies were acquired by PE in deals worth over $440 billion, and 20 to 25% of all private credit went to SaaS. The exposure across the sector is large.

The lesson Rory O'Driscoll would underline

Dave closes with a line from Rory O'Driscoll: as soon as something becomes a formula, the play is probably over. Private credit for SaaS worked reliably for nearly a decade. The combination of higher rates, compressed multiples, and closed IPO and M&A windows revealed that the formula was underwriting a world that no longer existed. Senior debt gets paid first. When the debt is impaired, the equity is gone. The math does not negotiate.

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Dave "CAC" Kellogg and Ray "Growth" Rike tell the full story of how Intercom, a $400M ARR company that stalled at 4% growth, executed one of the most dramatic AI-first transformations in B2B SaaS. From writing off tens of millions in ARR to building a proprietary vertical AI model, this episode breaks down what it actually took to reinvent a mature SaaS business from the ground up.

Topics Covered

• From 4% to 26% Growth: The Numbers Behind the Turnaround. Intercom hit rock bottom with five straight quarters of declining net new ARR before founder Eoghan McCabe returned and went all in on AI following the ChatGPT launch in November 2022. Ray and Dave walk through the growth trajectory and what made the timing of the reset both urgent and actionable.
• The "Burn the Ships" Organizational Decision. Intercom rotated roughly 80% of its R&D team onto the new AI product, deliberately wrote off 50 to 60 million in ARR, and created small startup-like teams of 10 to 15 people with directly responsible individuals leading each workstream. Ray and Dave discuss why half-measures fail and how a stuck business actually has an advantage: very little to lose.
• Board Dynamics and Why Committees Kill Bold Moves. Dave shares a candid take on how PE boards versus VC boards respond differently to dramatic pivots, and why the committee nature of multi-partner VC boards tends to drive toward measured, middle-ground responses that often produce no real outcome.
• AI Economics: Gross Margins, Inference Costs, and Building Your Own Model. The shift from SaaS to AI-native changes the cost structure fundamentally. Ray puts current gross margin ranges in context (40 to 55% for pure AI-native, 55 to 70% for blended), explains why inference spend is actually rising despite lower per-token costs, and discusses why Intercom built its own vertical customer agent model for both performance and COGS optimization.
• Outcome-Based Pricing and the 99-Cent Resolution. Customer support is one of the clearest use cases for outcome-based pricing because the natural unit is obvious: a resolved ticket. Ray and Dave break down how Intercom priced Fin at 99 cents per resolution, validated the model against an 81% internal resolution rate, and watched NRR climb from 112% to 146% as adoption scaled across 8,000 customers.
• Never Waste a Good Crisis. Dave frames the broader lesson for SaaS CEOs: two paths exist now, dramatic AI reinvention or a Rule of 60/70 efficiency play. The Intercom story illustrates what the reinvention path actually demands. Ray adds that many SaaS companies sitting at 10% growth and 25% EBITDA are already in a slow-moving crisis and just haven't admitted it yet.

If you lead a B2B SaaS company navigating the shift to AI, this episode is the most concrete case study available on what full commitment actually looks like in practice. Ray and Dave go beyond the headlines to examine the organizational design, board dynamics, cost structure, pricing model, and retention metrics behind Intercom's transformation. Whether you are considering an AI-first pivot or trying to understand why incremental approaches tend to stall, this episode gives you the analytical framework and the real numbers to think it through.

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