Venture capitalists will tell you that companies are experimenting wildly but are very hesitant to integrate AI solutions into their current business processes when you truly get them to talk about investing in AI firms.
There are, however, a few exclusions. And it seems that one of them is the field of artificial intelligence sales development representatives, or AI SDRs. These create customized outreach emails and make automated calls to prospective clients using voice technology and LLMs.
Regarding the surge of AI-driven savings and loans, Index Ventures partner Shardul Shah stated, "In certain markets, we're seeing five to ten companies all have success in a pretty short period of time."
Although it's not unusual for several firms to focus on the same issue, it's uncommon for them to all expand quickly. However, investors claim that businesses that automate content production for sales teams seem to be in this situation.
"It's amazing how well the products and markets fit each of these startups individually," Shah remarked. When ten of them have such amazing product-market fit, it's difficult to predict how that will work out.
Although the entire industry is on fire and customers are using these companies, Index has not yet made any investments in any of these businesses—many of which are less than a year old—because it is still too early to tell whether their growth will last in the long run. Or will they be abandoned, just like so many previous AI pilot programs, as soon as the initial buzz wears off and they can't justify their claimed superiority over human outreach?
AI sales are very popular with small enterprises. LLMs
The founder of Docket, a startup that trains AI sales engineers, Arjun Pillai, is certain that the strong acceptance rate of AI SDR is due to the ease with which small and medium-sized enterprises may test these tools. Pillai was the chief data officer of ZoomInfo, a platform for generating sales leads, prior to joining Docket.
According to Pillai, "the reply rate on cold emails fell at least 50% over the last two years." "Everyone is eager to try their service now that many businesses are claiming they can raise this rate."
The most well-known artificial intelligence sales representative businesses include Regie.ai, AiSDR, Artisan, and 11x.ai; however, incumbent ZoomInfo has also launched a copilot to rival these and other virtual sales agent startups.
It's unclear if these companies are genuinely assisting businesses in selling more successfully, despite their enormous revenue growth.
"How many businesses have been making payments for longer than six months?" is the query. Pillai enquired. An AI SDR needs to have extremely specific information about each potential consumer in order to develop a completely individualized outreach message. However, he noted that all of these organizations have access to the same public data and that our knowledge of each prospect is restricted.
According to Chris Farmer, partner and CEO of venture firm SignalFire, there is a lot of potential for AI to be used in sales and marketing. However, without access to unique data, AI SDR startups run the risk of being surpassed by established players like Salesforce, HubSpot, and ZoomInfo. The primary offerings of those companies are the data keepers for their clients. Therefore, such bots could be more effective if they provided their clients with the ability to access their own data.
Will they be crushed by the incumbents?
Another venture capitalist, who hasn't made any investments yet but looked into this market, claimed that her company looked at a number of AI SDR businesses and that within less than a year, all of them had $1 million in ARR. Although she found the companies' remarkable development appealing, she shared Farmer's concern that their solutions would one day be made available as a free feature by more established rivals.
Some investors take note of the story of Jasper, a copywriting firm that was last valued at $1.5 billion but had to fire 30% of its employees due to speed bumps once ChatGPT was launched.
The quick uptake of AI SDRs has investors unsurprised; they simply don't think the adoption will be sticky.