When you really research venture capitalists about investing in AI startups, they will tell you that companies are experimenting big, but are slow to add AI solutions to their ongoing business processes.
But there are some exceptions. And one of them appears to be an area known as AI sales development representatives, or AI SDRs. These use large language models (LLM) and voice technology to create personalized outreach emails and make automated calls to potential customers.
“In some markets, we are seeing five to 10 companies succeed in a fairly short period of time,” Shardul Shah, partner at Index Ventures, said of the rise of AI SDR.
While it’s not uncommon for multiple startups to face the same problem, it’s rare to see them all experience rapid growth. But that’s apparently the case for startups that automate content creation for sales teams, investors say.
“When one studies any of [these startups] individually, it’s like ‘wow, that’s a surprisingly fit product for the market,’” Shah said. “When all 10 products have a surprising fit in the market, it’s hard to answer, ‘How will that play out?'”
Index has not yet invested in any of these companies, many of which are less than a year old. Although the entire category is booming and customers are using them, it is still too early to know if their growth will continue in the long term or if they will be discarded like so many other AI pilot projects once the wow factor fades, because they do not work. be more effective than human extension.
Small Businesses Love LLMs in AI Sales
Arjun Pillai, founder of Docket, a startup that trains AI sales engineers, is convinced that the adoption of AI SDR is high because small and medium businesses can easily experiment with these tools. Prior to Docket, Pillai was chief data officer at sales lead generation platform ZoomInfo.
“In the last two years, the response rate to cold emails dropped by at least 50%,” Pillai said. “Now that there are a lot of companies saying they can improve this rate, everyone is willing to try their service.”
The best-known AI SDR startups include Regie.ai, AiSDR, Artisan, and 11x.ai, but ZoomInfo, an incumbent, also launched a co-pilot that competes with these and other virtual sales agent startups.
While these companies are seeing rapid revenue growth, it’s unclear if they are actually helping companies sell more effectively.
According to Tomasz Tunguz, founder of Theory Ventures, a chief revenue officer at a publicly traded company revealed to him that while an AI SDR helped generate a substantial volume of leads over a nine-month period, it did not generate actual sales.
“So that doesn’t mean AI isn’t going to work. That is, many of us [still] I don’t know how to use AI”, Tunguz said on stage at a SaaStr conference in September.
Will the current ones crush them?
Chris Farmer, partner and CEO at venture firm SignalFire, said he believes AI applied to sales and marketing is a huge opportunity, but without access to differentiated data, AI SDR startups risk being surpassed by traditional companies such as Salesforce, HubSpot and ZoomInfo. The main products of these companies are those that store their customers’ data. So if they offered bots that allowed their customers to access their own data, those bots could be more effective.
Another VC who looked at this market but hasn’t invested yet said his firm looked at several AI SDR startups and they all made $1 million in ARR in less than a year. The impressive growth of the startups was attractive, he said, but like Farmer, he worried that their solutions could eventually be offered as a free feature by established competitors.
Jasper, a copywriting startup last valued at $1.5 billion, but hit roadblocks and had to lay off 30% of your staff After the introduction of ChatGPT, it serves as a warning to some investors.
Investors are not surprised by the rapid adoption of AI SDRs; They simply doubt that adoption is complicated.
Updated: This story was originally published on August 22 and updated on December 26 with comments from Tomasz Tunguz.