When you really probe venture capitalists about investing in AI startups, theyâll tell you that businesses are experimenting wildly but are very slow to add AI solutions into their ongoing business processes.Â
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 LLMs and voice technology to craft personalized outreach emails and place automated calls to potential customers.Â
âIn some markets, weâre seeing five to 10 companies all have success in a pretty short period of time,â Shardul Shah, a partner at Index Ventures, said of the AI SDR boom.
While itâs certainly not uncommon for multiple startups to target the same problem, itâs rare to see all of them experience rapid growth. But thatâs apparently the case for startups that automate content creation for sales teams, investors say.
âWhen one studies any of [these startups] individually, itâs like âwow, thatâs stunning product market fitâ,â Shah said. âWhen all 10 of them have stunning product market fit, itâs hard to answer âhow is that going to play out?ââ
Index has yet to invest in any of these companies, many of which are less than a year old, because even though the whole category is on fire, and customers are using them, itâs still too early to know whether their growth will continue over the long term. Or will they be discarded, like so many other AI pilot projects, once the wow factor fades, because they donât prove to be more effective than human outreach, as they claim to be.
Arjun Pillai, founder of Docket, a startup that builds AI sales engineers, is convinced that AI SDR adoption is high because small and medium-sized businesses can easily experiment with these tools. Before Docket, Pillai was the former chief data officer at sales lead generation platform ZoomInfo.
âOver the last two years, the reply rate on cold emails fell at least 50%,â Pillai said. âNow that there are a bunch of companies that claim they can improve this rate, everyone is willing to try their service.â
The best known AI SDR startups include Regie.ai, AiSDR, Artisan and 11x.ai, but ZoomInfo, an incumbent, also released a copilot that competes with these and other virtual sales agent startups.
While these companies are experiencing rapid revenue growth, itâs unclear if theyâre actually helping businesses sell more effectively.
âThe question is how many companies have been paying for more than six months?â Pillai asked. To create a truly personalized outreach message, an AI SDR needs to have very specific data about each prospective customer. But whatâs known about each prospect is limited and all of these companies have access to the same public information, he said.Â
Chris Farmer, partner and CEO at venture firm SignalFire, said he believes that AI applied to sales and marketing is a large opportunity, but without access to differentiated data AI SDR startups risk being overtaken by incumbents like Salesforce, HubSpot and ZoomInfo. Those companiesâ main products are the keepers of their customersâ data. So if they offered bots that let their customers tap into their own data, such bots could be more effective.Â
Another venture capitalist that looked at this market but hasnât yet invested said her firm looked at several AI SDR startups and they all had $1 million in ARR within less than a year. The startupsâ impressive growth was attractive, she said, but like Farmer she was concerned their solutions could eventually be offered as a free feature by established competitors.Â
Jasper, a copywriting startup that was last valued at $1.5 billion, but ran into speed bumps and had to lay off 30% of its staff after ChatGPT was introduced, serves as a cautionary tale for some investors.Â
Investors are not surprised by the rapid adoption of AI SDRs; they are just doubting that adoption is sticky.
Looking for inspiration? Explore these captivating examples of branded content that effectively engage audiences and…
OpenAI's latest AI model, o1, is a significant advancement in AI technology. Equipped with self-fact-checking…
AI chatbots have revolutionized communication and customer service. This comprehensive guide explores the technology behind…
Google's dominance in the search engine market has raised antitrust concerns. This article explores the…
Discover Shopsense AI, a platform that allows music fans to find and purchase fashion dupes…
Explore the potential of publishing content beyond your website to reach a wider audience and…
View Comments
Right, integration with the CRM is critical for driving value.