Generative AI is having its zeitgeist moment with investors, even if some in the tech industry are seeking to slow its innovations down. But according to one AI-focused VC, certain companies won’t be able to get away with just having one AI slide in their deck any longer. “I think pretty quickly, we’re moving past, like, ‘AI for blah, blah, blah,’” Erin Price-Wright, a partner focused on early-stage investments at Index Ventures, recently told me.
She believes that, for enterprise SaaS (software-as-a-service) companies in particular, “Now, it’s reimagining what SaaS products look like with AI at their core” versus having AI as “a selling point.”
Index Ventures has been investing in AI startups over the years and got in on the so-called foundation model company Cohere (in the same bucket as OpenAI) back in 2021. Price-Wright is among a rapidly-growing segment of VCs who believe that we’re at the beginning of a big platform shift with AI, going to the internet and mobile.
From her perspective, “going forward, it’s going to be very difficult to raise any cash as at least a B2B or enterprise SaaS company if you don’t have an AI strategy.” Her reasoning is that software companies now have a standard of doing things like outsourcing databases or having a cloud strategy—and that AI is quickly becoming a similar pillar for SaaS companies.
In other words, as she recently penned in a blog post, “within a decade, AI will be a core component of every piece of application software that’s built and shipped.” Price-Wright argues that every SaaS company in their portfolio is “developing a strategy around AI,” pointing to recent AI announcements from portfolio companies like Discord, Notion, Intercom, Beamery, and Figma.
In that sense, Price-Wright argues that “basically all software investing right now, at least on the B2B side, is AI investing.” Valuations, therefore, can vary greatly: She says there isn’t a rule of thumb of, “’Oh, you put AI in front of this, and suddenly you get a 10% bump.’”
Of course, some companies are seeing a premium: namely, generative AI startups. Per PitchBook data, the median pre-money valuation for generative AI firms hit $90 million so far this year (based on nine deals PitchBook has tracked), up from $42.5 million in 2022.
Price-Wright believes the overall hype is justified. But for software startups hoping to snag a check from Index Ventures, the AI buzzword has “become a little less like, a wow factor,” and more of, “this is the base case.”
have a great weekend,
Anne Sraders
Twitter: @AnneSraders
E-mail: [email protected]
Submit a deal for the Term Sheet newsletter here.
Jackson Fordyce curated the deals section of today’s newsletter.
VENTURE DEALS
– Fetch. aia Cambridge, UK-based infrastructure platform for autonomous services, raised $40 million in funding from DWF Labs.
– P97a Houston-based mobile commerce and digital marketing platform provider to the convenience retail, auto industry, and fuel market, raised $40 million in funding from Portage Capital Solutions.
– Perplexity AIa San Francisco-based conversational AI-powered answer engine, raised $25.6 million in Series A funding. New Enterprise Associates led the round and was joined by Databricks Ventures, Elad Gil, Nat Friedmanand other angels.
– Effya Paris-based online energy renovation company, raised €20 million ($21.81 million) in funding led by Felix Capital.
– Paytrixa London-based embedded payments company for vertical software platforms, raised $18.3 million in Series A funding co-led by Unusual Ventures, Motive Partnersand bain Capital Ventures.
– Horizon Quantum Computinga Singapore-based quantum computing hardware-focused software development company, raised $18.1 million in Series A funding. Tencent, Sequoias Indian Capitals, SGInnovate, Pappas Capitaland Expeditions Fund invested in the round.
– fixiea Seattle-based automation platform for large language models, raised $17 million in seed funding. Redpoint Ventures led the round and was joined by Madrona Venture Group, Zetta Venture Partners, SignalFire, Bloomberg Betaand Kearny Jackson.
– Orbsa San Francisco-based pricing platform, raised $14 million in Series A funding. Menlo Ventures led the round and was joined by base case capital, The Cannon Project, Data Community Fund, EssenceVC, FOG Ventures, Scribble Ventures, South Park Commons, SV Angeland other angels.
– Votiroan Austin-based content security platform, raised $11.5 million in Series A funding led by Harvest Lane Asset Management.
– TROOPa remote-based corporate meeting technology and services developer, raised $11 million in Series B funding. Durable Capital Partners and Madrona Venture Groupco-led the round and were joined by All Iron Ventures and Conexo Ventures.
– BioCorteXa London-based digital medicine company, raised $5 million in seed funding co-led by Sofinnova Partners and Hoxton Ventures.
– finveritya London-based digital ecosystem for trade and supply chain finance, raised $5 million in funding. Outwards, Acrobators, Venturesand other angels.
– Prestaa remote-based digital lending platform, raised $3.3 million in pre-seed funding. Distributed Ventures led the round and was joined by Zeal Capital Partners, Matchstick Ventures, The Fund, Tech Starsand Jumpstart Ventures.
PRIVATE EQUITY
– Vista Equity Partners acquired Duck Creek Technologiesa Boston-based property and casualty insurance company, for approximately $2.6 billion.
OTHERS
– LLYC acquired BAM, a San Diego-based PR agency. Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
– Accel-KKR, a Menlo Park, Calif.-based private equity firm, raised $5.3 billion across two funds. $4.4 billion will be dedicated to majority buyout investments in the lower-middle market and middle-market software and IT-enabled services companies. $920 million will be dedicated to small-cap software and tech-enabled services companies.
PEOPLE
– Antlera Singapore-founded venture capital firm, promoted Rosalind Basany to global partners.
– LongRange Capitala Stamford, Conn.-based private equity firm, hired Andrew Cialino as principal, head of business development. Formerly, he was with SFW Capital Partners.
