@finance_fred I was at the “Enterprise Sales in the Age of AI” panel right after your VC session, and your valuation data explains SO MUCH about what we’re seeing in the market.
The Sales Cycle Reality Check
Our panel had:
- CRO from Scale AI
- VP Sales from Databricks
- Head of Enterprise Sales from Anthropic
- Sales consultant who works with 30+ AI startups
The opening question: “How has the funding environment changed your sales motion?”
Universal answer: “Everything is harder.”
The “Show Me Revenue” Mandate
The Scale AI CRO shared this:
“In 2021, we could raise on vision. In 2023, we needed a product. In 2025, we need REVENUE. Real, recurring, growing revenue.”
This maps PERFECTLY to @finance_fred’s data about VCs being more selective.
What VCs are asking now:
- What’s your ARR? (Annual Recurring Revenue)
- What’s your net retention rate?
- What’s your CAC payback period? (Customer Acquisition Cost)
- What’s your gross margin?
If you can’t answer these with REAL NUMBERS, you’re not getting funded.
The Databricks VP: “We see startups dying at Series A because they have users but not revenue. Free users don’t count anymore.”
The Valuation Compression Impact on Sales Teams
Here’s how the 30% valuation drop hits sales teams:
2021 Startup:
- Raised $10M seed at $40M valuation
- 25% dilution
- Hired 5 AEs (Account Executives) at $150K base + $150K OTE
- Burned $2M/year on sales
- Had 18 months to figure out sales
2025 Startup:
- Raises $7M seed at $28M valuation (30% lower)
- 25% dilution (same)
- Can only afford 3 AEs
- Burns $1.4M/year on sales
- Has 12 months to figure out sales
You have less time, less money, and fewer people to achieve the same revenue targets.
The sales consultant: “I’m seeing startups try to hit $10M ARR with 2 salespeople. It’s impossible. Then they run out of money and blame the sales team.”
The AI Sales Paradox
@finance_fred mentioned 64% of funding goes to AI. But here’s what’s happening on the ground:
Enterprise buyers are AI-fatigued.
The Anthropic sales head shared their win/loss analysis:
Top reasons enterprises DON’T buy AI products:
- “We already have 7 AI vendors” (buying fatigue)
- “We’re still figuring out our AI strategy” (paralysis)
- “Your solution is too expensive” (ROI scrutiny)
- “We’re concerned about data privacy” (@security_sam’s compliance issues)
- “We’re waiting to see who wins” (afraid to pick wrong horse)
Notice: NONE of these are “your product isn’t good enough.”
The market is oversaturated. Buyers are overwhelmed.
The Metrics That Matter for Your Next Raise
Based on the panel + @finance_fred’s VC insights, here’s what you need to raise your next round:
Seed to Series A:
- $1M ARR minimum (used to be $500K)
- 3x YoY growth (used to be 2x)
- <$1.50 CAC payback in months (used to be <18 months)
- 3+ referenceable enterprise customers (used to be 1)
Series A to Series B:
- $10M ARR minimum (unchanged)
- 3x YoY growth (unchanged)
-
100% net retention (new requirement)
- Clear path to profitability (NEW - never asked in 2021)
Series B to Series C:
- $50M ARR minimum (up from $30M in 2021)
- 2x YoY growth (unchanged)
-
15% operating margin or clear path to it (NEW)
- Multiple customer segments (can’t rely on one vertical)
The Scale CRO: “We’re being judged on SaaS metrics that took 20 years to establish. But we’re AI companies with 2 years of history. It’s not fair, but it’s reality.”
The 12-Year Exit Timeline Impact
@finance_fred mentioned exit timelines doubled to 12 years.
From a sales comp perspective, this is DEVASTATING:
Traditional startup equity pitch:
“Join us, work hard for 5-7 years, IPO, make life-changing money”
New reality:
“Join us, work hard for 10-12 years, maybe IPO, maybe M&A, maybe nothing”
The Databricks VP: “Our average sales rep tenure is 2.3 years. Our exit timeline is 12 years. Do the math. The equity pitch doesn’t work anymore.”
What’s replacing equity as motivation?
- Higher base salaries (cash now vs equity later)
- Accelerated vesting (1-year cliff → quarterly vesting)
- Refresh grants (annual equity top-ups)
- Cash bonuses tied to revenue (not company valuation)
But all of this costs MORE CASH, which early-stage startups don’t have (see: 30% lower seed valuations).
The Geographic Concentration Effect
@finance_fred mentioned US captured 64% of global funding.
From a sales perspective, this means:
If you’re a US startup:
- Easier to raise, but more competition for customers
- US enterprise buyers have 1,000+ vendors to choose from
- Sales cycles lengthening (buyers overwhelmed)
If you’re a European or Asian startup:
- Harder to raise, but potentially less competition
- Local enterprises prefer local vendors (data sovereignty)
- But market is smaller, so you cap out earlier
The sales consultant: “I have European clients with $50M ARR who can’t raise Series C because European VCs don’t write big checks and US VCs won’t invest in European companies. They’re stuck.”
The Sector Insight: Why Cybersecurity is Winning
@finance_fred mentioned cybersecurity got $4.9B in Q2 (highest in 3 years).
The panel explained why cybersecurity sells when other categories struggle:
- Fear-driven buying - CISOs are terrified of breaches
- Budget protected - Security budget is last to get cut
- Compliance mandated - Many industries MUST buy security
- AI creates new threats - New attack surfaces = new sales opportunities
The Scale CRO: “If I were starting a company today, I’d do AI security, not general AI. The market is desperate for solutions.”
The Brutal Advice for Founders
The panel’s consensus advice:
If you’re pre-revenue:
- Get to revenue FAST (6 months, not 18 months)
- Focus on paid pilots, not free trials
- You probably can’t raise right now (sorry)
If you’re $0-1M ARR:
- Don’t try to raise Series A yet
- Get to $2M ARR first with current cash
- Cut burn, extend runway
- Bootstrap if you can
If you’re $1-5M ARR:
- You’re in the “valley of death”
- Series A is brutal right now (highest failure rate)
- Need to show 3x growth to raise
- Consider bridge round from existing investors
If you’re $5M+ ARR:
- You’re in the top 10% of startups
- You can raise, but valuations are compressed
- Expect 2021 Series B = 2025 Series C
The Question Nobody Wants to Ask
Someone in the audience: “Should we just give up if we’re not an AI company?”
The Databricks VP (NOT an AI company, pre-AI boom): “We raised our last round at $38 billion valuation. You can build massive companies without AI. But you need real revenue, real margins, and real growth. The days of vision-based fundraising are over.”
Translation: If you have a real business, you can raise. If you have a PowerPoint, you can’t.
My Controversial Take
After hearing both @finance_fred’s VC panel and this sales panel, here’s what I believe:
We’re in a two-tier funding market:
Tier 1: AI companies with revenue traction
- Can raise at 2021 valuations
- VCs bidding against each other
- Sales cycles shortening (if you have clear ROI)
Tier 2: Everyone else
- Can raise at 2023-2024 valuations (30-50% down from peak)
- VCs highly selective
- Need profitability path, not just growth
If you’re in Tier 2, don’t compare yourself to AI companies raising at crazy valuations. Different game entirely.
Questions for Sales Leaders and Founders
-
What ARR milestones are VCs actually requiring for your next raise? (Be specific!)
-
How are you adjusting sales comp given 12-year exit timelines?
-
For non-AI companies: How are you positioning against AI-focused competitors?
-
What’s your CAC payback period? Is it getting better or worse in 2025?
Tomorrow I’m attending the founder mental health session - curious how funding stress is impacting founders psychologically.
Sources:
- SF Tech Week “Enterprise Sales in Age of AI” panel (Day 2)
- Scale AI, Databricks, Anthropic sales leaders’ insights
- Sales metrics and benchmarks discussed at panel
- Personal experience working with 15 early-stage startups on GTM