Why an AI Agency
Can't Raise VC Money
Table of Contents
How to Raise Series A: Don’t Fall into the AI Agency Trap!
Why does an AI Agency struggle to raise money? Well, the truth is that VCs are looking to invest in software not in consultancies, because software can scale up but consulting can’t. If you are selling more consulting then software, then you have a problem. Every time a major customer asks you for custom work and professional services to buy your product. You need to repeat to yourself “SaaS Startups raise Series A, consultancies don’t”. The truth is, your big customer probably isn’t going to buy your product after a custom feature. And even if he is, your startup will not have sold SaaS and therefore will not have created any value or real growth.
How to Raise Series A: Don’t Fall into the POC Trap
We work with AI companies and AI Agencies every day to help them implement enterprise sales strategies focused on selling software. Yet, time and again, we meet companies who want to grow their technology, sell SaaS, land big accounts, but instead they become an AI Agency managing a Proof of Concept factory.
The result is simple: low gross margins and the company’s momentum sinks in a few months. Don’t be that startup!
Why only SaaS Startups raise Series A
VCs are looking for strong vision, and SaaS is a commitment to a strong vision, as customers don’t just buy a tool for the next few weeks, but a vision for years to come. Enterprise software sales can be renewed for over a decade as long as the vendor does not make any major mistakes.
SaaS is a superior business model as the buyer frees up capital and the vendor has more visibility to invest in R&D and maintain a competitive advantage.
Consultants can’t Triple Triple Double Double Double if they are busy reselling their expertise to the same customer for every next iteration.
Selling anything other than SaaS may help get some $ in your bank account in the short term, but it is not traction and will not grow your valuation.