Understanding a company's sales strategy and ability to close leads is one of the most important parts of my job as a venture capitalist. When VITALIZE invests in seed stage companies, we are typically looking for founders who have been able to hit $500K+ of annual revenue. This early traction demonstrates the potential market viability as well as the founder's ability to generate revenue. 

I have noticed some emerging trends recently that help inform how I think about evaluating sales during due diligence:

Highly verticalized approaches are yielding best results out of the gate. With so many tech solutions on the market, those built specifically for one industry are faring better than general solutions. I think this is a trend that will only become more pronounced in the future and is a far departure from the horizontal world that prevailed in the 2010s and early 2020s. We are hearing more about "wedge strategies" in founder decks, which is another way to think about a very specific approach to proving product market fit out of the gate. Often times, these wedge strategies are aligned within a clearly defined vertical where the founder can tailor the product and messaging perfectly to their specific buyer profile.

Medium sized enterprises can be very attractive targets. Many VCs (myself included) have preferred to invest in companies with large enterprise clients due to the higher ACV (average contract value) per sale. However, I'm seeing a good number of interesting deals that focus on mid size businesses which still have a healthy ACV without as much competition for share of wallet. Small businesses continue to be the most challenging target market because of the high volume a founder has to sell to generate meaningful revenue, but mid size is definitely a growing area of interest for startups and VCs.

SaaS revenue models aren't a requirement as they have been in the past. For decades, VCs were inclined to discount or avoid startups unless they generated recurring revenue in the form of subscriptions. I believe buying patterns are changing, and executives are hesitant to be locked into long-term contracts with anyone other than core vendors. They would rather pay a transaction fee for software that generates value in real-time. I have shifted my thinking over time and tell founders that I am most interested in revenue growth, regardless if it's recurring or transactional. I think we will see more startups generate faster traction if they move to a transactional model which charges based on actual usage and value creation. Historically, exit multiples have been higher for subscription revenue, but I believe we will eventually see things equalize such that strong revenue growth and repeat dynamics can be just as valuable as traditional recurring revenue.

In-person sales are back in vogue. The influx of AI and tech solutions for sales and marketing have created an environment where there is so much noise that the pendulum has swung back to in-person being a key component of any sales strategy. I hear from founders that trade shows, curated dinners, and one-on-one meetings in person are the primary way that deals are getting done today. Leveraging AI to prospect can be part of a startup's strategy, but a strong sales motion that incorporates in-person touchpoints for mid to large sized contracts is critical.

I'd love to hear your thoughts. Are you seeing any other emerging sales trends worth noting?