How Bigger ACVs Are Bringing Direct Sales Back To Vertical AI
In a guest essay, Defy general partner Medha Agarwal argues that larger deal sizes are bringing direct sales back to vertical AI startups. Because vertical AI products replace labor rather than software, their annual contract values have jumped to 6- and 7-figure deals, paid partly out of headcount budgets rather than only software budgets. That economics shift makes high-touch direct sales viable further down market, and Agarwal highlights two channels driving distribution: private equity networks and industry conferences.
Key Takeaways
- Successful vertical AI startups are increasingly using channels like private equity networks and industry conferences to drive distribution, recognizing that larger deal sizes require a fundamentally different go-to-market playbook than traditional vertical SaaS.
Guest author Medha Agarwal, a general partner at Defy.vc, explains just what that means.
- As a result, ACVs have jumped meaningfully to 6- and 7-figure deals.
I've written before about how AI opened up distribution for vertical SaaS, and how the value framing shifted from subscription pricing to labor substitution economics .
- With vertical AI ACVs frequently landing in the 6- or 7-figure range, founders now have room to invest meaningfully in winning each logo.
We're also seeing these smaller businesses spending relatively more with quicker sales cycles which is enabling higher volume.
- The motivation is sometimes EBITDA driven, but can also be softer than that.
Many of these execs are focused on adding value across the portfolio, helping companies build AI competency, and coming up with an execution plan.
- We've seen this be particularly successful in industries where rollup strategies are popular like healthcare services, dental, MSP, accounting, legal, financial advisory, insurance brokerage, home services and industrial.
Successful vertical AI startups are increasingly using channels like private equity networks and industry conferences to drive distribution, recognizing that larger deal sizes require a fundamentally different go-to-market playbook than traditional vertical SaaS. Guest author Medha Agarwal, a general partner at Defy.vc, explains just what that means. Guest Author By Medha Agarwal For more than a decade, customers spent their software budget procuring vertical SaaS products.
ACVs, or annual contract values, were modest, customer acquisition cost had to stay below a ceiling, and the resulting go-to-market playbook was product-led growth, SDR-led and content-driven. With AI, many products are no longer SaaS but usage and outcomes based. They are replacing labor, not software.
At my investment firm, Defy , we call this new category of companies vertical AI. Vertical AI spend doesn't just come from a customer's software budget. It often comes out of headcount as well, a much larger line item.
For more details please read the original article at Crunchbase News.
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