Listen Labs, an AI market research startup, walked away from a signed term sheet for a $125 million Series C that would have valued the company at $1.5 billion, according to people familiar with the matter. Menlo Ventures was set to lead the financing, but the round did not close as Listen Labs entered acquisition discussions with Salesforce.
Walking away from a signed term sheet is uncommon in venture capital and is generally frowned upon by investors, several VCs told TechCrunch. The financing reportedly fell apart as another potential outcome emerged for the three-year-old startup.
Salesforce Discusses a Possible $2 Billion Acquisition
Salesforce has held talks to acquire Listen Labs for about $2 billion, according to Business Insider. The discussions have not been finalized and may still end without an agreement.
Listen Labs currently generates about $30 million in annualized revenue, according to two people familiar with its finances. A $2 billion acquisition would therefore value the company at roughly 67 times its annualized revenue, a price that Salesforce could ultimately consider too high, according to a person with experience negotiating exits to the company.
Several VCs said that if the Salesforce discussions fail, they expect Listen Labs to return to fundraising and seek a valuation of at least $2 billion. Simile, a competing startup that predicts human behavior, reached that valuation in July after raising a $200 million Series B led by Greenoaks.
Listen Labs generates about three times Simile’s annualized revenue, according to people familiar with both companies. That financing may have helped establish a higher valuation benchmark for Listen Labs.
AI Takes on Customer Research
Listen Labs was founded in 2023 by Florian Jüngermann, a former German national champion in competitive programming, and Alfred Wahlforss, who previously founded staffing startup Bemlo. The founders met while pursuing master’s degrees at Harvard, while Sequoia Capital has backed the company since its early stage.
The platform uses AI to create survey questions and interview customers through audio or video. It then analyzes the conversations and produces research reports and PowerPoint presentations, work traditionally handled by human market researchers over longer periods.
Customers include Microsoft, Canva, Anthropic and Sweetgreen. Listen Labs competes with companies including Outset, Keplar, Aaru and Simile, although their methods differ between interviewing real participants and using AI-generated people to predict human responses.
Listen Labs was valued above $500 million when it raised a $69 million Series B in January. The company said in its official Series B announcement that the round brought its total funding to $100 million and was led by Ribbit Capital, with participation from Evantic, Sequoia Capital, Conviction and Pear VC.
Listen Labs, Salesforce, Menlo Ventures and Simile did not immediately respond to requests for comment.
Featured image credits: Listen Labs
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