Venture capitalists are shifting their investment strategies as AI startups disrupt traditional growth patterns, emphasizing rapid innovation and a nuanced approach to evaluating potential winners in this fast-evolving space.
A New Era for AI Startup Investments
At TechCrunch Disrupt 2025, Aileen Lee, founder and managing partner of Cowboy Ventures, described the current climate for AI startups as “a funky time.” She highlighted how some AI companies are achieving extraordinary growth, leaping from zero to $100 million in revenue within a single year, signaling a significant shift in investment dynamics.
Changing Metrics for Series A Investors
Lee explained that Series A investors are no longer solely focused on rapid revenue growth. Instead, they consider a variety of factors including data generation, competitive moats, founders’ track records, and the technical depth of the product. “It’s an algorithm with different variables and different coefficients,” she said, emphasizing that the evaluation formula varies depending on the startup’s nature.
Jon McNeill, co-founder and CEO of DVx Ventures, noted that even startups with quick early revenue growth often face challenges securing follow-on funding. He observed that Series A investors are applying rigorous standards traditionally reserved for mature companies to seed-stage startups as well.
The Debate: Technology vs. Go-To-Market Strategy
McNeill pointed out that breakout companies often don’t have the best technology but excel in go-to-market strategies, which focus on customer acquisition and retention. However, Steve Jang, founder and managing partner of Kindred Ventures, disagreed, stating that both strong technology and go-to-market execution are necessary for success.
McNeill later clarified that while a solid product is essential, founders must develop exceptionally strong sales and marketing strategies from the outset, as investors have become more sophisticated in evaluating go-to-market approaches.
This discussion was further highlighted during the conference when Roy Lee, founder of viral startup Cluely, cautioned against launching products that barely work despite social media hype.
The Pressure to Innovate Rapidly
Aileen Lee emphasized the intense pressure on AI startups to deliver frequent product updates and new features to stay ahead of competitors. She cited companies like OpenAI and Anthropic as examples of rapid innovation, noting that startups must match their speed and quality to remain competitive.
Early Days and Open Opportunities in AI
Despite the rapid growth expectations, panelists agreed that the AI industry remains in its early stages. Steve Jang remarked, “There are no clear, outright winners, even in LLMs. There are competitors nipping at their heels.” This environment offers startups opportunities to challenge established players, whether they are longstanding companies or fast-moving newcomers.