If there’s one thing VCs agree on when backing AI startups, it’s that AI requires a different investment approach than previous technological changes.
“It’s a funky time,” said Aileen Lee, founder and CEO of Cowboy Ventures, on stage at TechCrunch Disrupt 2025. The longtime VC noted that the rules of investing have changed significantly now that some AI companies are jumping from “zero to $100 million in revenue in a single year.”
But Lee also noted that, based on her firm’s research, Series A investors aren’t just looking for rapid revenue growth. “It’s an algorithm with different variables and different coefficients.”
Some of the factors investors now measure, according to Lee, include whether the startup is generating data, the strength of its competitive moat, the founders’ past achievements and the technical depth of the product. “Depending on what your company is, the output of the algorithmic formula will be different,” he said.
Jon McNeill, co-founder and CEO of startup DVx Ventures, said that even startups that grow quickly from the ground up to $5 million in revenue often struggle to secure further funding. “I think this game has changed and it’s changing dynamically,” he said.
McNeil noted that Series A investors are now applying the same rigorous standards to startups that they previously reserved for more mature companies.
“I think a lot of investors have realized that companies that break out, in most cases, they don’t have the best technology,” McNeill said about why Series A VCs look so closely at startups’ ability to attract and retain customers. “They have the best market.
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Steve Jang, founder and managing partner of Kindred Ventures, disagreed that a strong go-to-market (GTM), an industry term for sales and marketing, carries more weight with investors. “I don’t think it’s 100% true to say that mediocre technology, great GTM wins and raises money and gets customers. I think it’s a necessary condition to have both.”
While McNeill later clarified that having a solid product is important, he said his initial comment related to the founders’ need to develop an extremely strong sales and marketing strategy right out of the gate. “Investors are becoming much more sophisticated in the market than in the past,” he said.
(The marketing vs. technology debate came to the fore later in the conference when Roy Lee, founder of viral startup Cluely, said on stage that launching a product that barely worked, even with massive social media buzz, might not always be the best idea.)
Aileen Lee added that AI startups are now under pressure to deliver product updates and new features at an unprecedented pace, preempting existing companies that might try to introduce similar products. “If you look at how much OpenAI and Anthropic are shipping, you have to figure out how to match how much you’re shipping, how fast, and the quality of it,” he said.
Despite expectations of breakneck growth and rapid product development, panelists agreed that the AI industry is still in its very early stages. As Jang put it, “There are no clear-cut, clear-cut winners, even in LLMs. There are competitors nipping at their heels.”
That means startups still have a path to unseat perceived leaders, whether they’re decades-old companies or fast-moving newcomers.
