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 an exciting time,” said Eileen Lee, founder and managing partner 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 going from “zero to $100 million in revenue in a year.”
However, Lee also noted that, based on his firm’s research, Series A investors aren’t just looking for quick revenue growth. “It’s an algorithm with different variables and different coefficients.”
According to Lee, some of the factors investors now measure include whether a startup is generating data, the strength of its competitive moat, the founders’ past achievements and the product’s technical depth. “Depending on what your company is, the output of the algorithmic formula is going to be different,” he said.
John McNeil, co-founder and CEO of startup creation firm DVx Ventures, says that even startups that quickly grow to $5 million in revenue from inception often struggle to secure follow-on funding. I think this game has changed, and it’s changing dynamically,” he said.
McNeill noted that Series A investors are now applying the same strict standards to seed-stage startups that they previously reserved for more mature companies.
“I think a lot of investors have found that breakout companies, for the most part, There isn’t the best technology,” McNeil says of why Series A VCs are looking so closely at a startup’s ability to attract and retain customers.
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Kindred Ventures founder and managing partner Steve Zhang disagrees that a strong go-to-market (GTM), an industry term for sales and marketing, carries more weight for investors. I don’t think it’s 100% true to say mediocre technology, great GTM wins and raises money and gets customers. I think having both is a necessary requirement.”
Although McNeil later clarified that having a solid product was important, he indicated that his initial comment was related to the founders‘ need to develop an exceptionally strong sales and marketing strategy out of the gate. “Investors are becoming much more sophisticated in how they approach the market than in the past,” he said.
(The marketing vs. technology debate was brought to the fore later in the conference when Roy Lee, founder of viral startup Cluly, said on stage that launching a product that barely works, even with massive social media fame, may not always be the best idea.)
Eileen Lee added that AI startups are now under pressure to deliver product updates and new features at an unprecedented pace, outpacing existing companies that may try to introduce similar products. If you look at how much OpenAI and Anthropic are shipping, you have to figure out how much you ship, how fast, and match the quality,” he said.
Despite expectations of explosive growth and rapid product development, panelists agreed that the AI industry is still in its very early stages. As Zhang puts it, “There is no clear, outright winner, even in the LLM. There are competitors nipping at their feet.”
That means startups still have a ways to go to upset perceived leaders, whether they’re decade-old companies or fast-moving newbies.