If there’s one thing VCs agree on when backing AI startups, it’s that AI requires a different investment approach than previous technology changes.
“These are funky times,” said Eileen Lee, founder and managing partner of Cowboy Ventures, on stage at TechCrunch Disrupt 2025. The longtime venture capitalist said some AI companies have gone from “zero to $100 million in revenue in a year,” and the rules for investing have changed dramatically.
But Lee also pointed out 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.”
Factors that investors are currently measuring include whether a startup is producing data, how competitive it is, the founder’s past performance, and the technical depth of the product, Lee said. “Depending on what your company is, the output of the algorithm formula will be different,” she said.
John McNeil, co-founder and CEO of startup creation firm DVx Ventures, said even startups that grow rapidly from inception to $5 million in revenue often struggle to secure follow-on funding. “I think the game has changed and it’s changing dynamically,” he said.
McNeil noted that Series A investors are now applying the same rigorous standards to seed-stage startups that were previously reserved for more mature companies.
“I think a lot of investors realize that breakout companies almost always don’t have the best technology,” McNeil said of why Series A VCs are so focused on startups’ ability to attract and retain customers. “They have the best go-to market.”
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Steve Jang, founder and managing partner of Kindred Ventures, disagreed that strong go-to-market (GTM), an industry term for sales and marketing, is more important to investors. “I don’t think it’s 100% true that mediocre technology and great GTM will be successful, raise money, and win customers. I think having both is a necessary requirement.”
Although McNeil later clarified that having a solid product is important, his initial comments were related to the need for founders to develop a very strong sales and marketing strategy from the beginning. “Investors are much more sophisticated about the markets they rely on than they have been in the past,” he said.
(The debate over marketing vs. technology came to the forefront later in the conference when Roy Lee, founder of viral startup Cluley, said on stage that launching a product that barely works, even if it’s achieved great social media fame, isn’t necessarily the best idea.)
Eileen Lee added that AI startups are currently under pressure to deliver product updates and new features at an unprecedented pace, staying ahead of incumbents seeking to introduce similar products. “If you look at the shipping volumes of OpenAI and Anthropic, you have to think about how to match shipping volume, shipping speed, and quality,” she said.
Despite expectations for tremendous growth and rapid product development, panelists agreed that the AI industry is still in its very early stages. As Jiang says, “Even in an LLM, there is no clear outright winner. There are competitors coming after them.”
This means that startups, whether they are decades-old established companies or radical startups, still have a path to take over leadership positions.
