VCs abandon old rules for a ‘funky time’ of investing in AI startups

If there’s one thing that VCs agree on when backing AI startups, it’s that AI requires a different investment approach than prior technological shifts.

As Aileen Lee, founder and managing partner of Cowboy Ventures, pointed out at JS Disrupt 2025, the landscape of investing in AI companies has drastically changed. With some AI startups achieving remarkable revenue growth, going from zero to $100 million in a single year, traditional investment rules no longer apply.

Lee emphasized that Series A investors are now looking beyond just rapid revenue growth. They are taking into account a myriad of factors such as the startup’s ability to generate data, the strength of its competitive edge, the founders’ track record, and the technical sophistication of the product. This shift in focus has led to a more nuanced approach to evaluating investment opportunities.

Jon McNeill, co-founder and CEO of DVx Ventures, highlighted the challenges faced by startups even after achieving rapid revenue growth. Securing follow-on funding has become increasingly difficult, as Series A investors now demand the same level of scrutiny for seed-stage startups as they do for more established companies.

McNeill emphasized the importance of having a strong go-to-market strategy, stating that breakout companies often excel in customer acquisition rather than having the best technology. While Steve Jang of Kindred Ventures disagreed slightly, emphasizing the need for a balance between technology and go-to-market strategy, the consensus was clear – startups need to excel in both areas to attract investors.

Amidst the debate over the importance of marketing versus technology, the need for rapid product development and frequent updates was underscored. AI startups are under immense pressure to stay ahead of the curve and deliver cutting-edge features to outpace competitors.

Despite the frenetic pace of growth and innovation in the AI industry, panelists agreed that the landscape is still nascent. There are no clear winners yet, even among established players. This presents a unique opportunity for startups to disrupt the status quo and challenge industry incumbents.