If there’s one thing VCs agree on when it comes to investing in AI startups, it’s that the approach needs to be different from past tech revolutions.
“It’s a funky time,” said Aileen Lee, founder and managing partner of Cowboy Ventures, during her talk at TechCrunch Disrupt 2025. The seasoned venture capitalist remarked that the landscape has changed drastically, with some AI firms managing to go from “zero to $100 million in revenue in just a year.”
However, Lee pointed out that Series A investors aren’t solely focused on rapid revenue growth. “It’s an algorithm with different variables and different coefficients.”
According to Lee, some key factors investors are now looking at include whether the startup is generating data, the robustness of its competitive moat, the founders’ previous achievements, and the technical depth of the product. “Depending on what your company is, the output of the algorithmic formula will vary,” she explained.
Jon McNeill, co-founder and CEO of DVx Ventures, emphasized that even startups that quickly scale to $5 million in revenue often find it tough to secure follow-on funding. “This game has changed, and it’s evolving all the time,” he said.
McNeill observed that Series A investors are applying stricter standards to seed-stage startups that they once reserved for more established companies.
“I think many investors have realized that the breakout companies often don’t have the best technology,” McNeill noted, highlighting that Series A VCs are increasingly focusing on startups’ ability to attract and keep customers. “They have the best go-to market.”
Steve Jang, founder and managing partner of Kindred Ventures, disagreed, arguing that it’s not entirely accurate to say that mediocre technology can win out over great go-to-market strategies. “Both elements are necessary,” he said.
While McNeill later affirmed the importance of having a solid product, he clarified that his earlier comment underscored the founders’ need to establish a robust sales and marketing strategy from the start. “Investors are becoming much more sophisticated regarding the go-to market than they have been in the past,” he stated.
This debate over the importance of marketing versus technology took center stage later during the conference when Roy Lee, founder of the viral startup Cluely, pointed out that launching a product that barely functions, even with a massive social media following, might not always be the best approach.
Aileen Lee further noted that AI startups are now facing pressure to roll out product updates and new features at an unprecedented speed, ahead of existing companies that might attempt to introduce similar offerings. “If you look at how much OpenAI and Anthropic are shipping, you’ll need to figure out how to keep pace in both quantity and quality,” she said.
Despite the high expectations for rapid growth and quick product development, the panelists agreed that the AI industry is still in its formative stages. As Jang remarked, “There are no clear, outright winners, even in LLMs. Competitors are right on their tails.”
This landscape means startups still have opportunities to challenge the perceived leaders, whether they are long-established firms or agile newcomers.
