VCs are abandoning the old rules in favor of the “cool time” of investing in AI startups

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

“It’s a cool time,” said Aileen Lee, founder and managing partner of Cowboy Ventures, on stage at TechCrunch Disrupt 2025. The longtime VC noted that the rules of investing have modified significantly now, with some AI firms jumping “from zero revenue to $100 million in one year.”

However, Lee also noted that her firm’s research shows that Series A investors don’t just expect rapid revenue growth. “It’s an algorithm with different variables and different coefficients.”

According to Lee, some of the aspects investors are currently measuring include whether the startup is generating data, the strength of its competitive advantage, the founders’ past track record and the technical depth of the product. “Depending on what your business is, the result of the algorithmic formula will be different,” she said.

Jon McNeill, co-founder and CEO of startup development firm DVx Ventures, said that even startups that grow quickly from the start and reach $5 million in revenue often struggle to secure follow-up funding. “I think the game has changed and is changing dynamically,” he said.

McNeill noted that Series A investors are now applying the same rigorous standards to seed-stage startups that were previously reserved for more mature firms.

“I think a lot of investors have realized that these are breakthrough firms in most cases they do not have the best technology,” McNeill said of why Series A VCs are looking so closely at startups’ ability to attract and retain customers. “They have the best go-to-market.”

Steve Jang, founder and managing partner of Kindred Ventures, disagreed that strong go-to-market (GTM), the industry term for sales and marketing, is more necessary to investors. “I don’t think it’s 100% true to say that mediocre technology, great GTM wins, raises money and gets customers. I think having both is a necessary requirement.”

Although McNeill later explained that having a solid product was necessary, he indicated that his initial concern was related to the founders’ have to develop an exceptionally strong sales and marketing strategy from the outset. “Investors are becoming more sophisticated in the markets they enter than they have been in the past,” he said.

(The marketing vs. technology debate got here to the fore later in the conference when Roy Lee, founder of the viral startup Cluely, said on stage that launching a product that hardly worked, even with massive social media fame, is not at all times the best idea.)

Aileen Lee added that AI startups are now under pressure to deliver product updates and latest features at an unprecedented pace, outpacing existing firms that may be attempting to launch similar products. “If you look at the volume of OpenAI and Anthropic products being shipped, you’re going to have to figure out how to match quantity, speed and quality,” she 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, outright winners, even in LLM. There are competitors nipping at their heels.”

This implies that startups still have a technique to unseat perceived leaders, whether or not they are decades-old firms or fast-growing upstarts.