If there’s one thing VCS agrees on when backing AI startups, it’s that AI requires a different investment approach than earlier technological changes.

“It’s a funky time,” said Eileen Lee, founder and managing partner of Cowboy Ventures at TechCrunch Disrupt 2025.

However, Lee also noted that, based on his firm’s research, Series A investors aren’t just looking for rapid revenue growth. “It’s an algorithm with different variables and different coefficients.”

According to Lee, investors now measure certain factors, including whether the startup is generating data, the strength of its competitive moat, the founders’ past accomplishments, 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.

Jon McNeill, co-founder and CEO of startup creation firm DVX Ventures, said that even startups growing rapidly from $5 million to $5 million 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 strict criteria to seed-stage startups that they previously reserved for more mature companies.

“I think a lot of investors have found that breakout companies, in most cases, McNeil doesn’t have the best tech,” McNeil said of why Series AVCS is looking so closely at startups’ ability to attract and retain customers. They have the best go-to market. “

Steve Jung, founder and managing partner of Candidate Ventures, 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 it takes both.”

Although McNeill later clarified that having a solid product is important, he indicated that his initial comment related to the need for founders to develop an exceptionally strong sales and marketing strategy right out of the gate. “Investors are becoming much more sophisticated in the going market than in the past,” he said.

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AI startups are now under pressure to deliver product updates and new features at an unprecedented pace, Eileen Lee added, and suggests existing companies might try to introduce similar products. “If you look at how much Openai and Anthropic are shipping, you have to figure out how quickly and how to match the quality,” he said.

Despite expectations of explosive growth and rapid product development, panelists agreed that the AI ​​industry is still in its infancy. As Jung said, “There are no clear, outright winners in LLM. Even in LLM. There are competitors hot on their heels.”

That means startups still have a ways to go to dethrone perceived leaders, whether they’re decades-old companies or fast-moving newcomers.