Why investing in growth-stage AI startups is getting riskier and more complicated
Making a bet on AI startups has never been so exciting -- or more risky. Incumbents like OpenAI, Microsoft, and Google are scaling their capabilities fast to swallow many of the offerings of smaller companies. At the same time, new startups are reaching the growth stage much faster than they historically have.
But defining "growth stage" in AI startups is not so cut-and-dried today.
Jill Chase, partner at CapitalG, said on stage at TechCrunch AI Sessions that she's seeing more companies that are only a year old, yet have already reached tens of millions in annual recurring revenue and more than $1 billion in valuation. While those companies might be defined as mature due to their valuation and revenue generation, they often lack much of the necessary safety, hiring, and executive infrastructure.
'On one hand, that's really exciting. It represents this brand new trend of extremely fast growth, which is awesome,' Chase said. 'On the other hand, it's a little bit scary because I'm gonna pay at an $X billion valuation for this company that didn't exist 12 months ago, and things are changing so quickly.'
'Who knows who is in a garage somewhere, maybe in this audience somewhere, starting a company that in 12 months will be a lot better than this one I'm investing in that's at $50 million ARR today,' Chase continued. 'So it's made growth investing a little confusing.'
To cut through the noise, Chase said it's important for investors to feel good about the category and the 'ability of the founder to very quickly adapt and see around corners.'
She noted that AI coding startup Cursor is a great example of a company that 'jumped on the exact right use case of AI code generation that was available and possible given the technology at the time.'
However, Cursor will need to work to maintain its edge.
'There will be, by the end of this year, AI software engineers,' Chase said. 'In that scenario, what Cursor has today is going to be a little less relevant. It is incumbent on the Cursor team to see that future and to think, okay, how do I start building my product so that when those models come out and are much more powerful, the product surface represents those and I can very quickly plug those in and switch into that state of code generation?'
This article originally appeared on TechCrunch at https://techcrunch.com/2025/06/06/why-investing-in-growth-stage-ai-startups-is-getting-riskier-and-more-complicated/
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
OpenAI to appeal copyright ruling in NY Times case as Altman calls for 'AI privilege'
OpenAI CEO Sam Altman said Thursday that the company plans to appeal a court decision in a copyright case brought by The New York Times. "Recently the NYT asked a court to force us to not delete any user chats. We think this was an inappropriate request that sets a bad precedent," Altman wrote in a post on X, adding that the company is "appealing the decision." Ai-generated Attorney Outrages Judge Who Scolds Man Over Courtroom Fake: 'Not A Real Person' "We will fight any demand that compromises our users' privacy; this is a core principle." The OpenAI co-founder said the case has accelerated the need for a conversation about "AI privilege," in which "talking to an AI should be like talking to a lawyer or a doctor." "I hope society will figure this out soon," Altman wrote, suggesting that "spousal privilege" might be a better analogy. Read On The Fox Business App The copyright case, brought by The New York Times, requires OpenAI to preserve ChatGPT output data indefinitely at the outlet's request. Ai's Development Is Critically Important For America – And It All Hinges On These Freedoms U.S. District Judge Sidney Stein was asked to vacate the May data preservation order on June 3, according to a court filing obtained by Reuters. The New York Times sued OpenAI and Microsoft in late 2023, accusing them of using millions of its articles without permission to train the large language model powering ChatGPT. "Defendants' generative artificial intelligence ('GenAI') tools rely on large-language models ('LLMs') that were built by copying and using millions of The Times's copyrighted news articles, in-depth investigations, opinion pieces, reviews, how-to guides, and more," the lawsuit says. The lawsuit claims that while defendants "engaged in widescale copying from many sources," OpenAI "gave Times content particular emphasis when building their LLMs — revealing a preference that recognizes the value of those works." Chatgpt Will Now Combat Bias With New Measures Put Forth By Openai "Using the valuable intellectual property of others in these ways without paying for it has been extremely lucrative for Defendants," the lawsuit says. "Microsoft's deployment of Times-trained LLMs throughout its product line helped boost its market capitalization by a trillion dollars in the past year alone. And OpenAI's release of ChatGPT has driven its valuation to as high as $90 billion." Stein said in an April court opinion that The Times had made a case that OpenAI and Microsoft were responsible for inducing users to infringe its copyrights. The opinion explained an earlier order that rejected parts of an OpenAI and Microsoft motion to dismiss, saying that the Times' "numerous" and "widely publicized" examples of ChatGPT producing material from its articles justified allowing the claims to continue. OpenAI COO Brad Lightcap said The New York Times and other plaintiffs "have made a sweeping and unnecessary demand in their baseless lawsuit against us: retain consumer ChatGPT and API consumer data indefinitely." "This fundamentally conflicts with the privacy commitments we have made to our users. It abandons long-standing privacy norms and weakens privacy protections," Lightcap said in a press release. "We strongly believe this is an overreach by The New York Times. We're continuing to appeal this order so we can keep putting your trust and privacy first. Click Here To Get Fox Business On The Go FOX Business has reached out to The New York Times for comment on OpenAI's appeal. FOX Business' Danielle Wallace and Reuters contributed to this report. Original article source: OpenAI to appeal copyright ruling in NY Times case as Altman calls for 'AI privilege'
New York Times
2 hours ago
- New York Times
Welcome to Campus. Here's Your ChatGPT.
OpenAI, the maker of ChatGPT, has a plan to overhaul college education — by embedding its artificial intelligence tools in every facet of campus life. If the company's strategy succeeds, universities would give students A.I. assistants to help guide and tutor them from orientation day through graduation. Professors would provide customized A.I. study bots for each class. Career services would offer recruiter chatbots for students to practice job interviews. And undergrads could turn on a chatbot's voice mode to be quizzed aloud ahead of a test. OpenAI dubs its sales pitch 'A.I.-native universities.' 'Our vision is that, over time, A.I. would become part of the core infrastructure of higher education,' Leah Belsky, OpenAI's vice president of education, said in an interview. In the same way that colleges give students school email accounts, she said, soon 'every student who comes to campus would have access to their personalized A.I. account.' To spread chatbots on campuses, OpenAI is selling premium A.I. services to universities for faculty and student use. It is also running marketing campaigns aimed at getting students who have never used chatbots to try ChatGPT. Some universities, including the University of Maryland and California State University, are already working to make A.I. tools part of students' everyday experiences. In early June, Duke University began offering unlimited ChatGPT access to students, faculty and staff. The school also introduced a university platform, called DukeGPT, with A.I. tools developed by Duke. OpenAI's campaign is part of an escalating A.I. arms race among tech giants to win over universities and students with their chatbots. The company is following in the footsteps of rivals like Google and Microsoft that have for years pushed to get their computers and software into schools, and court students as future customers. Want all of The Times? Subscribe.
Business Insider
3 hours ago
- Business Insider
Who will be Trump's new Silicon Valley bestie?
Mark Zuckerberg, Meta Platforms founder and CEO Zuckerberg was something of a MAGA stan earlier this year. Meta, his company, dropped $1 million on Trump's inauguration, and Zuck even co-hosted a black-tie soirée that night to honor the second-time president. Now, with Meta in the throes of a federal antitrust lawsuit, Zuckerberg may not be on Trump's good side. But the Meta CEO could be playing the long game here: He snapped up a $23 million, 15,000 square-foot DC mega mansion, establishing more of a presence in the capital. Zuck has also been on a bit of a rebrand journey, from a hoodie-wearing founder to a gold chain-wearing CEO with unapologetic swagger. Part of this transformation has included podcast appearances, like an episode with Trump-endorsing Joe Rogan in which Zuck talked about his "masculine energy" and his proclivity for bowhunting. Sam Altman, OpenAI cofounder and CEO Altman has also been circling the throne. First came Stargate: the $100 billion AI infrastructure plan between OpenAI, Oracle, and SoftBank, announced the day after Trump's inauguration. Then, in May, the OpenAI CEO joined Trump on a trip to Saudi Arabia while Altman was working on a massive deal to build one of the world's largest AI data centers in Abu Dhabi. This reportedly rattled Musk enough to tag along at the last minute, according to the Wall Street Journal. OpenAI was ultimately selected for the deal, which Musk allegedly attempted to derail, the Wall Street Journal reported. Jeff Bezos, Amazon founder and executive chairman, Washington Post owner, and Blue Origin founder Back in 2015, Bezos wanted to launch Trump into orbit after the at-the-time presidential candidate fired shots at Bezos on what was Twitter, now X, calling the Washington Post, which Bezos owns, a "tax shelter," Bezos responded that he'd use Blue Origin, a space company Bezos founded, to "#sendDonaldtospace." Times have certainly changed. In January, Bezos said he is "very optimistic" about the administration's space agenda. Behind the scenes, he has reportedly given Trump political advice, allegedly as early as the summer of 2024, according to Axios. There was a brief flare-up in April, though, after Amazon reportedly considered listing Trump's tariffs next to products' prices on the site, according to Punchbowl News. White House press secretary Karoline Leavitt called the plan a "hostile and political action." The idea, which was never implemented, was scrapped, and an Amazon spokesperson insisted it was only ever meant for its low-cost Haul store. If Trump does cancel Musk's SpaceX government contracts as he threatened to do, Bezos' Blue Origin, and rival to SpaceX, could stand to benefit. Blue Origin already has a $3 billion contract with NASA. Jensen Huang, Nvidia cofounder and CEO While Huang was notably missing from Trump's second inauguration in January, he did attend the Middle East trip in May. Nvidia is partnering with Oracle, SoftBank, and G42 on the OpenAI data center plans in the UAE. But Nvidia hasn't gotten off too easy: In April, Trump banned the chip maker from selling its most advanced chips, the H20, to China, a move that Nvidia says cost it $5.5 billion and reportedly prompted the company to modify the chip for China to circumvent US export controls. Sundar Pichai, Google CEO In April, a federal judge ruled that Google holds an illegal monopoly in some advertising technology markets. This is one of two major legal blows to Google in the past year: Back in August 2024, a federal judge ruled that Google violated antitrust law with its online search. If Google has to sell Chrome, Barclays told clients on Monday, Alphabet stock could fall 25%. This flurry of litigation — and potential divestment of the Chrome business — puts Pichai between a rock and a hard place. While the CEO was spotted with the rest of the technorati at Trump's inauguration, it's hard to say how he might cozy up to Trump, and whether friendly relations would do anything to remedy these rulings.
