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AI startups’ margin profile could ding their long-term worth
Despite all the enthusiasm, there's a niggling detail that deserves our attention: AI startups often have worse economics than most software startups.
Fittingly, startups and investors are working overtime to build and fund new technology companies to either create or implement new AI tech. Major rounds are often in the headlines, and startups are building at breakneck speeds to stay ahead of both the technology curve and the largest tech companies that have their own AI strategies. Back in 2020, venture firm a16z argued that AI startups would have lower gross margins due to “heavy cloud infrastructure usage and ongoing human support.”
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