what top vcs want from ai founders At TechCrunch Disrupt 2025, leading venture capitalists Jon McNeill, Aileen Lee, and Steve Jang provided valuable insights into what AI founders must consider to attract investment.
what top vcs want from ai founders
Understanding the AI Landscape
The artificial intelligence sector has rapidly evolved, becoming one of the most dynamic areas for investment. As the technology continues to advance, the expectations of investors have also shifted. Founders entering this space must be aware of the unique challenges and opportunities that come with developing AI-driven solutions.
Jon McNeill, co-founder of DVx Ventures, emphasized the importance of understanding the competitive landscape. “AI is not just about having a great idea; it’s about how defensible that idea is in a crowded market,” he stated. This sentiment reflects a growing concern among investors regarding the sustainability of AI startups amidst increasing competition.
The Importance of Defensibility
Defensibility refers to a startup’s ability to maintain a competitive edge over time. In the AI sector, this can be particularly challenging due to the rapid pace of technological advancements and the influx of new entrants. McNeill highlighted several factors that contribute to a startup’s defensibility:
- Proprietary Technology: Having unique algorithms or data sets can provide a significant advantage.
- Network Effects: As more users engage with a product, its value often increases, creating a barrier for competitors.
- Regulatory Compliance: Navigating the complex regulatory landscape can be a hurdle for competitors, especially in sectors like healthcare or finance.
Investors are increasingly looking for startups that can demonstrate a clear path to defensibility. Aileen Lee, founder of Cowboy Ventures, noted, “Investors want to see that you have thought through how to protect your business model and technology.” This perspective underscores the necessity for founders to articulate their strategies for sustaining a competitive advantage.
Building a Strong Team
Another critical aspect that VCs focus on is the founding team. Steve Jang, co-founder of Kindred Ventures, stressed that a strong team can often be more important than the product itself. “Investors are betting on people, not just ideas,” he remarked. A capable team can pivot, adapt, and overcome challenges that may arise during the startup journey.
Key Team Attributes
When evaluating a founding team, investors typically look for several key attributes:
- Domain Expertise: Founders should possess deep knowledge of the industry they are entering, particularly in AI, where technical expertise is paramount.
- Complementary Skills: A well-rounded team with diverse skill sets can tackle various aspects of the business more effectively.
- Resilience: The startup journey is fraught with challenges; a resilient team is better equipped to navigate setbacks.
Lee added, “A strong team can pivot when necessary. If you have the right people, you can adapt your product or strategy based on market feedback.” This adaptability is crucial in the fast-paced AI landscape, where market needs can shift rapidly.
Financial Considerations and Term Sheets
Understanding the financial aspects of running a startup is vital for founders seeking investment. McNeill, Lee, and Jang discussed the importance of term sheets, which outline the terms of an investment agreement between founders and investors. A well-structured term sheet can set the stage for a successful partnership.
Key Components of a Term Sheet
Founders should familiarize themselves with the following components of a term sheet:
- Valuation: This determines how much of the company an investor will own after the investment.
- Equity Stake: Founders need to understand how much equity they are willing to give up in exchange for funding.
- Liquidation Preferences: This clause outlines how proceeds from a sale or liquidation will be distributed among investors and founders.
- Board Composition: Investors often want a say in company decisions, which can affect the founding team’s autonomy.
Understanding these components is essential for founders to negotiate effectively and ensure that they are not giving away too much control or equity. Jang advised, “Always consult with a legal expert when reviewing term sheets. It’s crucial to understand the implications of each clause.” This advice is particularly relevant for first-time founders who may be unfamiliar with the intricacies of investment agreements.
Market Timing and Trends
Another critical factor that VCs consider is market timing. The AI sector is influenced by various trends, and being aware of these can help founders position their startups for success. McNeill pointed out, “Timing can be everything. You want to be ahead of the curve but not too far ahead that the market isn’t ready for your solution.” This balance is essential for founders to navigate effectively.
Current Trends in AI
Several trends are currently shaping the AI landscape:
- Generative AI: Technologies that can create content, such as text, images, and music, are gaining traction.
- AI Ethics: As AI becomes more integrated into daily life, ethical considerations are becoming increasingly important.
- AI in Healthcare: The application of AI in healthcare is expanding, with startups focusing on diagnostics, treatment recommendations, and patient management.
Founders should not only be aware of these trends but also consider how their solutions align with them. Lee noted, “Investors are looking for startups that are not just riding the wave but are also creating waves of their own.” This proactive approach can help founders stand out in a crowded market.
Networking and Community Engagement
Building relationships within the tech community is another vital aspect of securing investment. Jang emphasized the importance of networking, stating, “Your network can open doors that you didn’t even know existed.” Engaging with other founders, investors, and industry experts can provide valuable insights and opportunities.
Strategies for Effective Networking
Founders can adopt several strategies to enhance their networking efforts:
- Attend Industry Events: Participating in conferences, meetups, and workshops can help founders connect with potential investors and collaborators.
- Leverage Social Media: Platforms like LinkedIn and Twitter can be effective for sharing insights and connecting with industry leaders.
- Join Startup Incubators: These programs often provide mentorship, resources, and networking opportunities that can be invaluable for early-stage founders.
Lee advised, “Don’t be afraid to reach out to people. Most are willing to help if you approach them with genuine curiosity and respect.” This mindset can foster meaningful connections that may lead to investment opportunities or partnerships.
Conclusion
As the AI landscape continues to evolve, founders must remain agile and informed. By focusing on defensibility, building strong teams, understanding financial agreements, staying attuned to market trends, and engaging with the community, AI founders can position themselves for success. The insights shared by Jon McNeill, Aileen Lee, and Steve Jang at TechCrunch Disrupt 2025 serve as a valuable guide for navigating the complexities of launching and scaling an AI startup.
Source: Original report
Was this helpful?
Last Modified: September 25, 2025 at 9:56 pm
4 views
