The Growing Risks of Investing in Emerging AI Startups: Navigating Uncertainty in a Rapidly Evolving Landscape

Investing in AI startups has reached new heights of excitement — as well as risk. Giants like OpenAI, Microsoft, and Google are swiftly expanding their capabilities by acquiring many offerings from smaller firms. Simultaneously, new startups are entering the growth phase faster than ever before.

However, the concept of «growth stage» for AI startups has become increasingly ambiguous.

Jill Chase, a partner at CapitalG, shared at the TechCrunch AI Sessions that she’s noticing an influx of companies that are just a year old but already pulling in tens of millions in annual recurring revenue and boasting valuations exceeding $1 billion. While these companies might be considered mature in terms of valuation and revenue, they often lack the essential infrastructure for security, staffing, and management.

«On one hand, this is genuinely thrilling. It represents a completely new trend of rapid growth, which is fantastic,» said Chase. «On the other hand, it’s a bit intimidating because I’m about to invest X billion in a company that has only existed for 12 months, and everything is changing so quickly.»

«Who knows who in a garage, perhaps in this very room, is building a company that will be far superior in just 12 months to the one I’m investing in today that is making 50 million a year?» she continued. «So it’s somewhat perplexing regarding growth-stage investments.»

To cut through the noise, Chase emphasized the necessity for investors to be confident in the category and in the founder’s ability to adapt and recognize new opportunities rapidly.

She highlighted the startup Cursor, which specializes in AI code development, as an excellent example of a company that «identified exactly the effective use case of AI code that was feasible given the technology of the time.» However, Cursor will need to work diligently to maintain its standing.

«By the end of this year, there will be AI programmers,» noted Chase. «At that point, what Cursor has today might not be as relevant. The Cursor team needs to envision this future and think, ‘How can I begin shaping my product so that when these models arrive and become much more powerful, they can be integrated swiftly and seamlessly into our product for code generation?'»

[Source](https://techcrunch.com/2025/06/06/why-investing-in-growth-stage-ai-startups-is-getting-riskier-and-more-complicated/)