gross

The expectation that modern AI tech will find a home in every part of our lives is pandemic. Fittingly, startups and investors are working overtime to build and fund new technology companies to either create or implement new AI tech. But despite all the enthusiasm, there’s a niggling detail that deserves our attention: AI startups often have worse economics than most software startups. The conversation around AI gross margins is not new. 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.”