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. 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.
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 fact that Anthropic, a leading AI startup that has raised billions of dollars, reportedly had gross margins of 50% to 55% last December, underscores the costs of building and running modern AI models, and hints that AI-focused startups have a different valuation profile due to the sheer expense of all that computing power.