If the whole “AI-startup to billion-dollar tech giant” pipeline is tiring of you, you’re not alone. As it turns out, even the people giving billions of dollars of venture capital funding to tech entrepreneurs are getting irritated by the AI schtick.
he is Courtesy techcrunchWhich interviewed several investors in venture capital firms – early investors who try to turn young, risky companies into long-term hits.
According to Igor Ryabenky, founder and managing partner of Altair Capital, investors are now avoiding companies that use AI like magic.
“If your differentiation resides mostly in UI (user interface) and automation, that’s no longer enough,” Ryabenky explains. TC. “The barrier to entry has gone down, making it much more difficult to build a true moat.”
Certainly, with the rise of vibe coding, everyone and their grandmother has been able to hop on the AI-hype train. Offering an attractive AI concept is no longer enough; In Ryabensky’s words, the challenge is to build an AI service around “real workflow ownership and a clear understanding of the problem from day one.”
“Generic productivity tools, project management software, basic CRM clones, and thin AI wrappers built on top of existing APIs fall into this category,” the investor added. “If the product is mostly an interface layer without deep integration, proprietary data or embedded process knowledge, strong AI-native teams can rebuild it quickly. That’s what makes investors cautious.”
This view is echoed by Jake Saper, partner at Emergence Capital, who tells TC The difference can be found in looking at cursors and cloud code – the former, he says, focuses on form for human users rather than raw function. Sapper suggests that as AI agents become more popular, investors are pursuing the latter.
“One owns the developer’s workflow, the other simply executes the tasks,” he said, referring to the cursor and cloud code, respectively. “Developers are increasingly choosing execution over process.”
This change in investor sentiments comes as midweight Software as a Service (SaaS) companies have faced immense struggle With fundraising and valuation.
Part of this may result in something like this valuation inflation This has become rampant in the AI startup sector in the last year. But as the hype around agentic AI grows, it may be that the young companies already selling glorified chatbots will have to make way for a new, slightly shinier industry.
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