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AI Momentum Rounds Thrive on Early Revenue-Driven Usage Growth

One conversation I keep having with founders is about how and why these AI momentum rounds keep happening. A few of them have asked me why Company X was able to raise a big round based on a short window of traction or usage grow that outpaces revenue growth. It’s worth unpacking why this is happening: 1. Unlike traditional consumer companies, some of the companies that are prosumer/PLG are growing usage and revenue at the same time - regardless of what retention ultimately looks like, the early growth is coming with revenue, not just usage. This (in theory) derisks the "will this make money" question. 2. Most risk in venture is asymmetric. If these companies that get off to a fast start continue to grow, they will look like genius investments. If the growth was ephemeral or churn is high, the checks being written from seed to Series B are generally not so large that the fund writing them can't absorb those losses. If you have a large fund, the real risk is missing out on a future winner, not backing a hot company that fizzles. 3. Imagine you are a VC at a very large venture firm. Would you rather invest in a company where the flywheel appears to be working (even if you have concerns about retention/churn) or bet on a company that's growing slowly but where your money will unlock growth. Every incentive today is to invest in the stuff that's working and hope (or believe) it will continue to work.