At the recent HumanX conference in Las Vegas, a growing theme among early-stage venture capitalists was clear: AI is reshaping startup investing—and fast. Three leading VC firms, Kleiner Perkins, Bain Capital Ventures, and Primary Venture Partners, shared their bold strategies during a panel session, revealing that AI-focused startups now make up 80% to 90% of their new investments in 2024.
These investors, deeply entrenched in early-stage bets, unpacked how the AI boom is challenging traditional venture models, shifting timelines, and questioning the value of competitive moats. Here are the major takeaways from that conversation.
AI’s Unpredictable Yet Unstoppable Surge
AI innovation has proven far less linear than previous tech waves. According to Kleiner Perkins partner Leigh Marie Braswell, the current boom is powered by “unprecedented demand from both consumers and enterprises,” coupled with tangible results in real-world use cases. The momentum is undeniable.
Braswell highlighted strong product-market fit emerging across diverse areas—from AI tools for developers and legal teams to sales assistants and healthcare scribes. Kleiner Perkins has backed companies like Codeium (AI code generation), Glean (enterprise search), Nooks (sales tools), and Ambience Healthcare (clinical assistants).
The continuous evolution of large language models is expanding what’s possible. Bain Capital Ventures partner Aaref Hilaly emphasized the importance of spotting “nonobvious applications” in this fast-moving landscape. As model capabilities push further into reasoning and automation, entirely new startup categories emerge.
Bain’s AI bets include MagicSchool (edtech), Decagon (AI-powered customer support), and Moveworks (IT automation), the latter recently acquired by ServiceNow.
Moats Are Dead. Speed and Intuition Win
In today’s AI startup environment, defensibility no longer comes from proprietary technology alone. Founders are challenged to maintain a meaningful lead, even without traditional moats.
“Assume your competitors are smart and rational,” said Braswell. The real question becomes: how long can a startup stay ahead before others catch up?
Hilaly echoed the sentiment: “There are no moats, there is no defensibility, certainly at early-stage.” Instead, success hinges on relentless speed—shipping faster and evolving continuously.
Bain Capital Ventures prioritizes founders who deeply understand their users and act on instinct. But even early traction isn’t always a reliable signal.
According to Cassie Young of Primary Venture Partners, the current AI adoption curve may be inflated. Around 60% of generative AI spending reportedly comes from innovation budgets rather than operational ones, raising concerns about sustainability.
“Traction is a red herring right now,” said Young. “There are churn red lights everywhere.” Early wins don’t always translate into long-term product-market fit.
Primary’s AI investments include Lyric (supply chain), 1Mind (photorealistic avatars), and Alma (mental health).
Mission-Driven Founders Are Key
AI’s startup surge isn’t just about product—it’s about passion. At Primary, AI founders are often called “next-level missionaries,” a term that reflects the intensity required to compete in such fast-moving, high-pressure environments.
Customer obsession is critical. Startups must build with precision and purpose, tailoring every workflow to solve real pain points better than competitors. As Hilaly pointed out, smaller teams can now accomplish more with less capital thanks to AI—changing the calculus for investors and founders alike.
Today’s AI startups can generate revenue earlier in their lifecycle, increasing pressure on investors to make timely decisions before valuations surge.
Agents Aren’t Taking Over Yet, But They’re Coming
Agentic AI—autonomous agents capable of executing tasks—sparked buzz across the three-day event. But current tools aren’t quite ready to replace human workflows entirely.
“There are definitely people online claiming agents can do it all today. That’s wrong,” said Braswell. Agents can’t yet fully automate complex end-to-end tasks. However, the groundwork is being laid.
One example: a Codeium portfolio company recently used the Windsurf platform to build in-house sales software, eliminating expensive external tools and slashing costs dramatically.
The vision for the near future? AI tools that anticipate user workflows so effectively, switching between applications will no longer be necessary.
Eventually, as Hilaly noted, software itself will transform into agents. Once AI models can seamlessly interpret user context and string together actions, “everything we think of as a software application basically becomes an agent.”
Conclusion
As the AI startup space accelerates, investors are rethinking what defines a defensible business. Speed, deep user understanding, and mission-driven execution are overtaking traditional moats. While agentic AI is not yet a job-stealer, the shift toward automation is clear. For early-stage VCs, the playbook has changed—startups that move fast, obsess over customers, and adapt relentlessly are the ones most likely to lead the AI revolution.
