Charles HudsonFounder and Managing Partner, Precursor Ventures

Why are startups raising so much money in the AI era?

22 Jun 2025 · 1 min

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Charles Hudson explores why startups are raising record funding rounds even as AI makes them cheaper to build. He questions whether the money goes to customer acquisition, compute costs, or something else, comparing today's spending to the gig economy's massive user acquisition campaigns.

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And so I think in Uber, Lyft And Instacart and DoorDash, those hundreds of millions of dollars were going into customer acquisition, and we're building user moats and network effects that really enhance the businesses. I continue to wrestle with this paradox, which is that, oh, AI, in theory, makes these companies much cheaper to start. I'm not sure it makes them cheaper to build, but we'll go with the premise. It makes them cheaper to start, and it makes them more efficient. Then I'm like, well, then why are they raising so much money, and what are they going to do with it? And to me, it's unclear. Yes, you need to fund the purchase of credits, or let's call it compute. You have to finance that. But of these companies, it feels like the money they're raising is growing faster than compute costs. So.