The Brutal Truth About What VCs Really Want from AI Founders (And It's Not Just a Flashy Demo)

Together with my cofounders and growth advisers, we’ve seen an ocean of AI startups in the last 2 years. In this dazzling world of new products and companies, it's easy to get caught up in the hype.

Founders are racing to create the next groundbreaking AI demo that will make investors' jaws drop and wallets open.

But here's the cold, hard truth:

that stunning demo you've poured your heart and soul into? It might be the very thing holding your startup back.

Rebecca Lynn, founder and managing partner of Canvas Ventures, pulls no punches when it comes to what venture capitalists are really looking for in AI startups.

And, perhaps a bit surprisingly, it's not just about how impressive your demo looks in a controlled environment.

Your AI demo wowed investors, but here's why they're still not writing checks!

"It's really easy to create a company in Gen AI in demo mode,"

Lynn explains.

"It is a very different thing to take that beautiful demo and put it in the wild and scale it."

This gap between a polished demo and a scalable, real-world product is where many AI startups stumble and fall. Lynn has seen it happen time and time again:

"We've already seen a handful of companies that were backed by amazing investors kind of blow up because they weren't able to transition from that really cool slick demo into the wild, essentially into full production."

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So, what's a founder to do? Lynn's advice is crystal clear:

"The biggest question we have for companies is... come to us when you have a customer that's live."

Forget first-mover advantage: Why being second could make you millions

In a world obsessed with being first, Lynn shared different opinions that might just change how you think about your startup strategy.

"I think first mover advantage is a fallacy," she states boldly.

Why?

Because being first often means spending enormous amounts of time and money to prove out a brand new market. And once you've done that hard work? You're left with a mountain of technical debt.

Lynn's investment in Lending Club, which went on to become the largest US tech IPO in 2014, wasn't a first-mover play. Prosper had already seeded the market. But Lending Club, as a second mover, was able to learn from Prosper's experience and quickly develop a better product with better marketing and no technical debt.

"I would challenge anyone to come up with more than just a handful of companies that are public today that truly were the first mover," Lynn says. "There are very few."

The counterintuitive trait that makes CEOs irresistible to both customers and investors

When it comes to what makes a CEO truly stand out, Lynn's answer might surprise you. It's not about having the most cutting-edge technology or the most impressive pedigree.

It's about -