{"id":1758,"date":"2020-04-09T13:40:00","date_gmt":"2020-04-09T13:40:00","guid":{"rendered":"https:\/\/icrowdnewswire.com\/?p=2496169"},"modified":"2020-04-09T13:40:00","modified_gmt":"2020-04-09T13:40:00","slug":"why-ai-startups-economics-will-likely-improve-over-time","status":"publish","type":"post","link":"https:\/\/ipsnews.net\/business\/2020\/04\/09\/why-ai-startups-economics-will-likely-improve-over-time\/","title":{"rendered":"Why AI startups\u2019 economics will likely improve over time"},"content":{"rendered":"
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Hello and welcome<\/span>back to our regular morning look at private companies, public markets and the gray space in between.<\/p>\n

If you can recall February, wedug into the question of AI startup gross margins<\/a>.Venture shop a16z had published an interesting blog<\/a>on the subject, arguing that it may be the case that AI-focused startups will enjoy strong gross margins, but perhaps not as strong as those posted by SaaS companies.<\/p>\n

Modern software startups (SaaS companies) have some of the highest gross margins in business, delivering their digital services over the Internet at little cost. Their high-margin revenue has made themincredibly valuable to private and public investors alike<\/a>. To seea16z<\/a>draw a line for AI gross margins a little under SaaS, then, was notable. AI startups might earn long-term lower revenue multiples than SaaS firms, and, if so, they might need to adjust their valuation expectations.<\/p>\n

Since that nerdy interlude, the world has fallen apart. The United States has accreted over 337,000 COVID-19 cases, the stock markets have fallen sharply and we’re somewhere between a bear market and a recession. Shit, as they say, has changed.<\/p>\n

But after our first look at the world of AI margins,asking a number of VCs to weigh in on the matter<\/a>, we wound up talking to one more VC,David Blumberg<\/a>ofBlumberg Capital<\/a>, who had some interesting notes on the AI margin matter to share from his portfolio.<\/p>\n

Since that conversation,TechCrunch covered Deepgram’s Series A<\/a>, which brought the subject of AI startups and their margins back into our heads. So, before Q2 really gets under way, a little more on AI and COGS.<\/p>\n<\/div>\n<\/div>\n<\/div>\n