I don’t know what your social media feed looks like these days, but mine is filled with March Madness, memes, and a relentless catalog of AI startups’ impressive (and rapidly attained) revenue figures.
Here is a very incomplete selection of what I’m talking about here:
In less than three years, Midjourney’s annual recurring revenue (or ARR) soared from zero to $200 million.
Over about 24 months, ElevenLabs, a voice AI leader, saw its ARR soar from zero to near $100 million.
In three months, Lovable, an AI app-building startup, went from zero to $17 million in ARR.
And, perhaps most famously, AI coding juggernaut Cursor went from nothing to $100 million in ARR in one year. (For the uninitiated, ARR is the metric that counts how much predictable revenue a company can anticipate generating over one year, frequently from subscriptions or contracts.)
These are just some of the numbers I’ve watched glaze excitedly around social media. And the excitement seems very fair—bolstered by AI, companies seem to have the capacity to grow faster than we’ve ever seen before. But I did wonder: How seriously should I be taking revenue growth that’s just so darn fast? Can something that good materialize that quickly?
“The resounding answer is a firm ‘it depends,'” said Rebecca Lynn, Canvas Ventures managing director. “This is really where our job as investors becomes both interesting and hard. We see, time and again, that even pre-revenue companies can raise a lot of money, but can’t necessarily get their demo into the wild. We’re really careful about that.”
Lynn continued: “Now, the next piece is revenue—we’ve seen a lot of companies scale very quickly, hit something like $30 million, and then flatline. So what you really have to ask is: Where are the end consumers? We really need to understand their usage, because you want to see that revenue is not ephemeral.”
Because here’s the thing—AI revenue right now means lots of different things. There are subscriptions, enterprise contracts, consumer revenue, and use-based arrangements. Across this spectrum, predictability varies. For example, usage-based billing in AI is pretty big and has for some companies facilitated otherwise impossible growth. But that doesn’t mean that revenue will be there in five years—or in five months. In short, this isn’t the hard-won, steady SaaS revenue of yore.
“We’re seeing different pricing and revenue models, which are good…
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