AI startups overtake software firms in revenue growth — Report

Artificial intelligence start-ups are achieving revenue milestones at a pace far exceeding that of previous generations of software companies, according to data from fintech giant, Stripe.

The findings suggest that AI companies are generating substantial business growth at an unprecedented rate, offering insights into how this transformative technology is reshaping the tech landscape.

The analysis of the data by Financial Times, which reviewed payments data from Stripe’s platform, revealed that leading AI firms were reaching millions of dollars in sales within their first year—a stark contrast to the slower growth trajectory of non-AI tech start-ups.

The AI firms were outpacing traditional software businesses, especially those in the “software-as-a-service” category, where it typically took years to reach similar revenue levels, the report noted.

Stripe’s data highlighted the performance of 100 of the highest-grossing privately-held AI companies as of July 31, 2024, showing they were generating sales much faster than comparable SaaS start-ups from 2018.

Among those AI firms were OpenAI, Anthropic, Mistral, GitHub, and Midjourney, all of which had seen significant success with their AI-driven products.

The rapid scaling of AI start-ups comes amid investor concerns about the economic returns on generative AI.

Big tech’s multibillion-dollar investments in AI infrastructure have sparked debates among experts on whether the technology could deliver sustainable profits.

The Head of Information at Stripe, Emily Sands, stated, “Unlike past generations of software companies, AI companies face significant compute costs from the start, pushing them to focus on monetization much earlier.”

Meanwhile, a recent Goldman Sachs report questioned the profitability of AI ventures, noting that today’s AI winners were no longer capital-light businesses, as substantial computing power was needed to run and train AI models.

Despite those concerns, Stripe’s data indicated that AI companies adapted to the financial pressures by developing experimental products that consumers were eager to pay for.

OpenAI’s ChatGPT, for example, became the fastest-growing consumer application in history when it reached 100 million users within two months of its launch in November 2022.

OpenAI has since launched a subscription service, helping its revenues reach an annualised $3.6bn, though it continues to spend heavily on training new AI models.