Venture capital investors are becoming increasingly selective as the AI boom reshapes the tech landscape, panelists at TechCrunch Disrupt revealed. While fewer companies are securing funding, the size of successful deals has actually increased, signaling a shift in investor strategy towards larger bets on fewer, more promising ventures.

Thomas Green of Insight Partners cited a study indicating this trend of fewer rounds being funded alongside growing deal sizes. This data underscores a more rigorous evaluation process by investors, who are prioritizing companies demonstrating clear potential for significant scale.

The current market demands more than just a novel idea. Katie Stanton of Moxxie Ventures emphasized the importance of defensibility, noting that while starting a company has become easier, building a truly sustainable and competitive business is more challenging than ever. Investors are scrutinizing a company's ability to repeatedly sell and consistently grow within a substantial market. GV's Sangeen Zeb explained that his firm employs a formulaic approach, meticulously analyzing product-market fit by tracking demand patterns and ensuring consistent quarter-over-quarter growth.

The implications of this shift are significant for startups seeking Series A funding. Companies must demonstrate not only product-market fit but also a proven ability to scale and generate consistent revenue growth. This requires a strong understanding of market dynamics, a robust sales strategy, and a clear path to defensibility against competitors.

However, Green cautioned that venture-scale growth is not suitable for every company. Startups should carefully consider whether the pursuit of venture capital aligns with their long-term goals and potential for significant market impact. The current investment climate suggests that only those with the potential to become truly large businesses should pursue this path.