“Small but mighty” AI startups are making waves—some even hitting $20M to $100M in ARR with lean teams. But as Jason Lemkin points out, this model has a hidden flaw: it often doesn't scale.

These startups thrive on early momentum, but when it comes time to expand, they face significant challenges. The very lean structures that propelled their initial success can become obstacles, making it difficult to build robust sales, marketing, and customer success teams.

The key takeaway? Early efficiency is impressive, but without a plan for scaling operations and teams, even the most promising AI startups can hit a growth ceiling.

Reference: Lemkin, J. (2025, April 8). The Problem with “Small But Mighty” AI Start-Ups. SaaStr.