Why AI Startups Keep Repeating the History of Bubble Crashes

— The Hidden Game of Inflated Valuations, Vague Visions, and Vanishing Liquidity

When GPT-4 was released in 2023, it ignited a gold rush. Governments launched AI innovation funds. Corporations pivoted overnight. Venture capital firms went into overdrive, desperate to discover the next unicorn before it slipped away.

From the outside, the AI revolution seemed inevitable—and unstoppable. But from the inside, for those of us who’ve worked at AI startups, the story is far messier. And far more dangerous.

The Vision-Fueled Money Loop

In today’s AI startup world, few companies are profitable. Fewer still have proven business models. And yet, billions of dollars continue to flow into them. Why?

Because the system isn’t built around sustainability—it’s built around speculation.

Here’s the typical cycle:

1. Build an impressive demo (not necessarily a product).

2. Pitch a vision of the future. Sprinkle buzzwords like “multimodal,” “autonomous,” or “AGI.”

3. Raise funding on that vision.

4. Burn through it to scale perceived growth.

5. Raise again before the money runs out.

Real users? Real revenue? Optional. In this loop, what matters most is how investable your story sounds. The longer the runway, the longer the illusion can be maintained.

A Game of Hot Potato

The truth is, many founders and VCs know this game for what it is: hot potato.

Startup CEOs are under relentless pressure to “look investable”—not necessarily to be viable. That means chasing growth at any cost, even if it burns through capital and trust.

Meanwhile, VCs often aren’t incentivized to build long-term value. Their job is to get in early and exit early—ideally before the music stops. It’s not that they’re evil. They’re just playing the game as it’s designed.

But what happens to the employees who joined believing in the mission? What about customers left with half-baked products? What about the next VC holding the bag?

When Founders Don't Understand the Tech

One of the most troubling trends in AI startups today is the rise of non-technical founders selling technical dreams.

Some founders can barely explain the difference between fine-tuning and prompt engineering. But they know how to network, how to pitch, and how to charm investors. To many VCs, that’s enough.

And the due diligence process? Often a shallow review of pitch decks, high-level metrics, and a few reference calls. Even when technical advisors are brought in, they’re evaluating a curated show, not the raw, messy reality under the hood.

The Numbers Always Look Good—Until They Don’t

Startups learn quickly that perception is currency. Metrics can be massaged. Growth can be “gamed.” User counts can be inflated with free trials and marketing gimmicks. And internal problems? Those stay buried.

When funding dries up, many founders double down—not on product, but on appearances. They raise one more round, push one more narrative, and pray for an acquisition or IPO before the truth catches up.

This isn’t just unsustainable. It’s toxic.

Haven’t We Seen This Before?

Korea lived through the dot-com bubble. It saw how inflated valuations, empty promises, and overreliance on “next-round funding” can devastate not just companies, but entire ecosystems.

We’re on the verge of repeating that cycle—except this time, it’s written in Python and powered by GPUs.

So Where Do We Go From Here?

If you’re a developer or engineer joining a startup, ask:

• Does the leadership understand the tech—or just know how to sell it?

• Are there paying customers? Or just pilots and demos?

• Is the team solving a real problem? Or chasing investor buzzwords?

If you’re a VC, ask:

• Have you seen the source code, the infra, the retention data?

• Are you funding innovation—or just performance art?

And if you’re a policymaker pouring funds into AI? Make sure the money goes not just to ideas, but to execution.

Final Thought

The AI startup world is filled with brilliance. But brilliance without integrity becomes a firework—bright, loud, and gone in seconds.

Right now, we don’t need more fireworks. We need builders. Real ones.