WHEN ARE NEGATIVE GROSS MARGINS ACCEPTABLE FOR AN AI STARTUP?

Summary from the TLDR Founders newsletter

Your AI product gets better, customers use it more, and each account becomes less profitable. Harvey reportedly hit negative 50% gross margins in June as usage grew under flat seat pricing. Subsidizing usage can help acquire customers or learn what they'll pay for, but it needs a way out. The comparison with Legora lays out three options. Charge for usage, make each request cheaper, or cap what's included. One proposed test is whether customers would stay when the product keeps 40 cents of each dollar after covering the cost of serving them.