Vibe Revenue - a mirage of AI success

So what happens when the vibes… stops?

Pat Grady coined the term “vibe revenue” in a recent conversation with us.

Vibe revenue is that initial surge of adoption and revenue when you launch something new and shiny in the AI world - a phenomenon driven more by excitement and novelty than by sustainable value creation.

This concept resonated deeply with what we're building at Paid.

Let me break down why vibe revenue matters and how it impacts the way we should think about building AI agent businesses.

And more importantly, what happens when the vibes… stops?

First, what exactly is vibe revenue?

Vibe revenue is that initial burst of customer adoption and spending that comes from the "wow factor" of new AI technology. It's:

• Fast growth that feels magical but may not be sustainable

• Driven by curiosity and experimentation, not embedded workflows

• Often characterized by poor retention and engagement metrics

• A result of people trying something because it's novel, not because it solves their problems deeply

As Pat put it:

"You go zero to a hundred overnight or whatever number it is. And then you look at the metrics and it turns out your engagement stinks and your retention stinks... It's because everybody's willing to try something... but the difference between having a magic moment and solving an end-to-end workflow in a unique and compelling way, that can be a pretty big difference."

(Check out the full podcast episode here, where Pat describes it at around minute 12.)

Agent Talk #7: Pat Grady (Sequoia) - What actually works in AI startups

Have no doubt, many many companies will face this trap.

The Momentum Trap: When Vibe Revenue Evaporates

The inflection point will likely hit about 6-9 months after the peak.

This is when:

1. Initial contracts come up for renewal

2. Novelty has worn off (or competitors caught up)

3. Customers evaluate ROI with cold, hard metrics

4. Stakeholders question whether to continue investing

This moment separates the vibe companies from the value companies.

Without genuine momentum, you're facing what I call the "renewal cliff" - that sudden drop when customers realize they've been paying for excitement rather than results.

Not all is lost though.

The 80/20 (”Pareto principle”) problem in AI development

The 80/20 rule takes on a new meaning in AI. You can get 80% of the way there in minutes, creating that magical demo or first experience that gets people excited.

But that last 20% - the part that creates actual stickiness and retention - might take weeks or months of refinement.

This creates a dangerous trap for new founders:

1. You build something that creates initial excitement

2. You raise money based on early traction metrics

3. You discover your retention cliff when the novelty wears off

4. Your business hits a wall when growth flattens

With vibe revenue, you hit a peak very quickly - but the novelty wears off and the revenue drops. After that, a more sustainable upwards momentum is possible.

What Creates True Momentum in AI Agent Businesses?

Having worked with dozens of AI agent companies, I've observed that sustainable momentum comes from three critical elements:

1. Not just features. You need workflow integration for long term retention.

The difference between a cool demo and a must-have product is how deeply it embeds into daily workflows. Companies retaining momentum have:

• Connections to existing tools

• Clear "jobs to be done" that happen repeatedly

• Evidence of increasing usage depth over time (that means expansion!)

Practically: Track not just how many people use your product, but how many different workflows they integrate it into. Each integration point creates another reason to renew.

2. Initial results are tricky. You have to expand for repeated engagement.

Successful AI (and specifically agentic) companies demonstrate a pattern of expanding value:

• Each month, the AI or AI agent handles more complex tasks

• Users trust it with increasingly important decisions

• The value proposition evolves from "cool tool" to "business critical"

At Paid, we see this firsthand - customers who measure and demonstrate expanding value maintain 85%+ renewal rates, while those who don't struggle to maintain even 40%.

Practically: Can you demonstrate with metrics that your models are improving based on usage? Can you prove to your customers that the more they use it, the better they get?

3. Don’t trust usage metrics alone. Share what your product does!

True momentum comes from shifting the narrative from what their agent does to what outcomes it delivers, like:

• Time saved per employee

• Revenue generated or costs reduced

• Specific business metrics that matter are improve

As Pat noted in our conversation: "The 80-20 might give you a magical moment, but you gotta get that last 20% to get people to stick, and that's where a lot of people are getting stuck."

Practically: Look at cohort retention - What percentage of day 1 users are still active on day 7, 14, 30? Are people completing valuable workflows or just trying one feature?

Building this elusive momentum measurement system

To avoid the vibe revenue trap, implement a momentum measurement system from day one:

1. Value Tracking: Document specific outcomes achieved for each customer

2. Expansion Metrics: Track how users expand both usage depth and breadth

These metrics serve as early warning systems, helping you identify which accounts are building momentum and which are stuck in vibe territory.

Escaping the “vibe revenue”

Here are our practical recommendations for escaping the vibe revenue:

1. Expect the vibe phase - Acknowledge that it will happen, but don't be fooled by it. It won’t last.

2. Look beyond top-line growth - Analyze retention and engagement deeply.

3. Invest in that crucial 20% - The difference between magic moments and sticky products. Design for integrations from day one.

4. Build trust mechanisms - Make your AI and AI agent's work transparent and verifiable. If you can, make it reliable too.

5. Find your value receipts - Define how you measure and communicate value, and do it often. This should include every touchpoint, including your monthly invoices.

6. Price for outcomes - Align your revenue model with the value you create. Now is the time to consider outcome-based pricing.

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