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The Margin Trap Myth: Why the Best Infrastructure Companies Often Start Ugly | Notable Capital

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Innovation doesn’t come cheaply. At $2M ARR, Vercel* sat at 0% gross margins—then, they soared past $8M (and later $200M) ARR with 70+% margins, without compromising on product quality. Charging ahead as an industry leader and using new technology is expensive, which can make the gross margins equation appear out of whack early on. But as underlying infrastructure costs decrease, the scales balance. "Our early approach to gross margins was very deliberate,” Marten Abrahamsen, Vercel’s Chief Financial Officer, told us. “Our hypothesis was: solve the hardest infrastructure problems and the margins will follow. So we focused relentlessly on developer experience and product velocity, and the unit economics naturally improved as we achieved scale from $2M to $200M ARR." Those same dynamics are playing out now across AI companies. Over the last decade, the software industry’s growth has been fueled as much by extraordinary business models as extraordinary technical achievements. Cloud comput

The Margin Trap Myth: Why the Best Infrastructure Companies Often Start Ugly | Notable Capital Clear Search Results 0 Results for "" AI Insights Infrastructure The Margin Trap Myth: Why the Best Infrastructure Companies Often Start Ugly Rethinking Gross Margins in Infrastructure and AI Glenn Solomon Dan Cahana September 4, 2025 Innovation doesn’t come cheaply. At $2M ARR, Vercel* sat at 0% gross margins—then, they soared past $8M (and later $200M) ARR with 70+% margins, without compromising on product quality. Charging ahead as an industry leader and using new technology is expensive, which ca

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