by Chief Financial Officer Chia-Hua (Phyllis) Chen
Last month I talked about the infrastructure cost trap. Since then, I’ve had more conversations with early-stage AI EdTech founders, and another theme keeps coming up. It’s what I call the growth mirage.
Here’s the scene: a founder is thrilled because their DAU and MAU are climbing fast. The graphs look beautiful. The team starts talking about product-market fit. But then someone opens the cloud billing dashboard, and those numbers are climbing just as fast. What looked like traction is actually a ticking burn-rate problem.
The tricky part is, the growth mirage doesn’t feel fake in the moment. Users are engaging. The product is being used. The illusion comes from the fact that every bit of engagement has a hidden cost attached. In AI-native platforms, more interaction isn’t just “server load”—it’s real dollars flowing out with every session.
I’ve seen a few common patterns:
- Strong engagement propped up by compute-heavy features. Real-time personalization is impressive, but it quietly eats margin.
- Feature stacking. Teams launch new AI features quickly, users get that wow-factor, but each feature lingers in the background as a recurring cost.
- Freemium at scale. Free users drive up usage numbers, but infrastructure costs accelerate far faster than revenue can catch up.
So the usual growth dashboard—DAU, MAU, retention curves—it’s not enough anymore. What really matters are questions like:
- How much compute does it take to deliver one meaningful learning outcome?
- What’s the efficiency of a single session—are we squeezing value out of each GPU cycle, or wasting it?
- And is the pace of paid conversion actually keeping up with the burn?
AI lowers the barrier to entry in EdTech, but it also raises the bar for sustainability. That’s why growth metrics can be deceiving. They look like progress, but if you’re not careful, you’re just scaling your expenses faster than your business.
The danger isn’t slow growth—it’s chasing a mirage and building a company on top of it.