The more money you spend, the more lethal they become. To ensure that they don’t act as XP fodder, they start to get equipped with structure destroying weapons.
This has made a big differnce IMHO - pirates can quickly become a real threat instead of just an annoyance or (as stated) XP fodder. They can wipe out colonies. There's a nice little balance going on here - you spend money on sending pirates against your enemies, the pirates spend that money getting stronger, those pirates then come back at you and bite your ass.