{"id":3488947,"date":"2026-03-31T21:00:00","date_gmt":"2026-03-31T21:00:00","guid":{"rendered":"https:\/\/techingeek.com\/index.php\/2026\/03\/31\/its-not-your-fantasy-ai-seed-startups-are-achieving-elevated-valuations\/"},"modified":"2026-03-31T21:00:00","modified_gmt":"2026-03-31T21:00:00","slug":"its-not-your-fantasy-ai-seed-startups-are-achieving-elevated-valuations","status":"publish","type":"post","link":"https:\/\/techingeek.com\/index.php\/2026\/03\/31\/its-not-your-fantasy-ai-seed-startups-are-achieving-elevated-valuations\/","title":{"rendered":"It\u2019s not your fantasy: AI seed startups are achieving elevated valuations"},"content":{"rendered":"
<\/div>\n

Pete Martin recalls securing a $5 million seed round at a $25 million post-money valuation for his AI-driven cybersecurity firm Realm back in 2024, which feels like a millennium in \u201cAI years\u201d.\u00a0\u00a0<\/p>\n

At that time, that valuation appeared elevated for that sum, he noted. However, presently, \u201cit\u2019s quite standard\u201d to observe a $10 million seed round at a $40 million to $45 million post-money valuation, particularly for an AI enterprise, he mentioned.\u202f\u00a0<\/p>\n

In fact, this tends to occur exclusively for AI firms, as investors are showing scant interest in any other sectors.\u00a0<\/p>\n

During the latest Y Combinator Demo Day in March, conversations revolved around the inflated valuations of companies, stated Ashley Smith, a general partner at early-stage fund Vermilion. Numerous startups had clinched six- to seven-figure customer contracts, including one that had only been operational for eight weeks, she remarked, leading to companies requesting $5 million at a $40 million post-money valuation. <\/p>\n

This situation surpassed the so-called \u201cYC tax,\u201d which illustrates how much extra investors are prepared to invest simply because the startup is a YC alumnus, she explained.\u00a0Even with those early revenue figures, Smith asserted that market investors are valuing rounds \u201cyears ahead of actual traction.\u201d <\/p>\n

Major venture firms, buoyed with capital, are also entering rounds at earlier stages, escalating startup prices and valuations with the hope of attaining significant returns if these companies eventually go public or exit. Smaller VC firms also exhibit an unquenchable thirst for AI enterprises. As an investor concentrated on AI infrastructure, Smith noted that she frequently finds herself priced out of a round, especially when a larger firm steps in. This is one reason both founders and VCs claim seed deal volume has declined, even as valuations have soared, according to data from Carta.\u00a0\u00a0<\/p>\n

Shanea Leven, founder of the enterprise AI application platform Empromptu, points the finger at Cursor, which achieved $100 million in revenue within just 12 months in early 2025. It was one of the first prominent AI companies to raise the standard for how rapidly these startups could achieve traction, although it certainly wasn\u2019t the sole example. Others include Lovable, Bolt, OpenEvidence, and ElevenLabs, all touting their rapid progress. Although these are exceptions, it\u2019s challenging for some not to feel the generated excitement.\u00a0\u00a0<\/p>\n

\n
\n

Techcrunch event<\/p>\n

\n

\n\t\t\t\t\t\t\t\t\tSan Francisco, CA<\/span>
\n\t\t\t\t\t\t\t\t\t\t\t\t\t|<\/span>
\n\t\t\t\t\t\t\t\t\t\t\t\t\tOctober 13-15, 2026<\/span>\n\t\t\t\t\t\t\t<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/div>\n

\u201cThe expectations from investors are changing now,\u201d she claimed. \u201cThe pressure is unprecedented, not just to become a billion-dollar entity, but a $50 billion one.\u201d\u202f\u00a0\u00a0<\/p>\n

Accelerated traction, larger valuations\u00a0<\/h2>\n

VCs are quick to justify the rise in seed valuations. For example, Marlon Nichols, managing general partner at MaC Ventures, stated that the evidence lies in the traction evident right from the start, influencing seed pricing. When he founded his firm in 2019, he noted his average entry investment was $2.5 million. Currently, it\u2019s $5 million.\u202f\u00a0<\/p>\n

\u201cThe top seed-stage firms no longer resemble typical seed-stage companies,\u201d he asserted.\u202fThe evolution of AI tools enables founders to reach minimal viable products and acquire early customers more rapidly than ever, even among large enterprises that are eagerly scouting for AI deployment solutions.<\/p>\n

Nichols\u2019 last two seed investments were generating over $2 million in revenue, featuring \u201cpaid pilots from substantial enterprises\u201d and \u201ca clear pathway to full commercial agreements.\u201d He issued checks ranging between $3 million and $4 million and agreed to value the startups at $25 million and $30 million post-money, respectively, significantly more compared to a few years ago.\u00a0\u00a0<\/p>\n

The founders\u2019 past experiences also impacted his term-sheet offers. \u201cThey possessed relevant backgrounds\u201d and \u201ca history of execution,\u201d he explained, \u201cwhich mitigated much of that early-stage risk.\u201d\u00a0\u00a0<\/p>\n

Moreover, investors are prepared to pay premium prices for proven AI talent, favoring second-time founders or those possessing credentials from recognized prior employers (such as OpenAI). This also raises anticipated valuations across the landscape.<\/p>\n

\u201cThere\u2019s an ongoing competition for outstanding researchers currently, and I don\u2019t classify it as good or bad; it simply reflects the existing market conditions,\u201d Amber Atherton, a partner at the early-stage consumer fund Patron, noted.\u202f\u00a0<\/p>\n

That\u2019s what is driving some of the most extreme seed valuations, like the $2 billion seed for Thinking Machine Labs at a $12 billion valuation by ex-OpenAI Mira Murati.\u202f\u00a0<\/p>\n

Leven, who is a second-time founder, mentioned that her startup’s valuation at this stage is double that of her initial company at a comparable phase. Not only is her latest venture AI-focused, but it also has substantially more traction than her previous startup did at this point, illustrating how swiftly new businesses like hers can expand.\u202f\u00a0<\/p>\n

\u201cI presently hold several six-figure contracts and am about to close a seven-figure deal. You need these to secure funding,\u201d Leven explained. \u201cA friend of mine is attempting to raise a comparable amount, but hers is not in AI, and it took her two years to achieve half of what I secured in three weeks.\u201d\u202f\u00a0<\/p>\n

Pre-seed is the new seed\u00a0<\/h2>\n

Seed VCs like Vermilion\u2019s Smith are countering increasing seed valuations by pursuing more pre-seed deals. Pre-seed startups resemble the kind of companies that seed firms used to be many years ago: extremely early and pre-revenue.\u00a0<\/p>\n

Jonathan Lehr, a general partner at Work-Bench, is investing from a $160 million fund predominantly aimed at seed rounds, though he mentioned that the firm has become \u201cmore comfortable\u201d participating at the pre-seed stage as companies scale much quicker.\u00a0\u00a0<\/p>\n

It’s becoming more typical to see investors inject capital into startups at earlier stages, as enhanced exposure is simply the cost of \u201caccessing firms that can scale rapidly and emerge as category leaders,\u201d\u202fLehr commented.\u00a0<\/p>\n

Meanwhile, Atherton noted that to secure a stake in these promising early-stage enterprises, the average check size for her firm\u2019s $100 million Fund II now spans from $4 million to $5 million, up from $1 to $2 million for its $90 million Fund I. <\/p>\n

\u201cAI has significantly elevated the standards for founders to launch with live products and customers right away,\u201d she stated.\u202f<\/strong>\u00a0\u201cInvestors must act more swiftly and assess real-world traction at an earlier stage since the best founders are delivering products with users and revenue almost immediately.\u201d<\/p>\n

Thus, seed VCs are no longer \u201cbacking ideas\u201d; they are \u201cbacking early indications of genuine consumer product demand,\u201d she articulated. Seed VCs are also accelerating their pace, shifting \u201cfrom slow diligence to high-conviction judgments regarding distribution, retention, and founder characteristics.\u201d\u00a0<\/p>\n

But there\u2019s a catch<\/h2>\n

As expectations have risen, so have investors\u2019 demands.\u202f\u00a0<\/p>\n

Atherton expressed that it’s no longer adequate for a company to merely develop and dispatch a product. Today, anyone can achieve that. It\u2019s not solely about traction, although that is beneficial. It centers on the future, the narrative founders present about how they will outperform their competitors and dominate the market. This is what these seed VCs believe will propel startups towards sustained, $50 billion+ valuations or at least lead to some profitable exit.<\/p>\n

\u201cIndividuals are merely striving to withstand the pressure,\u201d Leven noted. \u201cOtherwise, there won\u2019t be sufficient funds to expand and genuinely compete.\u201d\u202f\u00a0<\/p>\n

The upside of raising significant amounts of capital at the nascent stages for a founder is that it enables the company to accelerate and recruit costly talent. VCs understand, as they formulate their term sheets, that talent during the AI era is expensive, as are the operations of the AI models supporting these startups, and contending with other well-funded adversaries, sometimes large SaaS companies already valued in the billions.\u00a0<\/p>\n

Everyone, according to Leven, is attempting to replicate the success of Google\u2019s acquisition of Wiz. However, the stakes are higher as well. Founders must evolve their businesses into entities that validate the elevated early valuations before seeking further funding. Series A investors are also anticipating larger, quicker, and more.\u202f\u00a0<\/p>\n

Nichols and his firm are currently evaluating an increasing number of young companies, with new expectations that they meet their milestones within approximately 18 months. \u201cThat discipline is equally crucial as backing winners,\u201d he stated.\u00a0\u00a0<\/p>\n

Elevated seed valuations lead to a narrower margin for mistakes, Lehr commented, adding: \u201cLess latitude for experimentation, diminished tolerance for pivots, and heightened scrutiny if progress doesn\u2019t align with the capital raised.\u201d\u202f\u00a0<\/p>\n

Martin, the cybersecurity entrepreneur, successfully completed his Series A funding late last year, mentioning that the benchmarks were manageable for his firm to meet.\u00a0Yet, he too cautioned founders.<\/p>\n

\u201cYou might find yourself trapped in the middle,\u201d Martin warned. \u201cToo costly for new investors, yet lacking the momentum to validate the next round.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

<\/div>\n

Pete Martin recalls securing a $5 million seed round at a $25 million post-money valuation for his AI-driven cybersecurity firm Realm back in 2024, which feels like a millennium in \u201cAI years\u201d.\u00a0\u00a0<\/p>\n

At that time, that valuation appeared elevated for that sum, he noted. However, presently, \u201cit\u2019s quite standard\u201d to observe a $10 million seed round at a $40 million to $45 million post-money valuation, particularly for an AI enterprise, he mentioned.\u202f\u00a0<\/p>\n

In fact, this tends to occur exclusively for AI firms, as investors are showing scant interest in any other sectors.\u00a0<\/p>\n

During the latest Y Combinator Demo Day in March, conversations revolved around the inflated valuations of companies, stated Ashley Smith, a general partner at early-stage fund Vermilion. Numerous startups had clinched six- to seven-figure customer contracts, including one that had only been operational for eight weeks, she remarked, leading to companies requesting $5 million at a $40 million post-money valuation. <\/p>\n

This situation surpassed the so-called \u201cYC tax,\u201d which illustrates how much extra investors are prepared to invest simply because the startup is a YC alumnus, she explained.\u00a0Even with those early revenue figures, Smith asserted that market investors are valuing rounds \u201cyears ahead of actual traction.\u201d <\/p>\n

Major venture firms, buoyed with capital, are also entering rounds at earlier stages, escalating startup prices and valuations with the hope of attaining significant returns if these companies eventually go public or exit. Smaller VC firms also exhibit an unquenchable thirst for AI enterprises. As an investor concentrated on AI infrastructure, Smith noted that she frequently finds herself priced out of a round, especially when a larger firm steps in. This is one reason both founders and VCs claim seed deal volume has declined, even as valuations have soared, according to data from Carta.\u00a0\u00a0<\/p>\n

Shanea Leven, founder of the enterprise AI application platform Empromptu, points the finger at Cursor, which achieved $100 million in revenue within just 12 months in early 2025. It was one of the first prominent AI companies to raise the standard for how rapidly these startups could achieve traction, although it certainly wasn\u2019t the sole example. Others include Lovable, Bolt, OpenEvidence, and ElevenLabs, all touting their rapid progress. Although these are exceptions, it\u2019s challenging for some not to feel the generated excitement.\u00a0\u00a0<\/p>\n

\n
\n

Techcrunch event<\/p>\n

\n

\n\t\t\t\t\t\t\t\t\tSan Francisco, CA<\/span>
\n\t\t\t\t\t\t\t\t\t\t\t\t\t|<\/span>
\n\t\t\t\t\t\t\t\t\t\t\t\t\tOctober 13-15, 2026<\/span>\n\t\t\t\t\t\t\t<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/div>\n

\u201cThe expectations from investors are changing now,\u201d she claimed. \u201cThe pressure is unprecedented, not just to become a billion-dollar entity, but a $50 billion one.\u201d\u202f\u00a0\u00a0<\/p>\n

Accelerated traction, larger valuations\u00a0<\/h2>\n

VCs are quick to justify the rise in seed valuations. For example, Marlon Nichols, managing general partner at MaC Ventures, stated that the evidence lies in the traction evident right from the start, influencing seed pricing. When he founded his firm in 2019, he noted his average entry investment was $2.5 million. Currently, it\u2019s $5 million.\u202f\u00a0<\/p>\n

\u201cThe top seed-stage firms no longer resemble typical seed-stage companies,\u201d he asserted.\u202fThe evolution of AI tools enables founders to reach minimal viable products and acquire early customers more rapidly than ever, even among large enterprises that are eagerly scouting for AI deployment solutions.<\/p>\n

Nichols\u2019 last two seed investments were generating over $2 million in revenue, featuring \u201cpaid pilots from substantial enterprises\u201d and \u201ca clear pathway to full commercial agreements.\u201d He issued checks ranging between $3 million and $4 million and agreed to value the startups at $25 million and $30 million post-money, respectively, significantly more compared to a few years ago.\u00a0\u00a0<\/p>\n

The founders\u2019 past experiences also impacted his term-sheet offers. \u201cThey possessed relevant backgrounds\u201d and \u201ca history of execution,\u201d he explained, \u201cwhich mitigated much of that early-stage risk.\u201d\u00a0\u00a0<\/p>\n

Moreover, investors are prepared to pay premium prices for proven AI talent, favoring second-time founders or those possessing credentials from recognized prior employers (such as OpenAI). This also raises anticipated valuations across the landscape.<\/p>\n

\u201cThere\u2019s an ongoing competition for outstanding researchers currently, and I don\u2019t classify it as good or bad; it simply reflects the existing market conditions,\u201d Amber Atherton, a partner at the early-stage consumer fund Patron, noted.\u202f\u00a0<\/p>\n

That\u2019s what is driving some of the most extreme seed valuations, like the $2 billion seed for Thinking Machine Labs at a $12 billion valuation by ex-OpenAI Mira Murati.\u202f\u00a0<\/p>\n

Leven, who is a second-time founder, mentioned that her startup’s valuation at this stage is double that of her initial company at a comparable phase. Not only is her latest venture AI-focused, but it also has substantially more traction than her previous startup did at this point, illustrating how swiftly new businesses like hers can expand.\u202f\u00a0<\/p>\n

\u201cI presently hold several six-figure contracts and am about to close a seven-figure deal. You need these to secure funding,\u201d Leven explained. \u201cA friend of mine is attempting to raise a comparable amount, but hers is not in AI, and it took her two years to achieve half of what I secured in three weeks.\u201d\u202f\u00a0<\/p>\n

Pre-seed is the new seed\u00a0<\/h2>\n

Seed VCs like Vermilion\u2019s Smith are countering increasing seed valuations by pursuing more pre-seed deals. Pre-seed startups resemble the kind of companies that seed firms used to be many years ago: extremely early and pre-revenue.\u00a0<\/p>\n

Jonathan Lehr, a general partner at Work-Bench, is investing from a $160 million fund predominantly aimed at seed rounds, though he mentioned that the firm has become \u201cmore comfortable\u201d participating at the pre-seed stage as companies scale much quicker.\u00a0\u00a0<\/p>\n

It’s becoming more typical to see investors inject capital into startups at earlier stages, as enhanced exposure is simply the cost of \u201caccessing firms that can scale rapidly and emerge as category leaders,\u201d\u202fLehr commented.\u00a0<\/p>\n

Meanwhile, Atherton noted that to secure a stake in these promising early-stage enterprises, the average check size for her firm\u2019s $100 million Fund II now spans from $4 million to $5 million, up from $1 to $2 million for its $90 million Fund I. <\/p>\n

\u201cAI has significantly elevated the standards for founders to launch with live products and customers right away,\u201d she stated.\u202f<\/strong>\u00a0\u201cInvestors must act more swiftly and assess real-world traction at an earlier stage since the best founders are delivering products with users and revenue almost immediately.\u201d<\/p>\n

Thus, seed VCs are no longer \u201cbacking ideas\u201d; they are \u201cbacking early indications of genuine consumer product demand,\u201d she articulated. Seed VCs are also accelerating their pace, shifting \u201cfrom slow diligence to high-conviction judgments regarding distribution, retention, and founder characteristics.\u201d\u00a0<\/p>\n

But there\u2019s a catch<\/h2>\n

As expectations have risen, so have investors\u2019 demands.\u202f\u00a0<\/p>\n

Atherton expressed that it’s no longer adequate for a company to merely develop and dispatch a product. Today, anyone can achieve that. It\u2019s not solely about traction, although that is beneficial. It centers on the future, the narrative founders present about how they will outperform their competitors and dominate the market. This is what these seed VCs believe will propel startups towards sustained, $50 billion+ valuations or at least lead to some profitable exit.<\/p>\n

\u201cIndividuals are merely striving to withstand the pressure,\u201d Leven noted. \u201cOtherwise, there won\u2019t be sufficient funds to expand and genuinely compete.\u201d\u202f\u00a0<\/p>\n

The upside of raising significant amounts of capital at the nascent stages for a founder is that it enables the company to accelerate and recruit costly talent. VCs understand, as they formulate their term sheets, that talent during the AI era is expensive, as are the operations of the AI models supporting these startups, and contending with other well-funded adversaries, sometimes large SaaS companies already valued in the billions.\u00a0<\/p>\n

Everyone, according to Leven, is attempting to replicate the success of Google\u2019s acquisition of Wiz. However, the stakes are higher as well. Founders must evolve their businesses into entities that validate the elevated early valuations before seeking further funding. Series A investors are also anticipating larger, quicker, and more.\u202f\u00a0<\/p>\n

Nichols and his firm are currently evaluating an increasing number of young companies, with new expectations that they meet their milestones within approximately 18 months. \u201cThat discipline is equally crucial as backing winners,\u201d he stated.\u00a0\u00a0<\/p>\n

Elevated seed valuations lead to a narrower margin for mistakes, Lehr commented, adding: \u201cLess latitude for experimentation, diminished tolerance for pivots, and heightened scrutiny if progress doesn\u2019t align with the capital raised.\u201d\u202f\u00a0<\/p>\n

Martin, the cybersecurity entrepreneur, successfully completed his Series A funding late last year, mentioning that the benchmarks were manageable for his firm to meet.\u00a0Yet, he too cautioned founders.<\/p>\n

\u201cYou might find yourself trapped in the middle,\u201d Martin warned. \u201cToo costly for new investors, yet lacking the momentum to validate the next round.\u201d<\/p>\n","protected":false},"author":2,"featured_media":3488948,"comment_status":"open","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3488947","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/posts\/3488947"}],"collection":[{"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/comments?post=3488947"}],"version-history":[{"count":0,"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/posts\/3488947\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/media\/3488948"}],"wp:attachment":[{"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/media?parent=3488947"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/categories?post=3488947"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/techingeek.com\/index.php\/wp-json\/wp\/v2\/tags?post=3488947"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}