Chloe Ladwig/PitchBook
Startup valuations in news headlines don't always match the price every VC paid behind the scenes.
While letting investors in the same funding round at different valuations isn't a new invention, the AI boom has enabled some founders to play favorites in this way. And VCs tell PitchBook they're seeing an uptick in this practice lately, often to reward early believers in a startup, funding round leads, or top investors.
"For investors who committed early, despite the risk, and committed to providing real value to the founders beyond cash—rather than piggybacking on others' convictions—a tranche round creates value and meritocracy in the AI era," said Josh Constine, a venture partner at SignalFire. "The best founders have abundant access to competing capital, giving them more leverage to define the valuations than when the capital was scarce, and there wasn't a massive technology shift opening up huge opportunities that investors are looking for."
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