When headline valuations aren’t what they appear

Chloe Ladwig/PitchBook

Startup valuations in information headlines do not at all times match the worth each VC paid behind the scenes.

Whereas letting buyers in the identical funding spherical at totally different valuations is not a brand new invention, the AI increase has enabled some founders to play favorites on this approach. And VCs inform PitchBook they’re seeing an uptick on this observe recently, typically to reward early believers in a startup, funding spherical leads, or high buyers.

“For buyers who dedicated early, regardless of the chance, and dedicated to offering actual worth to the founders past money—fairly than piggybacking on others’ convictions—a tranche spherical creates worth and meritocracy within the AI period,” stated Josh Constine, a enterprise companion at SignalFire. “The most effective founders have ample entry to competing capital, giving them extra leverage to outline the valuations than when the capital was scarce, and there wasn’t an enormous know-how shift opening up enormous alternatives that buyers are in search of.”

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The observe hit the web VC discourse earlier this month when Mercor co-founder Brendan Foody accused Sequoia of utilizing two-tranche rounds to inflate headline valuations. Sequoia companion Shaun Maguire responded that the agency splits its verify solely when rivals can pay greater than it’ll for a sizzling deal.

Current enterprise rounds with such constructions embody vibe-coder Lovable‘s Collection A final July, and AI-native IT startup Serval‘s Collection B spherical in December, based on PitchBook information. Serval’s December spherical, led by Sequoia at a $1 billion valuation, mixed two courses of most popular shares priced at totally different valuations in the identical deal. The Wall Road Journal reported that Sequoia’s lowest Serval entry valued the corporate at lower than $400 million, beneath half the headline determine.

Representatives for the startups didn’t return requests for remark.

That stated, VCs squeezing into the spherical and paying a premium for that privilege is dangerous, stated Kyle Stanford, PitchBook’s director of US enterprise capital analysis. AI startups raised $255.5 billion globally within the first quarter of 2026, surpassing the full-year 2025 whole in a single quarter, based on PitchBook’s Q1 2026 AI VC Developments report. With demand working that sizzling, paying up for entry could be the one approach onto a coveted cap desk.

Some VCs taking the upper valuation are glad to be included in a spherical that in any other case might have been closed off to them.

“It is undoubtedly been a theme that we have seen,” stated Mike Paulus, founder and CEO of PCM Encore. “There’s at all times been a price to having a Sequoia or a Benchmark because the lead investor, each by way of the identify and the signaling. [Investors] rolling up their sleeves has at all times meant quite a bit, and in a approach, everybody else obtained to come back within the spherical—simply not on an identical phrases, whereas doing quite a bit much less work and arguably including quite a bit much less worth.”

Lead VCs are taking upward of two-thirds of rounds, based on new Carta information. There’s “a rising consciousness” amongst high VCs main rounds to push for higher phrases in return for the better danger they’re taking through high-conviction bets on bigger verify sizes, stated Ashley Neville, Carta’s director of insights.

“Rounds are being so oversubscribed that founders are in a position to come to the desk and say, ‘We’re promoting extra of the corporate for more cash,'” Neville stated. “VCs are simply so desperate to get on the cap desk.”

Nonetheless, founders do must navigate delicate relationships when forcing some VCs into worse economics on their investments. This can be a massive a part of the rationale why tranched rounds have traditionally been a uncommon incidence. The observe was almost unattainable in enterprise capital’s final bear market, when VCs had the higher hand and plenty of startups took no matter they might get.

“If I used to be elevating capital, I’d have a very onerous time letting two totally different individuals make investments, on the similar time, at totally different valuations,” Paulus stated. “It is sort of head-exploding. And that is most likely the rationale why it is nonetheless comparatively uncommon.”

SignalFire has landed most popular fairness phrases as a lead investor in some startups it has labored carefully with on tech buildouts and likewise hiring, Constine stated—although he declined to share specifics.

“It definitely can have an effect on relationships with new buyers,” he stated. “You wish to begin off that partnership with each facet feeling good and all-in on supporting the corporate. If an investor is so bitter about any person else’s valuation, and so they do not feel like they’re enthusiastic about supporting the corporate, then they most likely do not make sense as a lead.”

This text initially appeared on PitchBook Information