I think all of us are still systematically underpricing the extent of value AI is going to unlock for both enterprises and individuals.
As with compounding, the human brain isn’t wired to grasp exponentials. And the outcomes AI will drive over the next few decades are honestly unfathomable in humanity’s current context.
If you operate with this premise, it makes sense why category-defining companies are being valued at trillions, compared to going public at $10-100B in the 2010s.
This dynamic should reflect across the startup financing stack, and the reason why early and growth investors today are paying up for the best companies.
As long as you can be more-right-than-wrong in underwriting these companies as category-winners, beyond a certain level of de-risking/ PMF, the entry valuation really doesn’t matter because the commensurate exit valuations have also gone up dramatically.
I think a16z was one of the earliest VCs to grasp this change and also have the mental plasticity and capital war chest to execute behind this philosophy.
What is unclear to me is: while the power law winners in both public and private markets will keep going up in value without any real ceiling, does the median venture exit outcome also similarly increase in value? Eg., does the $100-250M M&A/ secondary sale outcome from the 2010s become the $5-10B outcome in 2030?
‘Cos if that’s the case, then it makes complete sense why entry valuations in YC have gone up from $10M a decade back to $50M today. And all pre-seed and seed investors like us should willingly pay up for whatever we deem to be the “best” consensus companies in our deal flow.
Another point: for pre-seed & seed stage micro VCs like Operators Studio
, I expect secondary sales during growth rounds to constitute a large portion of our exit outcomes. I asked ChatGPT to analyze how Series C pre-money valuations in US startups have evolved over the last decade.
Interestingly, the median Series C pre-money valuation rose from approximately $75M in 2016 to $320M in 2025, a little over 4x. Here’s the annual trend:
So, it’s not illogical that seed valuations should be expected to go up by a similar factor during this time period, especially in an efficient venture market like the Bay Area.
It’s obvious now that accessing growth rounds in the very best companies is delivering early-stage-like venture returns in this market. However, the reality is that beyond a handful of top VCs, most of us fund managers neither have this access nor the fund size to do these types of deals.
For us emerging managers, the equation still stays the same – our best bet is to find non-consensus-and-right companies early enough.
It’s hard to find non-consensus teams in consensus fishing ponds like Stanford, ex-foundational model folks, repeat unicorn founders, and celebrity execs stepping out to startup.
We will need to look beyond these channels, back non-obvious people from non-pipeline backgrounds, perhaps fish outside the US.
PS: If you are curious about how to be non-consensus-and right, you might find these posts of mine interesting – A Talent Scout Mindset For VC, An Investing Framework to Find Startup Diamonds and Staying In The Ring Long Enough.
