Pete Martin remembers raising a $5 million seed round at a $25 million post-money valuation for his AI-powered cybersecurity company Realm way back in 2024, aka, like a thousand “AI years” ago.
That valuation seemed high for that amount at the time, he recalled. But today, “it’s pretty typical” to see a $10 million seed round at a $40 million to $45 million post-money valuation, he said, especially if you are an AI company.
Actually, that type of thing happens only if you are an AI company, as investors are showing little interest in anything else.
At the most recent Y Combinator Demo Day held in March, everyone was talking about how high the companies were priced, said Ashley Smith, a general partner at the early-stage fund Vermilion. Many startups had already landed six- to seven-figure customer contracts, including a company that was only eight weeks old, she said, so there were companies asking for $5 million at a $40 million post money.
This time, it was more than the so-called “YC tax,” meaning how much more an investor is willing to pay just because the startup went through YC, she believed. Even with those early revenue numbers, Smith said investors in this market are pricing rounds “years ahead of traction.”
The big venture firms, flush with cash, are also moving into rounds earlier, driving up startup prices and valuations in hopes of cashing in big if these companies exit or IPO one day. Smaller VC firms have an insatiable appetite for AI companies, too. As an investor focused on AI infrastructure, Smith said she can easily find herself priced out of a round, especially when a larger firm moves in. That’s one reason why seed deal count is down but valuations are up, both founders and VCs said, and data from Carta shows.
Shanea Leven, founder of the enterprise AI application platform Empromptu, blames Cursor, which, in early 2025, hit $100 million in revenue in just …