Everybody retains asking: “Are we in an AI bubble?” However simply as typically, I hear a unique query, adopted by recognition: “Wait—they raised another round?”
This 12 months, a handful of high AI startups—some now so massive that calling them “startups” feels vaguely ironic—have raised not only one big spherical of funding, however two or extra. And with every spherical, the startups’ valuations are doubling, typically even tripling, to succeed in astonishing new heights.
Take Anthropic. In March it raised a $3.5 billion Sequence E at a $61.5 billion valuation. Simply six months later, in September, it pulled in a $13 billion Sequence F spherical. New valuation: $183 billion.
OpenAI, the startup that ignited the AI increase with ChatGPT, stays the tempo setter, fetching an unprecedented $500 billion valuation in a young supply final month. That’s up from the $300 billion valuation it garnered throughout a March funding spherical, and the $157 billion valuation it began off this 12 months with on account of an October 2024 funding.
In different phrases, within the 12 months between October 2024 and October 2025, OpenAI’s valuation elevated by roughly $29 billion each month—nearly $1 billion per day.
It’s not simply the LLM giants. Additional down (however nonetheless excessive on) the AI meals chain, recruiting startup Mercor in February raised its $100 million Sequence B at a $2 billion valuation—after which by October raised one other $350 million as the corporate’s valuation leapt to $10 billion.
Properly over a dozen startups have raised two or extra funding rounds this 12 months with escalating valuations, together with Cursor, Reflection AI, OpenEvidence, Lila Sciences, Harmonic, Fal, Abridge, and Doppel. Some, like Harvey and Databricks, are at present reported to be of their third rounds.
These valuation progress spurts, particularly at a scale of billions and tens of billions of {dollars}, are extraordinary and lift a lot of dizzying questions, starting with: Why is that this even taking place? Is the phenomenon a mirrored image of the energy of those startups, or the distinctive enterprise alternative introduced by the AI revolution, or a little bit of each? And the way wholesome is this type of factor—what dangers are the startups, and the broader market, taking up by elevating a lot capital so quick and pumping valuations up so rapidly?
The specter of 2021
To listen to some trade insiders clarify it, there’s extra to the present phenomenon than frothy market circumstances. Whereas the ZIRP, or zero rate of interest coverage, period that peaked in 2021 noticed its share of startups elevating a number of back-to-back rounds (Cybersecurity startup Wiz was valued at $1.7 billion in its Might 2021 spherical, and when it raised $250 million in October its valuation sprung to $6 billion), the underlying dynamics had been fully totally different again then (not least as a result of ChatGPT hadn’t launched but).
Tom Biegala, founding associate at Bison Ventures, mentioned that he doesn’t imagine that is something like 2021, when “companies would raise a round… not because they’ve made any sort of real progress or any technical or commercial milestones.” Investor enthusiasm was so excessive and capital flowed so effortlessly again then that the notion of momentum was typically sufficient to attract multiple spherical of capital in a 12 months, Biegala mentioned.
And for each profitable Wiz, there have been quite a few startups within the ZIRP-era that additionally raised two or extra rounds inside 12 months which have since struggled (like grocery supply app Jokr, NFT market OpenSea, and telehealth startup Cerebral).
Lots of as we speak’s high-flying AI startups are placing up spectacular numbers, even when we must be suspicious of ARR at this second. You could have younger firms like vibe coding startup Lovable, which went from zero to $17 million in ARR in three months, and conversational AI startup Decagon hit “seven figures” in ARR over its first half-year. Cursor is probably probably the most well-known of all: The developer-focused AI coding software went from zero to $100 million in ARR in a single 12 months.
Felicis Ventures founder and managing associate Aydin Senkut describes the back-to-back fundings as an indication of a excessive velocity market the place the prices of being unsuitable are larger than ever. “The prize now goes to those who identify and support these outliers earliest,” Senkut says, “because being in the wrong sector or too late may not just reduce returns, it may zero them out.”
“The prize is so big”
Whereas broad pleasure over generative AI is fueling the collection of funding rounds, startups pushing the boundaries in sure verticals are among the many largest beneficiaries of the pattern.
Cursor, the buzzy AI coding startup, completed 2024 with a wholesome $2.6 billion valuation. Its valuation jumped to $10 billion in June 2025, when Cursor raised $900 million in funding. This month, Cursor introduced that it’s now price $29.3 billion, because it scooped up $2.3 billion in extra capital from traders together with Accel, Thrive, and Andreessen Horowitz.
Harvey, an AI startup aimed on the authorized trade, raised a complete of $600 million in two separate funding rounds throughout the first six months of 2025, lifting its valuation first to $3 billion after which to $5 billion. In October, a number of retailers, together with Bloomberg and Forbes, reported that Harvey simply raised one other spherical of funding that offers the startup an $8 billion valuation.
Every is consultant of their respective sectors: Each coding and authorized AI are booming proper now. Authorized AI firm Norm AI in November raised $50 million from Blackstone—shortly after elevating a $48 million Sequence B raised in March. Likewise, in coding, Lovable raised its $15 million seed spherical in February, adopted up with a $200 million Sequence A at a $1.8 billion valuation by July.
Healthcare and AI can be sizzling, with firms like OpenEvidence elevating its July Sequence B of $210 million at $2.5 billion valuation, solely to comply with up in October with one other $200 million at a $6 billion valuation. Abridge (final valued at $5.3 billion) and Hippocratic AI (final valued at $3.5 billion) fall into this class, as effectively.
Max Altman, Saga Ventures cofounder and managing associate, says the pattern isn’t merely the results of exuberant startup traders throwing cash round. For some startups, rapid-fire fundraising is changing into a part of the strategic playbook—an efficient technique of taking up competitors.
“What these companies are doing is, very smartly, salting the Earth for their competitors,” Altman instructed Fortune. “The prize is so big now, with so many people going after it. So, a really amazing strategy is to suck up all the capital, have the best funds invest in your company so they’re not investing in your competitors. Stripe did this really early on, it was smart—you become this force of nature that’s too big to fail.”
That mentioned, that doesn’t imply everybody attracting large capital is a winner ready within the wings.
When the inspiration isn’t set
If elevating a number of rounds rapidly could be a strategic benefit, it may possibly additionally grow to be a harmful legal responsibility. Or, as Andreessen Horowitz normal associate Jennifer Li places it, these back-to-back fundraisings can go proper—and so they can go unsuitable.
So when do they go unsuitable?
“When the focus shifts from building to fundraising before the foundation is set,” mentioned Li.
Like a skyscraper constructed on unstable floor, startups that may’t help overly lofty valuations threat a painful comedown. The valuations of a few of hyped AI startups might look untenable (maybe even unhinged) within the public markets, ought to the startup make it that far. The ensuing recalibration manifests itself within the plummeting worth of workers’ fairness, creating expertise retention and recruiting dangers. Lots of 2025’s largest IPOs, resembling Chime and Klarna, had been decisive valuation cuts from their 2021 highs.
Throughout the personal markets, speedy rounds of fund elevating means cap tables can get rapidly complicated as founder stakes dilute. After which maybe, the largest threat of all: That a few of these excessively funded startups find yourself with wild burn charges that they’ll’t roll again if instances get robust and capital dries up. That may result in layoffs, or worse.
Ben Braverman, Altman’s Saga cofounder and managing associate, mentioned that is finally a narrative about each the focus of capital in AI and about how VCs have developed their methods within the aftermath of 2021. Enterprise capital has at all times been concerning the Energy Legislation—that massive winners hold profitable massive—however that’s grow to be very true as VCs chase consensus favorites greater than ever.
“The story of 2021 to now, on all sides of the market, is a flight to quality,” mentioned Braverman. “Seemingly VCs made the same decision over the last cycle: ‘We’re going to put the majority of our dollars into a few brand names we really trust. And obviously, that has its own consequences.”
A type of penalties is that extra capital than ever is flowing right into a restricted set of AI darlings. And whereas time period sheets are being signed at a feverish tempo as we speak, even bullish traders acknowledge that, like several cycle, there will probably be winners and losers.
“In this type of environment, investors sometimes fall into a trap where they think every new AI model company is going to look like OpenAI or Anthropic,” Bison Ventures’s Biegala instructed Fortune.
“They’re assigning big valuations to those businesses, and it’s an option value on those companies becoming the next OpenAI or Anthropic,” Biegala mentioned. However, he notes, “a lot of them are not necessarily going to grow into those valuations…and you’re going to see some losses for sure.”
