People are constantly inquiring: “Are we in an AI bubble?” And just as frequently, I encounter another query, met with understanding: “Wait—they raised another round?”
TL;DR
- Prominent AI ventures like Anthropic and OpenAI are securing multiple, substantial funding rounds with rapidly escalating valuations.
- Companies across AI sectors, including coding, legal, and healthcare, are experiencing significant growth and increased valuations.
- This rapid fundraising can be a strategic move to outpace competitors, but carries risks if valuations are unsustainable.
- Industry experts debate whether this trend mirrors the 2021 bubble or signifies genuine business traction and a "new phenotype of startup."
This year, a few prominent AI ventures—some so substantial that labeling them “startups” seems somewhat humorous—have secured not merely a single substantial funding tranche, but two or even more. With each subsequent funding phase, these companies' worth is escalating, often doubling or even tripling, achieving remarkable new peaks.
Consider Anthropic. In March, it secured a $3.5 billion Series E funding at a $61.5 billion valuation. Merely six months onward, in September, it gathered a $13 billion Series F investment. The new valuation stands at $183 billion.
OpenAI, the company that ignited the AI boom with ChatGPT, continues to lead the way, securing a remarkable $500 billion valuation in a recent tender offer. This figure surpasses the $300 billion valuation it achieved in a March funding effort, and the $157 billion valuation it began the year with, following an October 2024 funding.
Over the year spanning October 2024 to October 2025, OpenAI's worth saw an approximate rise of $29 billion monthly, equating to nearly $1 billion each day.
Beyond the major LLM players, further down the AI hierarchy, the recruitment firm Mercor secured $100 million in Series B funding in February, achieving a $2 billion valuation. Subsequently, by October, they acquired an additional $350 million, propelling the company's valuation to $10 billion.
More than twelve new companies have secured multiple investment rounds in the current year, experiencing increased valuations. These include Cursor, Reflection AI, OpenEvidence, Lila Sciences, Harmonic, Fal, Abridge, and Doppel. Reports indicate that certain firms, such as Harvey and Databricks, are presently undergoing their third funding stages.
These surges in valuation, particularly when reaching billions and tens of billions of dollars, are remarkable and prompt a series of perplexing inquiries, starting with: What is driving this trend? Does this situation signify the robustness of these new companies, the distinct commercial prospects offered by the AI transformation, or a combination of both? Furthermore, how sustainable is this pattern—what potential dangers are these startups, and the wider marketplace, encountering by securing substantial funding at such a rapid pace and inflating their worth so swiftly?
The specter of 2021
According to some industry experts, the present situation involves more than just a booming market. Although the period of zero interest rate policy (ZIRP), which reached its height in 2021, witnessed numerous startups securing successive funding rounds (Cybersecurity firm Wiz achieved a valuation of $1.7 billion during its May 2021 funding, and subsequently raised $250 million in October its valuation sprung to $6 billion), the fundamental factors were entirely distinct at that time (notably, ChatGPT had not yet been released).
Tom Biegala, founding partner at Bison Ventures, said that he doesn’t believe this is anything 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 high and capital flowed so effortlessly back then that the perception of momentum was often enough to draw more than one round of capital in a year, Biegala said.
Furthermore, for every successful Wiz, a multitude of new ventures during the ZIRP period also secured two or more funding stages within a year, and these have since faced difficulties (such as the grocery delivery application Jokr, the NFT exchange OpenSea, and the remote healthcare firm Cerebral).
Terrence Rohan, managing director at Otherwise Fund, says today’s multi-round startups are demonstrating real business traction: “The revenue growth we’re seeing in select companies is without precedent. In certain cases, one could argue that we are dealing with a new phenotype of startup,” Rohan said via email.
Numerous prominent AI ventures are currently showcasing remarkable financial achievements, even if we should be suspicious of ARR at this moment. Consider emerging firms such as Lovable, a coding startup that achieved $17 million in annual recurring revenue within a mere three months, and Decagon, a conversational AI company that reached “seven figures” in ARR during its initial six months. Cursor stands out as possibly the most notable example: this AI coding utility, designed for developers, rapidly grew from zero to $100 million in ARR over the span of a single year.
Felicis Ventures founder and managing partner Aydin Senkut describes the back-to-back fundings as a sign of a high velocity market where the costs of being wrong are higher 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”
Although widespread enthusiasm for generative AI is driving a wave of investment, companies innovating within specific sectors are reaping the most significant rewards from this phenomenon.
Cursor, the much-talked-about AI coding venture, concluded 2024 with a robust valuation of $2.6 billion. Its worth surged to $10 billion in June 2025, following Cursor's acquisition of $900 million in investment. This month, Cursor announced announced its current valuation at $29.3 billion, having secured $2.3 billion in further funding from backers such as Accel, Thrive, and Andreessen Horowitz.
Harvey, an artificial intelligence firm targeting the legal sector, secured an aggregate of $600 million across two distinct investment periods during the initial half of 2025, escalating its worth initially to $3 billion and subsequently to $5 billion. In October, various publications, such as Bloomberg and Forbes, announced that Harvey had completed an additional funding effort, assigning the company an $8 billion valuation.
Both coding and legal AI are experiencing significant growth, reflecting their respective industries. Norm AI, a legal AI firm, secured $50 million in funding from Blackstone in November, following a $48 million Series B round in March. Similarly, in the coding domain, Lovable completed a $15 million seed funding round in February, subsequently raising $200 million in a Series A round by July, which valued the company at $1.8 billion.
The intersection of healthcare and artificial intelligence is also experiencing significant activity, evidenced by firms such as OpenEvidence securing $210 million in their July Series B funding round at a $2.5 billion valuation, subsequently raising an additional $200 million in October at a $6 billion valuation. Companies like Abridge (previously assessed at $5.3 billion) and Hippocratic AI (previously assessed at $3.5 billion) are also part of this trend.
Max Altman, a cofounder and managing partner at Saga Ventures, asserts that this movement isn't merely a consequence of enthusiastic startup investors disbursing funds. For certain nascent companies, swift capital acquisition is evolving into a component of their strategic approach—an efficient method for confronting rivals.
“What these companies are doing is, very smartly, salting the Earth for their competitors,” Altman told Coins2Day. “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 said, that doesn’t mean everyone attracting massive capital is a winner waiting in the wings.
When the foundation isn’t set
While rapidly securing multiple funding rounds might offer a strategic edge, it also carries the potential for significant risk. As Jennifer Li, a general partner at Andreessen Horowitz, observes, these successive capital raises can either succeed or fail.
“They go right when the capital directly fuels product market fit and execution,” Li said via email. “For example, when the company uses new resources to expand infrastructure, improve models, or meet outsized demand.”
So when do they go wrong?
“When the focus shifts from building to fundraising before the foundation is set,” said Li.
Startups unable to sustain excessively high valuations are susceptible to a difficult decline, much like a tall building erected on shaky foundations. The valuations of certain highly publicized AI ventures might appear unsustainable (or even irrational) on public exchanges, assuming the company reaches that stage. This subsequent adjustment leads to a sharp decrease in the worth of employee stock options, posing challenges for retaining and attracting staff. Several prominent IPOs from 2025, including Chime and Klarna, demonstrated significant reductions in their valuations compared to their 2021 peaks.
In the realm of private investments, swift fundraising cycles can rapidly complicate cap tables as founder ownership diminishes. Furthermore, a significant potential hazard emerges: certain excessively capitalized startups might sustain unsustainable spending levels that prove impossible to curtail should economic conditions worsen and funding become scarce. This situation could precipitate workforce reductions, or even more severe consequences.
Ben Braverman, cofounder and managing partner at Altman’s Saga, stated that this narrative ultimately concerns the consolidation of funding in AI and the adjustments venture capitalists have made to their approaches following 2021. Venture capital has historically operated on the Power Law principle—where substantial successes yield even greater returns—a trend that has intensified as VCs increasingly pursue widely favored investments.
“The story of 2021 to now, on all sides of the market, is a flight to quality,” said 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 result of this is that an unprecedented amount of funding is directed toward a select group of favored AI companies. And though investment agreements are being finalized rapidly at present, even optimistic financiers concede that, as with any market trend, some ventures will succeed while others will falter.
“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 told Coins2Day.
“They’re assigning big valuations to those businesses, and it’s an option value on those companies becoming the next OpenAI or Anthropic,” Biegala said. But, 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.”