A new venture tactic lets startups claim $1B “unicorn” valuations while early investors buy shares at far lower prices.
A new valuation trick in the AI funding race
As competition for top AI startups intensifies, venture capital firms and founders are experimenting with an unusual funding structure: selling the same equity at two different prices in a single round.
The strategy allows startups to announce a headline valuation above $1 billion, even though a substantial portion of the investment occurred at a much lower valuation.
The goal is simple—manufacture momentum in an increasingly crowded AI market.
- Creates the perception of market leadership
- Helps startups claim unicorn status
- Attracts talent, customers, and additional investors
But behind the headline numbers lies a more complicated cap table.
How the two-tier valuation structure works
Traditionally, startups raise funding through sequential rounds—Series A, Series B, Series C—with each round increasing the company’s valuation.
The new tactic compresses what would normally be two funding rounds into one.
A lead investor commits capital at two valuation tiers:
- A large portion at a lower valuation
- A smaller portion at a higher valuation
Other investors then enter the round at the higher price.
This structure lets the company publicly announce the higher valuation, even though the lead investor’s average price is lower.
Think of it like airline tickets: passengers sit in the same cabin but paid very different fares.
As FPV Ventures co-founder Wesley Chan put it:
“You can’t sell the same product at two different prices. Only airlines can get away with this.”
The Aaru example: manufacturing a unicorn
One recent example is synthetic-customer research startup Aaru.
The company raised a Series A round led by Redpoint, using the multi-tier pricing structure.
According to reporting:
- Redpoint invested a large portion at a $450 million valuation
- A smaller portion was invested at $1 billion
- Other venture firms joined at the $1 billion price
That structure allowed Aaru to claim a unicorn valuation, even though much of the capital entered at a lower price.
For venture firms competing to back the hottest AI startups, the headline number can become a strategic weapon.
Jason Shuman, general partner at Primary Ventures, explained the logic:
- A massive valuation signals market dominance
- It can scare rivals away from funding competitors
- It positions the startup as the clear category leader
In venture capital, perception often shapes reality.
Historically, founders offered discounted shares to top-tier VCs because their backing sends a powerful signal to the market.
Today, the dynamic has flipped.
Many AI funding rounds are heavily oversubscribed, meaning demand from investors exceeds the available shares.
Instead of rejecting interested investors, startups now allow them to participate immediately—but at a higher price.
Investors accept the premium because it secures a spot on the company’s cap table.
Another example is Serval, an AI-powered IT help desk startup.
- Sequoia reportedly invested at a $400 million valuation
- Serval later announced its $75 million Series B at a $1 billion valuation
Again, the headline valuation tells only part of the story.
The risks of chasing headline valuations
While the strategy can boost a startup’s reputation, it also raises the stakes for future fundraising.
Even if the true blended valuation is below $1 billion, the company must raise its next round above the headline valuation.
Otherwise, it faces a down round—a funding round at a lower valuation.
Down rounds carry serious consequences:
- Founders and employees lose ownership percentage
- Investor confidence can erode
- Recruiting new talent becomes harder
Jack Selby, managing director at Thiel Capital, warns founders not to chase inflated valuations too aggressively.
He points to the painful market reset of 2022, when many startups saw their valuations collapse.
“If you put yourself on this high-wire act, it’s very easy to fall off,” Selby said.
In the fast-moving AI market, perception may win early headlines. But eventually, fundamentals still decide the landing.
TL;DR:
AI startups are using a two-tier funding structure where lead investors buy shares at a lower valuation while others invest at a higher price. This lets companies claim $1B unicorn status, even though the average valuation is lower. The tactic boosts momentum—but increases the risk of painful down rounds later.
AI summary
- AI startups are selling equity at two different prices in the same round.
- Lead VCs invest partly at a lower valuation, others at a higher one.
- This enables startups to claim unicorn status.
- Oversubscribed AI rounds drive investors to pay premium prices.
- Risk: future funding must exceed the inflated headline valuation.
