Venture Capital’s Daring Kingmaking Strategy: How VCs Are Crowning AI Winners Before They Prove Themselves
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Venture Capital’s Daring Kingmaking Strategy: How VCs Are Crowning AI Winners Before They Prove Themselves
In the high-stakes world of venture capital, a bold new pattern is emerging that’s reshaping how AI startups are funded. Imagine a one-year-old company with modest revenue securing a $415 million valuation through a $90 million Series A round. This isn’t fantasy—it’s the reality for DualEntry, an AI enterprise resource planning startup, and it represents a fundamental shift in how top-tier VCs are placing their bets. The strategy? Deploy massive capital early to create market winners through sheer financial force, a tactic known as ‘kingmaking.’ For cryptocurrency investors watching from the sidelines, this aggressive funding approach reveals how traditional venture capital is adapting to the AI revolution, creating both unprecedented opportunities and significant risks in the startup ecosystem.
What Is the Kingmaking Strategy in Venture Capital?
The kingmaking strategy involves venture capital firms deploying unusually large funding rounds into selected startups at early stages, aiming to overwhelm competitors by creating an insurmountable bank-account advantage. This approach isn’t entirely new—what’s changed is the timing. Jeremy Kaufmann, a partner at Scale Venture Partners, explains: ‘Venture capitalists have always evaluated competitors and bet on who they think will win a category. What’s different is that it’s happening much earlier.’
Consider these key characteristics of kingmaking:
- Early Stage Deployment: Massive funding at Series A or B rounds rather than later stages
- Category Selection: Focus on AI application categories with clear market potential
- Valuation Disconnect: Funding amounts that far exceed traditional revenue multiples
- Competitive Pressure: Designed to create market dominance through financial superiority
AI Startups: The Primary Targets of Kingmaking
The AI startup landscape has become the primary battleground for this strategy. DualEntry’s $90 million Series A at a $415 million valuation, despite reportedly having annual recurring revenue around $400,000, exemplifies this trend. The company’s co-founder, Nestares, disputes that revenue figure, stating it was ‘considerably higher’ when the deal closed, but even optimistic estimates show a significant valuation-to-revenue multiple.
This pattern extends beyond DualEntry. The AI ERP category has seen multiple startups raising substantial back-to-back rounds:
| Company | Funding Round | Amount | Timeline |
|---|---|---|---|
| Rillet | Series B | $70 million | August 2025 |
| Rillet | Series A | $25 million | June 2025 |
| Campfire AI | Series B | $65 million | October 2025 |
| Campfire AI | Series A | $35 million | August 2025 |
Jaya Gupta, a partner at Foundation Capital, noted on X: ‘There’s no new data between rounds. Series Bs happen 27-60 days after Series As regularly.’ This rapid succession funding occurs across multiple AI application categories, including IT service management and SOC compliance.
How Early Funding Creates Market Advantages
Why would venture capital firms deploy such substantial capital to early-stage companies with limited revenue? The strategy offers several potential advantages that extend beyond traditional growth funding:
- Market Perception: Well-funded startups appear more stable to enterprise buyers, making them preferred vendors for significant software purchases
- Talent Acquisition: Substantial funding allows startups to attract top engineering and executive talent
- Customer Confidence: Large war chests signal long-term viability, crucial for enterprise sales cycles
- Competitive Barrier: The financial advantage can deter competitors and potential market entrants
David Peterson, partner at Angular Ventures, contrasts this with previous cycles: ‘The 2010s version of this was just called ‘capital as a weapon.’ He points to Uber and Lyft as canonical examples, but notes that for those companies, ‘the capital weaponization didn’t begin until they reached their Series C or D rounds.’
The Risks and Rewards of Kingmaking for ERP Software
The kingmaking strategy carries significant risks alongside its potential rewards. For ERP software startups specifically, the approach creates both opportunities and challenges:
Potential Benefits:
- Accelerated market penetration against established players like Oracle NetSuite
- Ability to invest heavily in product development and customer acquisition
- Enhanced credibility with enterprise customers wary of startup stability
Significant Risks:
- Valuation bubbles that may collapse if growth expectations aren’t met
- Pressure to justify massive valuations with rapid revenue growth
- Potential for market consolidation that leaves few survivors
History offers cautionary tales. Notable failures like logistics company Convoy and the bankruptcy reorganization of scooter company Bird demonstrate that massive capitalization offers no guarantee of success. Yet major VC firms continue this approach, driven by what Peterson describes as the ‘fully internalized lesson of the power law.’
Why Venture Capital Firms Embrace This High-Stakes Approach
Despite the risks, several factors drive venture capital firms toward kingmaking strategies in AI sectors:
- Market Timing: AI represents a transformative technology shift comparable to mobile or cloud computing
- Competitive Dynamics: Multiple well-funded startups in the same category create winner-take-most dynamics
- FOMO Psychology: Fear of missing out on the next Uber or Airbnb of AI
- Portfolio Strategy: Willingness to accept high failure rates for potential outsized returns
As one VC who declined to invest in DualEntry told Bitcoin World, the disconnect between valuation and revenue has become increasingly common. This reflects a broader shift in how venture capital evaluates early-stage opportunities in transformative technology categories.
FAQs: Understanding the Kingmaking Phenomenon
What companies are using the kingmaking strategy?
Several venture capital firms are employing this approach, including Lightspeed Venture Partners, Khosla Ventures, Andreessen Horowitz (a16z), and Sequoia Capital. These firms are backing AI startups like DualEntry, Rillet, and Campfire AI with unusually large early-stage rounds.
Who are the key people mentioned in this strategy?
Key figures include Jeremy Kaufmann of Scale Venture Partners, David Peterson of Angular Ventures, and Jaya Gupta of Foundation Capital. These investors have observed and participated in the shifting funding patterns.
How does this affect the broader AI startup ecosystem?
The kingmaking strategy creates both opportunities and challenges. It provides selected startups with resources to accelerate growth but may create valuation bubbles and increase competitive pressure on unfunded or underfunded competitors.
What historical precedents exist for this approach?
Previous examples include the ridesharing wars between Uber and Lyft, where massive late-stage funding created competitive advantages. The key difference today is how early in company development this strategy is being deployed.
Are there successful examples of kingmaking?
While it’s too early to judge current AI startups, historical examples like Uber demonstrate how substantial funding can create market dominance. However, failures like Convoy and Bird show the risks of overcapitalization without sustainable business models.
Conclusion: The Future of Venture Capital in the AI Era
The kingmaking strategy represents a fundamental evolution in how venture capital approaches transformative technology opportunities. By deploying massive funding at earlier stages, VCs aim to create market winners through financial force rather than organic growth. This approach carries significant risks—including potential valuation bubbles and high-profile failures—but reflects the venture community’s belief in AI’s transformative potential and the lessons learned from previous technology cycles.
For cryptocurrency investors and observers, this trend offers insights into how traditional venture capital is adapting to rapid technological change. The aggressive funding of AI startups parallels certain patterns seen in crypto venture investing, though with different risk profiles and market dynamics. As AI continues to reshape enterprise software and other sectors, the kingmaking strategy will likely produce both spectacular successes and notable failures, ultimately testing whether early financial advantage can reliably create lasting market leadership.
To learn more about the latest AI market trends and venture capital strategies, explore our articles on key developments shaping AI startup funding and technology adoption across industries.
This post Venture Capital’s Daring Kingmaking Strategy: How VCs Are Crowning AI Winners Before They Prove Themselves first appeared on BitcoinWorld.
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Venture Capital’s Daring Kingmaking Strategy: How VCs Are Crowning AI Winners Before They Prove Themselves
Share:
BitcoinWorld
Venture Capital’s Daring Kingmaking Strategy: How VCs Are Crowning AI Winners Before They Prove Themselves
In the high-stakes world of venture capital, a bold new pattern is emerging that’s reshaping how AI startups are funded. Imagine a one-year-old company with modest revenue securing a $415 million valuation through a $90 million Series A round. This isn’t fantasy—it’s the reality for DualEntry, an AI enterprise resource planning startup, and it represents a fundamental shift in how top-tier VCs are placing their bets. The strategy? Deploy massive capital early to create market winners through sheer financial force, a tactic known as ‘kingmaking.’ For cryptocurrency investors watching from the sidelines, this aggressive funding approach reveals how traditional venture capital is adapting to the AI revolution, creating both unprecedented opportunities and significant risks in the startup ecosystem.
What Is the Kingmaking Strategy in Venture Capital?
The kingmaking strategy involves venture capital firms deploying unusually large funding rounds into selected startups at early stages, aiming to overwhelm competitors by creating an insurmountable bank-account advantage. This approach isn’t entirely new—what’s changed is the timing. Jeremy Kaufmann, a partner at Scale Venture Partners, explains: ‘Venture capitalists have always evaluated competitors and bet on who they think will win a category. What’s different is that it’s happening much earlier.’
Consider these key characteristics of kingmaking:
- Early Stage Deployment: Massive funding at Series A or B rounds rather than later stages
- Category Selection: Focus on AI application categories with clear market potential
- Valuation Disconnect: Funding amounts that far exceed traditional revenue multiples
- Competitive Pressure: Designed to create market dominance through financial superiority
AI Startups: The Primary Targets of Kingmaking
The AI startup landscape has become the primary battleground for this strategy. DualEntry’s $90 million Series A at a $415 million valuation, despite reportedly having annual recurring revenue around $400,000, exemplifies this trend. The company’s co-founder, Nestares, disputes that revenue figure, stating it was ‘considerably higher’ when the deal closed, but even optimistic estimates show a significant valuation-to-revenue multiple.
This pattern extends beyond DualEntry. The AI ERP category has seen multiple startups raising substantial back-to-back rounds:
| Company | Funding Round | Amount | Timeline |
|---|---|---|---|
| Rillet | Series B | $70 million | August 2025 |
| Rillet | Series A | $25 million | June 2025 |
| Campfire AI | Series B | $65 million | October 2025 |
| Campfire AI | Series A | $35 million | August 2025 |
Jaya Gupta, a partner at Foundation Capital, noted on X: ‘There’s no new data between rounds. Series Bs happen 27-60 days after Series As regularly.’ This rapid succession funding occurs across multiple AI application categories, including IT service management and SOC compliance.
How Early Funding Creates Market Advantages
Why would venture capital firms deploy such substantial capital to early-stage companies with limited revenue? The strategy offers several potential advantages that extend beyond traditional growth funding:
- Market Perception: Well-funded startups appear more stable to enterprise buyers, making them preferred vendors for significant software purchases
- Talent Acquisition: Substantial funding allows startups to attract top engineering and executive talent
- Customer Confidence: Large war chests signal long-term viability, crucial for enterprise sales cycles
- Competitive Barrier: The financial advantage can deter competitors and potential market entrants
David Peterson, partner at Angular Ventures, contrasts this with previous cycles: ‘The 2010s version of this was just called ‘capital as a weapon.’ He points to Uber and Lyft as canonical examples, but notes that for those companies, ‘the capital weaponization didn’t begin until they reached their Series C or D rounds.’
The Risks and Rewards of Kingmaking for ERP Software
The kingmaking strategy carries significant risks alongside its potential rewards. For ERP software startups specifically, the approach creates both opportunities and challenges:
Potential Benefits:
- Accelerated market penetration against established players like Oracle NetSuite
- Ability to invest heavily in product development and customer acquisition
- Enhanced credibility with enterprise customers wary of startup stability
Significant Risks:
- Valuation bubbles that may collapse if growth expectations aren’t met
- Pressure to justify massive valuations with rapid revenue growth
- Potential for market consolidation that leaves few survivors
History offers cautionary tales. Notable failures like logistics company Convoy and the bankruptcy reorganization of scooter company Bird demonstrate that massive capitalization offers no guarantee of success. Yet major VC firms continue this approach, driven by what Peterson describes as the ‘fully internalized lesson of the power law.’
Why Venture Capital Firms Embrace This High-Stakes Approach
Despite the risks, several factors drive venture capital firms toward kingmaking strategies in AI sectors:
- Market Timing: AI represents a transformative technology shift comparable to mobile or cloud computing
- Competitive Dynamics: Multiple well-funded startups in the same category create winner-take-most dynamics
- FOMO Psychology: Fear of missing out on the next Uber or Airbnb of AI
- Portfolio Strategy: Willingness to accept high failure rates for potential outsized returns
As one VC who declined to invest in DualEntry told Bitcoin World, the disconnect between valuation and revenue has become increasingly common. This reflects a broader shift in how venture capital evaluates early-stage opportunities in transformative technology categories.
FAQs: Understanding the Kingmaking Phenomenon
What companies are using the kingmaking strategy?
Several venture capital firms are employing this approach, including Lightspeed Venture Partners, Khosla Ventures, Andreessen Horowitz (a16z), and Sequoia Capital. These firms are backing AI startups like DualEntry, Rillet, and Campfire AI with unusually large early-stage rounds.
Who are the key people mentioned in this strategy?
Key figures include Jeremy Kaufmann of Scale Venture Partners, David Peterson of Angular Ventures, and Jaya Gupta of Foundation Capital. These investors have observed and participated in the shifting funding patterns.
How does this affect the broader AI startup ecosystem?
The kingmaking strategy creates both opportunities and challenges. It provides selected startups with resources to accelerate growth but may create valuation bubbles and increase competitive pressure on unfunded or underfunded competitors.
What historical precedents exist for this approach?
Previous examples include the ridesharing wars between Uber and Lyft, where massive late-stage funding created competitive advantages. The key difference today is how early in company development this strategy is being deployed.
Are there successful examples of kingmaking?
While it’s too early to judge current AI startups, historical examples like Uber demonstrate how substantial funding can create market dominance. However, failures like Convoy and Bird show the risks of overcapitalization without sustainable business models.
Conclusion: The Future of Venture Capital in the AI Era
The kingmaking strategy represents a fundamental evolution in how venture capital approaches transformative technology opportunities. By deploying massive funding at earlier stages, VCs aim to create market winners through financial force rather than organic growth. This approach carries significant risks—including potential valuation bubbles and high-profile failures—but reflects the venture community’s belief in AI’s transformative potential and the lessons learned from previous technology cycles.
For cryptocurrency investors and observers, this trend offers insights into how traditional venture capital is adapting to rapid technological change. The aggressive funding of AI startups parallels certain patterns seen in crypto venture investing, though with different risk profiles and market dynamics. As AI continues to reshape enterprise software and other sectors, the kingmaking strategy will likely produce both spectacular successes and notable failures, ultimately testing whether early financial advantage can reliably create lasting market leadership.
To learn more about the latest AI market trends and venture capital strategies, explore our articles on key developments shaping AI startup funding and technology adoption across industries.
This post Venture Capital’s Daring Kingmaking Strategy: How VCs Are Crowning AI Winners Before They Prove Themselves first appeared on BitcoinWorld.
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Semiconductor Startup xLight’s $150M Government Deal: A Bold Gamble or State Capitalism?