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Seed: A Tale of Two Investment Paths

Imagine a venture capital landscape divided not by geography or sector, but by fundamental investment philosophies. This is the potential future of seed-stage investing: a market cleaved into two distinct, almost highly different ecosystems.

On one side, massive multi-stage funds with billions under management. Their investment calculus is brutally simple: they need massive, earth-shaking exits to generate meaningful returns. For these firms, a $1 billion outcome is barely worth discussing. They're hunting for the next decacorn, the startup that could generate $5-10 billion in value.

These funds will become the natural home for proven, repeat founders—entrepreneurs with track records of success. They'll offer larger inception rounds, higher valuations, and comprehensive support networks. For a certain class of founder, this will be the only path that makes sense.

On the other side, specialized seed-only firms will carve out a different niche. Their investment thesis will focus on more modest but still meaningful outcomes. These firms will become the champions of first-time founders, less proven entrepreneurs, and companies with strong but not explosive growth potential.

Seed-only firms will need to develop new playbooks for supporting companies that might not attract traditional Series A funding. They'll become expert navigators of alternative growth paths, helping founders succeed outside the traditional venture capital trajectory.

The implications extend beyond funding. This model suggests a more nuanced understanding of entrepreneurial success. Not every great company needs to become a global behemoth. Some can be highly profitable, innovative, and impactful at a more modest scale.

Founders will face more complex decisions. Taking money from a multi-stage fund might mean signing up for an aggressive growth mandate. Choosing a specialized seed firm could offer more flexible, founder-friendly support. The funding choice becomes a strategic decision about company's trajectory.

The bifurcated seed market represents more than a funding model. It's a reimagining of how we support innovation, how we define success, and how we help entrepreneurs turn bold ideas into reality.

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Bay Area Startups Collectively Secured $10.3B

Holidays may be imminent, but there was no slowdown this week with more than forty companies closing on $10.3B in funding. Databricks led the charge, closing on $8.6B of what will be a $10B total round (CEO Ali Ghodsi said there was more than $19B in demand). Seven other megadeals – six of the seven going to AI infrastructure or applied AI – made up $10B of the total.

This week brings the December-to-date funding total to 8X that of the full month of December last year, with a pipeline of fundings still in the works.

Appetite for AI: The Databricks $8.6B Series J has been in the works and in the news since the middle of the year. Originally targeted at $4B - $5B, investor demand pushed the total up to $6B - $7B, and then to $8B at a $55B valuation. Fast forward to last week, the size of the round had reportedly increased to $9.5B at a $60B valuation. The final figure? $10B at a $62B valuation, the largest venture round recorded (OpenAI set the previous record at $6.5B). As a secondary sale, the entire round is non-dilutive, with employees and early investors selling some or all of their stakes to new investors eager to get in, even at the (much) higher valuation.

Follow us on LinkedIn to stay on top of Bay Area startup fundings, exits, executive & investor activity.

Early Stage:

• Decart closed a $32M Series A, their efficient systems-level AI infrastructure enables a tenfold improvement in both training and inferencing of the largest generative models.

• Backflip AI closed a $30M Series A, pioneering AI technology for the designers and engineers who create the physical infrastructure of modern life.

• Fraction AI closed a $6M Pre-Seed, developing a new Web3 decentralized platform for crowdsourcing labelled data.

• Maisa closed a $5M Pre-Seed, their AI Digital Workers can solve problems and execute workflows autonomously with full traceability.

• LeadBeam closed a $2M Seed, update your CRM Anywhere with voice, image or location intelligence on the go.

Growth Stage:

• Databricks closed a $8.6B Series J, providers of the Databricks Lakehouse Platform which unifies data, analytics and AI.

• Perplexity AI closed a $500M Series D, builder of the world's first generally available conversational answer engine drawing from credible sources in real-time.

• SandboxAQ closed a $300M Series Unknown, delivering solutions at the intersection of AI and quantum techniques.

• Anysphere closed a $100M Series B, building the engineer of the future: a human-AI programmer that's an order of magnitude more effective than any one programmer.

• Intersect Power closed a $50M Private Equity round, developing, owning, and operating some of the world’s largest grid-tied clean energy resources, and co-located facilities for large industrial loads including data centers, e-fuels, and other energy intensive products

Follow LinkSV on LinkedIn to stay on top of Bay Area startup fundings, exits, executive & investor activity.

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WHATS NEXT // JPM WEEK 2025

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