A Crunchbase News analysis argues that very large first financings rarely produce venture-scale returns because high entry valuations limit investor upside.
Biotech Parallel
Biotech has the longest history of mega first rounds in venture. According to the Crunchbase News article, large first rounds in biotech have produced a handful of strong outcomes for first-check investors and a very long tail of modest ones. The author compiled a dataset of every publicly available $100 million-plus first round over the last 15 years, roughly 200 deals.
Return Data
Only 20% of those deals had recorded exits. Of those, only a few delivered 10x MOIC or better for the first-round investor. In other words, approximately 1% of companies that publicly raised $100 million or more in their first financing round generated returns that justify the asset class, according to the Crunchbase News article.
That distribution will improve with a few well-placed AI outcomes. OpenAI and Anthropic alone will essentially double the number of outlier returns in this data set when they exit. First-round investors are looking at 30-40x returns at OpenAI’s projected IPO valuations.
Historical Comparisons
By comparison, Sequoia Capital and Kleiner Perkins each turned roughly $12.5 million of their Google checks into around $4 billion. First Round Capital reportedly turned a roughly $500,000 investment in Uber into $2.5 billion.
Smaller AI Rounds
The number of $50 million-plus seed rounds has exploded since 2018. Yet several AI companies that reached valuations above $5 billion raised modest first rounds: Cursor less than $10 million, ElevenLabs $2 million, Legora $11 million, Sierra $25 million, and Cohere $5 million, according to the Crunchbase News article.
