(Bloomberg) — Within the quiet days earlier than Christmas final yr, when most enterprise capitalists had retreated to vacation escapes in Aspen or Jackson Gap, Lightspeed Enterprise Companions’ investing workforce was considering a bid for a bit of OpenAI rival Anthropic.
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The enterprise capital agency approached Anthropic with a suggestion to steer a multibillion-dollar funding, in response to an individual conversant in the matter. An settlement rapidly took form: a $2 billion funding spherical at a $60 billion valuation, tripling what the startup was value a yr earlier. By early January, the deal was successfully performed.
With $25 billion below administration, Lightspeed is a part of a rarified strata of VC corporations prepared and capable of again tech’s hottest, and costliest, corporations. Along with Anthropic, Lightspeed has lately participated in a big funding spherical for synthetic intelligence firm Databricks Inc. that valued it at $62 billion, in addition to an funding in Elon Musk’s xAI at a $50 billion valuation.
AI megadeals have change into a staple of the top-tier VC eating regimen regardless of the dangers, together with that corporations haven’t but confirmed they’ll revenue off these investments.
“It’s high-stakes poker,” mentioned Sierra Ventures Managing Associate Tim Guleri, an AI investor.
Prior to now three months alone, xAI, OpenAI and Anthropic have raised greater than $20 billion to help their hefty computing prices. These offers collectively valued the three corporations at greater than $250 billion. Altogether, US AI startups raised a report $97 billion in 2024, in response to PitchBook information.
For enterprise capitalists, there’s rising stress — notably on people who missed the possibility to again the highest AI corporations at decrease costs — to align themselves with the main gamers earlier than it’s too late, buyers mentioned. Representatives for Lightspeed and Anthropic declined to remark for this story.
“It exhibits you’re within the recreation,” mentioned Peter Werner, co-chair of Cooley’s enterprise capital observe group. “What you don’t wish to be is a enterprise fund that’s making an attempt to be within the combine, lacking out or creating a popularity that you simply’re not nimble sufficient to get into the perfect and hottest rounds.”
VC Shift
Lightspeed was based greater than 20 years in the past on the heels of the dot-com bust by Barry Eggers, Christopher Schaepe, Peter Nieh and Ravi Mhatre, who led the Anthropic negotiations. It’s finest recognized for savvy investments in client expertise, fintech and enterprise software program, making early bets on corporations like Snap Inc., Affirm Holdings Inc. and Rubrik Inc. Regardless of its observe report, the agency has but to change into as a lot of a family identify as among the most well-known tier one VC gamers. With its aggressive AI bets, insiders say these offers may completely elevate its standing — in the event that they succeed.
Like a lot of the VC trade, Lightspeed has redirected its consideration towards AI startups, backing early-stage corporations such because the music firm Suno Inc. and video startup Pika, along with larger gamers. In December, it parted methods with its two lead client buyers and mentioned it was adjusting its client investing technique to higher go well with the “age of AI.”
In whole, Lightspeed has already invested $2.2 billion in AI offers, a determine that doesn’t embrace its newest Anthropic funding, in response to one other particular person conversant in the matter. Quickly, it’ll have further firepower to throw on the cash-hungry corporations. It’s nearing the tip of a fundraising anticipated to usher in $7 billion, an individual conversant in the matter mentioned. A spokesperson for Lightspeed declined to touch upon the fundraising. The Data earlier reported on the fundraising efforts.
The agency’s Anthropic funding is certainly one of its most formidable but. And whereas the $60 billion worth could appear eye-wateringly excessive, Lightspeed’s companions are hopeful the deal will at some point seem like a cut price.
“In mixture, it feels just like the valuations are costly as a result of we see quite a lot of exercise and quite a lot of offers getting performed,” mentioned Lightspeed Associate Guru Chahal at a Fortune Brainstorm Tech convention final yr. “While you look again, each spherical, on the time, appeared extremely costly and, looking back, was extremely cheap.”
Large AI offers stay a supply of debate in Silicon Valley. Whereas the largest corporations stand to be essentially the most transformative, some enterprise capitalists argue that collaborating in enormous funding rounds received’t yield the returns tech buyers have to fulfill their backers. These buyers are concentrating on smaller AI apps and companies, quite than the giants like Anthropic and OpenAI, engaged in creating the dear constructing blocks of the trade.
The latest proliferation of AI megadeals additionally speaks to a broader shift in VC: a departure from the normal technique of early-stage investments, the place corporations purchase bigger stakes at decrease valuations. Now, VC corporations are paying a significant premium, and betting {that a} small variety of AI corporations may finally be value over $1 trillion.
The rising measurement of VC funds has additionally required corporations to write down bigger checks, mentioned Weber. Quite than aiming for enormous multiples on their funding, corporations are “not essentially looking for dwelling runs, they’re looking for methods to double their cash,” he mentioned.
“There are solely so many iconic, generational pre-IPO corporations on the market right this moment,” IVP Basic Associate Ajay Vashee mentioned. “In case your mandate is to be investing at that stage, then it’s a must to discover alternatives to place your capital to work.”
Shaky Begin
The race to seek out these alternatives is fraught with dangers, together with regulatory uncertainty, fierce competitors and hovering infrastructure prices for main AI builders.
Traders concern their AI bets might fall brief, leaving corporations uncovered if the bubble bursts. Already, the sector has seen some billion-dollar corporations stumble.
For instance, Lightspeed co-led a high-profile funding in Stability AI, the developer of the picture generator Steady Diffusion that was valued at $1 billion in 2022. Shortly after, a number of key builders resigned from the enterprise amid rising tensions with mercurial Chief Government Officer Emad Mostaque, lawsuits and monetary difficulties. Mostaque resigned from the corporate in early 2024. The corporate has since appointed a brand new CEO and raised further capital, Bloomberg reported.
Lightspeed can be a significant investor in Mistral, the Paris-based open-source firm now competing in opposition to a slew of better-funded language fashions.
In fact, Lightspeed and different high VC corporations are hopeful that inserting a number of bets in competing corporations will yield not less than one main AI winner. If not, the fallout could possibly be vital.
“You possibly can’t lose too many video games of this high-stakes poker,” mentioned Sierra Ventures’ Guleri. “That’s the chance of the technique.”
