Pete Martin remembers raising a $5 million seed round at a $25 million post-money valuation for his AI-powered cybersecurity company Realm way back in 2024, aka, like a thousand “AI years” ago.

That valuation seemed high for that amount at the time, he recalled. But today, “it’s pretty typical” to see a $10 million seed round at a $40 million to $45 million post-money valuation, he said, especially if you are an AI company.

Actually, that type of thing happens only if you are an AI company, as investors are showing little interest in anything else.

At the most recent Y Combinator Demo Day held in March, everyone was talking about how high the companies were priced, said Ashley Smith, a general partner at the early-stage fund Vermilion. Many startups had already landed six- to seven-figure customer contracts, including a company that was only eight weeks old, she said, so there were companies asking for $5 million at a $40 million post money.

This time, it was more than the so-called “YC tax,” meaning how much more an investor is willing to pay just because the startup went through YC, she believed. Even with those early revenue numbers, Smith said investors in this market are pricing rounds “years ahead of traction.”

The big venture firms, flush with cash, are also moving into rounds earlier, driving up startup prices and valuations in hopes of cashing in big if these companies exit or IPO one day. Smaller VC firms have an insatiable appetite for AI companies, too. As an investor focused on AI infrastructure, Smith said she can easily find herself priced out of a round, especially when a larger firm moves in. That’s one reason why seed deal count is down but valuations are up, both founders and VCs said, and data from Carta shows.

Shanea Leven, founder of the enterprise AI application platform Empromptu, blames Cursor, which, in early 2025, hit $100 million in revenue in just 12 months. It was one of the first high-profile AI companies to raise the bar for how fast these startups could gain traction, although it certainly wasn’t the only one. Others include Lovable, Bolt, OpenEvidence, ElevenLabs, all boasting about their fast traction. Though these are outliers, it’s hard for some not to feel the reverberated heat.

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“The investors are expecting that now,” she said. “The pressure is at an all-time high, not to be a billion-dollar company, but a $50 billion.”

Faster traction, bigger valuations

VCs are quick to defend the rationale of rising seed valuations. For instance, Marlon Nichols, managing general partner at MaC Ventures, said the proof is in the form of traction right out of the gate, driving seed pricing. When he launched his firm back in 2019, he said his average entry check was $2.5 million. Today, it’s $5 million.

“The best seed-stage companies do not look like traditional seed-stage companies anymore,” he said. The advancement of AI tools means that founders can get to minimal viable products and gain early customers faster than ever before, even among big enterprises, which are eagerly looking for ways to employ AI.

Nichols’ last two seed investments were already generating more than $2 million in revenue, with “paid pilots from large enterprises” and “a clear line of sight to full commercial agreements.” He cut checks between $3 million and $4 million, and agreed to value the startups at $25 million and $30 million post-money, respectively, which is a lot compared to a few years ago.

The founders’ backgrounds also played a role in his term-sheet offers. “They had relevant experience” and “a track record of execution,” he said, “which reduced a lot of that early-stage risk.”

Plus, investors are willing to pay astronomical premiums for proven AI talent, favoring second-time founders or those with the right pedigree from the right previous employer (like OpenAI). This, too, brings up expected valuations across the board.

“There’s a war for great researchers right now, and I don’t think it’s good or bad; it’s just the current state of the market,” Amber Atherton, a partner at the early-stage consumer fund Patron, said.

That’s what is driving the most extreme seed valuations,

It’s not your imagination: AI seed startups are commanding higher valuations