(Bloomberg) — Within the quiet days before Christmas last 12 months, when most enterprise capitalists had retreated to holiday escapes in Aspen or Jackson Hole, Lightspeed Enterprise Partners’ investing team was contemplating a bid for a chunk of OpenAI rival Anthropic.
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The enterprise capital firm approached Anthropic with a suggestion to steer a multibillion-dollar investment, in line with an individual accustomed to the matter. An agreement quickly took shape: a $2 billion funding round at a $60 billion valuation, tripling what the startup was price a 12 months earlier. By early January, the deal was effectively done.
With $25 billion under management, Lightspeed is an element of a rarified strata of VC firms willing and in a position to back tech’s hottest, and most costly, firms. Along with Anthropic, Lightspeed has recently participated in a big funding round for artificial intelligence company Databricks Inc. that valued it at $62 billion, in addition to an investment in Elon Musk’s xAI at a $50 billion valuation.
AI megadeals have grow to be a staple of the top-tier VC weight loss plan despite the risks, including that firms haven’t yet proven they’ll profit off these investments.
“It’s high-stakes poker,” said Sierra Ventures Managing Partner Tim Guleri, an AI investor.
Prior to now three months alone, xAI, OpenAI and Anthropic have raised greater than $20 billion to support their hefty computing costs. Those deals collectively valued the three firms at greater than $250 billion. Altogether, US AI startups raised a record $97 billion in 2024, in line with PitchBook data.
For enterprise capitalists, there’s rising pressure — particularly on people who missed the prospect to back the highest AI firms at lower prices — to align themselves with the leading players before it’s too late, investors said. Representatives for Lightspeed and Anthropic declined to comment for this story.
“It shows you’re in the sport,” said Peter Werner, co-chair of Cooley’s enterprise capital practice group. “What you don’t need to be is a enterprise fund that’s attempting to be in the combo, missing out or developing a fame that you just’re not nimble enough to get into one of the best and hottest rounds.”
VC Shift
Lightspeed was founded greater than 20 years ago 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 best known for savvy investments in consumer technology, fintech and enterprise software, making early bets on firms like Snap Inc., Affirm Holdings Inc. and Rubrik Inc. Despite its track record, the firm has yet to grow to be as much of a household name as among the most famous tier one VC players. With its aggressive AI bets, insiders say these deals could permanently elevate its standing — in the event that they succeed.
Like much of the VC industry, Lightspeed has redirected its attention toward AI startups, backing early-stage firms equivalent to the music company Suno Inc. and video startup Pika, as well as to larger players. In December, it parted ways with its two lead consumer investors and said it was adjusting its consumer investing strategy to raised suit the “age of AI.”
In total, Lightspeed has already invested $2.2 billion in AI deals, a figure that doesn’t include its latest Anthropic investment, in line with one other person accustomed to the matter. Soon, it’ll have additional firepower to throw on the cash-hungry firms. It’s nearing the tip of a fundraising expected to usher in $7 billion, an individual accustomed to the matter said. A spokesperson for Lightspeed declined to comment on the fundraising. The Information earlier reported on the fundraising efforts.
The firm’s Anthropic investment is one in every of its most ambitious yet. And while the $60 billion value could appear eye-wateringly high, Lightspeed’s partners are hopeful the deal will someday appear to be a bargain.
“In aggregate, it looks like the valuations are expensive because we see lots of activity and lots of deals getting done,” said Lightspeed Partner Guru Chahal at a Fortune Brainstorm Tech conference last 12 months. “Whenever you look back, every round, on the time, seemed incredibly expensive and, on reflection, was incredibly inexpensive.”
Big AI deals remain a source of debate in Silicon Valley. While the largest firms stand to be essentially the most transformative, some enterprise capitalists argue that participating in huge funding rounds won’t yield the returns tech investors have to satisfy their backers. Those investors are targeting smaller AI apps and services, slightly than the giants like Anthropic and OpenAI, engaged in developing the pricey constructing blocks of the industry.
The recent proliferation of AI megadeals also speaks to a broader shift in VC: a departure from the normal strategy of early-stage investments, where firms acquire larger stakes at lower valuations. Now, VC firms are paying a serious premium, and betting that a small variety of AI firms could ultimately be price over $1 trillion.
The growing size of VC funds has also required firms to put in writing larger checks, said Weber. Reasonably than aiming for large multiples on their investment, firms are “not necessarily trying to search out home runs, they try to search out ways to double their money,” he said.
“There are only so many iconic, generational pre-IPO firms on the market today,” IVP General Partner Ajay Vashee said. “In case your mandate is to be investing at that stage, then you’ve gotten to search out opportunities to place your capital to work.”
Shaky Start
The race to search out those opportunities is fraught with risks, including regulatory uncertainty, fierce competition and soaring infrastructure costs for leading AI developers.
Investors fear their AI bets may fall short, leaving firms exposed if the bubble bursts. Already, the sector has seen some billion-dollar firms stumble.
For instance, Lightspeed co-led a high-profile investment in Stability AI, the developer of the image generator Stable Diffusion that was valued at $1 billion in 2022. Shortly after, several key developers resigned from the business amid rising tensions with mercurial Chief Executive Officer Emad Mostaque, lawsuits and financial difficulties. Mostaque resigned from the corporate in early 2024. The corporate has since appointed a latest CEO and raised additional capital, Bloomberg reported.
Lightspeed can be a serious investor in Mistral, the Paris-based open-source company now competing against a slew of better-funded language models.
After all, Lightspeed and other top VC firms are hopeful that placing several bets in competing firms will yield a minimum of one major AI winner. If not, the fallout might be significant.
“You’ll be able to’t lose too many games of this high-stakes poker,” said Sierra Ventures’ Guleri. “That’s the chance of the strategy.”