Back in January, Yelp acquired Hatch for $300 million. One thing that jumped out was the pre-money valuation and purchase price. Given Hatch’s $25 million ARR, the purchase price reflected a 12x ARR multiple. This begged the question: Are Covid-era multiples back fro valuations? The answer is yes and no.
Though it’s not always the case, there’s a tale of two cities dynamic happening, where companies legitimately built on proprietary AI – as with Hatch and several others – are in high demand among investors. That bestows a degree of negotiating leverage and a seller’s market for startup equity.
But whether or not a funded company is built on AI, the current environment is marked by sobriety and fundamentals. Though AI is enticing an investor land grab, there’s still a meaningful degree of substance in the space, such as rapid revenue growth. Even AI mega rounds are often built on solid ground.
“I wouldn’t say we’re back to the days of high valuations for companies without proven results,” Progress Partners’ managing director David Arslanian said. “We’re still in a period that prioritizes fundamentals for the most part, with AI and non-AI funded startups showing strong financials or clearly defined markets.”
Breaking Records
Back to the “tale of two cities” funding landscape, it’s not a new or groundbreaking observation but we were compelled to do some digging to quantify it further. For many individual deals and aggregate funding trends in AI, the valuations and funding appetite mirror what was shown in the Hatch deal.
If we look at the first quarter of 2026, it broke several funding records, with most of the action owed to AI. Specifically, the quarter tallied $297 million in total venture funding, says Crunchbase. This breaks all quarterly funding records on average and is a 2.5x year-over-year jump, thanks to a few AI mega deals.
Specifically, four of the five largest venture rounds on record happened in Q1. These were OpenAI ($122 billion), Anthropic ($30 billion), xAI ($20 billion), and Waymo ($16 billion). These four companies raised $188 billion collectively in Q1, which was 65 percent of total global venture funding during the quarter.
Beyond those four largest deals, 10 AI companies raised more than $1 billion each in Q1. And in total, $242 billion went to AI companies in Q1. Considering $297 in total venture funding in the quarter, that makes AI’s share 80 percent. Many of these outsized outliers were also late-stage deals.
On Pace
If we pan back further to full-year 2025, the story is similar. Total funding was $425 billion according to Crunchbase, up 30 percent from $328 billion in 2024. But more important than the rate itself was the fact that it represented a turnaround from three consecutive years of aggregate funding declines.
Even more notable, 2025 was the third biggest total funding year on record, trailing only 2021 and 2022. Other records include the largest private funding round in history, given OpenAI’s $40 billion round. 2025 also saw the largest private valuation ever recorded, given SpaceX’s $800 billion valuation.
Just like Q1 of this year, the 2025 funding figures are buoyed by AI mega deals. OpenAI, Scale AI, Anthropic, Project Prometheus, and xAI collectively raised $84 billion – 20 percent of total funds raised in 2025. Beyond those mega deals, about half of 2025’s total global funding went to AI companies.
So if we look at the trending, 2026 is on pace for a larger share of AI funding than 2025. But we’ll have to see how the rest of the year shakes out. Meanwhile, we’ll close by saying that those in the “seller’s market” have proprietary and defensible AI tech, not just pitch decks peppered with the term AI.
