'Dual Pricing' Debate in Silicon Valley: Are AI Startups Inflating Valuations?

Strategic Valuation Increases and Unicorn Status According to a report by the Wall Street Journal, funding rounds conducted by the AI startup Serval last December have brought a new financing strategy in Silicon Valley to light.
In a private deal with venture capital giant Sequoia, the company received investment at a valuation of under $400 million.
Just days later, an investment from another group pushed the valuation above $1 billion, granting the company "unicorn" status.
This valuation increase of approximately $600 million in less than a week is seen as a prime example of the "dual pricing" practice that has become common among high-profile startups.
In this method, startups sell a portion of their shares to a lead investor at a lower price while simultaneously offering additional shares to other investors at a much higher price.
This situation allows the lead investor to realize significant paper gains while enabling the startup to announce a high market value to the public.
Warnings of 'Artificial Inflation' from Industry Experts Many venture capital investors and independent accounting experts state that such multi-layered deals raise questions regarding the true market value within the AI sector.
Chris Douvos, founder of AHOY Capital, emphasized that this practice definitely inflates valuations, noting that founders are attempting to focus market interest on a single point through strategic moves.
Data from financial software provider Carta reveals that such financing deals showed a significant increase in the final quarter of last year.
Peter Wendell, founder of Sierra Ventures, stated that this method is used to maintain a perception of high value and to gain prestige.
Imbalance Between Revenue and Market Value According to PitchBook data, Serval’s valuation, which was approximately $220 million in October, skyrocketed to $1.2 billion in December, despite its annual recurring revenue (ARR) being only around $1 million.
This gap between revenue and valuation brings transparency debates among investors.
Former Cisco Systems CEO John Chambers expressed that most venture capital investors would not prefer to participate in such non-transparent deals where some partners are offered much more advantageous terms.
Experts warn that while this method is legal, it could damage market confidence in the long run.