According to an analysis by Newcomer, dual-valuation deals have become pervasive in the current AI funding cycle. In practice, prestige venture firms are getting better prices than other investors within the same round.

What a dual valuation is

A normal funding round has a single price: the company raises a given amount at a given valuation, and everyone in the round buys shares at that price. That is what we call the round's "valuation".

Dual valuation breaks that rule. Within the same round some investors come in at a lower valuation — that is, more cheaply. The same company has two different prices at the same moment.

Why founders accept it

Why a founder would agree to this is not obvious at first: they are giving away more equity for less money.

The reason is that a prestige firm's presence in a round carries value in itself. That name appearing on the investor list makes the next round easier, makes hiring easier, increases customer confidence. The founder is buying that signal and paying for it with discounted equity.

Newcomer's framing says exactly this: prestige firms are monetising their brand names. In a period when capital is abundant, money provides no differentiation; the name does.

Why it has spread now

The cause is competition within AI rounds. When more investors want into a round than the company wants to raise, bargaining power passes to the founder.

But that power is not applied uniformly. A founder can demand full price from an ordinary fund while granting a discount to a well-known one — because what they receive from each is not the same.

What it signals

The practice has two consequences, both relevant to outside observers:

  • The stated valuation does not give the full picture. Headlines saying \"company X raised at valuation Y\" may be reflecting the highest price in the round.
  • Returns are distributed unevenly. Two investors in the same round realise very different gains at the same exit.

This is not wrongdoing — it is an agreement freely made between parties. But it makes the valuation figures read across the industry that little bit more ambiguous.

Its relation to the bubble argument

The spread of the practice can also be read as an indicator of overheating in AI investment. Dual valuations appear when investors are queuing to get into a round; in periods when capital is scarce nobody negotiates a second price.

Seen that way, the prevalence of dual valuations is an indirect gauge of market temperature. The practice beginning to recede would be an early sign that the cycle is cooling.

For founders

There is a cost to this arrangement on the founder's side, and it is not immediately visible. Discounted equity leaves a structure in which existing investors are diluted less in later rounds; the cost therefore lands on the founder's and employees' shares.

The benefit a prestige name brings is real, but so is its price. Whether that calculation was made correctly only becomes visible when the company reaches an exit.