Silicon Valley Is Paying Billions for AI Startups That Haven't Built Anything.

Earlier this year David Silver, a longtime Google DeepMind scientist best known for his work on AlphaGo, went looking for money for his new company, Ineffable Intelligence. He had no product to show investors and no plan to sell one anytime soon. When the round was announced, the reported valuation was $5.1 billion.

Not everyone paid that price. Sequoia and a handful of other early backers got in for a tiny fraction of it.

Same company, 70 times the price

Forbes pieced together how the deal worked in a June investigation. Despite having no near-term plans to launch products, Ineffable raised $1.1 billion in seed funding, which was billed as Europe's largest seed round ever, at a reported $5.1 billion valuation.

The money came in two stages. In the first, Ineffable raised $11 million from Sequoia and others at about $55 million pre-money, according to UK company filings. About a month later it raised another $1.1 billion at $4 billion pre-money, with Lightspeed, Index Ventures and DST Global among the buyers. Forbes calculated that works out to more than 70 times the price for the same company, just weeks apart. As far as the public record shows, Ineffable didn't release anything or announce a customer in between.

Forbes found other companies doing the same thing. Baseten, which sells AI infrastructure, raised $1.5 billion in two tranches, one at an $11 billion valuation and the other at $13 billion. Sources told Forbes that Aaru and Serval split their rounds too, and one VC told the magazine it's standard among founders out to get the highest valuation they can.

Billion-dollar seed rounds

Even without the two-price trick, huge pre-product rounds have become common. According to ellipsis Ventures, the largest seed rounds in venture history now all belong to neolabs, the industry's name for research-first AI companies. Thinking Machines raised $2 billion at a $12 billion valuation before it had a product. Safe Superintelligence is valued at $32 billion with no product, no API and no published research.

A DesignRush funding guide puts Project Prometheus's $6.2 billion seed, raised with no shipped product, among the biggest seed rounds in tech history. ELI by Techbible reported that Ricursive Intelligence, started by the team behind Google's AlphaChip, raised a $300 million Series A at a $4 billion valuation two months after it launched.

Why founders want the big number

For the early investors, the appeal is obvious. They buy into a famous team cheaply and see their stake marked up almost right away. Founders like the arrangement for their own reasons, according to Forbes. A giant valuation makes it easier to close the next round and land deals, and it helps when recruiting researchers who have offers from several labs.

Jaya Gupta, a partner at Foundation Capital, told Forbes that in this market "a billion-dollar headline is worth a lot more than an accurate one."

At least one founder has complained in public. Mercor CEO Brendan Foody went after Sequoia by name on X over split rounds, Forbes reported, though he later conceded that top firms across the industry do it. Sequoia partner Shaun Maguire's answer was that other investors are just willing to pay much more than Sequoia for hot AI companies.

The price nobody reports

Amplify partner Sarah Catanzaro told Forbes that a company's real worth in these deals is usually the blended valuation, a weighted average of both tranches, and that number almost never comes out. What readers see instead is the higher figure sitting next to Sequoia's name.

It also matters who's on the other side of these deals. Per Forbes, corporate investors like Nvidia, Google and Microsoft are said to care less about price because their checks often come back to them as chip contracts and cloud deals. ellipsis Ventures counted Nvidia in 32 of the 60-plus neolab funding rounds, more than any venture firm, with much of that money returning to Nvidia as compute spending.

Some investors may not plan to stick around. Forbes reported that demand is strong enough for investors to resell stakes on the secondary market at higher prices, even at companies whose business prospects are weak.

Employees can get caught out. Someone who joins after a big round is announced may get stock options priced near the headline valuation rather than the blended one. British taxpayers have money in this too. Ineffable was backed by the UK's new Sovereign AI fund and the British Business Bank, both publicly funded, and Forbes couldn't find out which price they paid.

Seed prices have tripled

The celebrity rounds pull everything else up with them. ellipsis Ventures reports that across all US seed rounds tracked by Carta, the 95th-percentile valuation nearly tripled to $200 million in the year to Q2 2026, the fastest rise in a decade. Forbes cites a count by Menlo Ventures' Deedy Das of more than 63 neolabs worth over $300 billion combined, having raised about $48 billion between them.

The biggest checks are going to very few companies. Second Talent's funding tracker shows startups raised $510 billion in the first half of 2026, and OpenAI and Anthropic took 43% of it. Some of the world's largest investors were uneasy long before this year. At the 2025 Milken Asia Summit, Reuters reported, GIC's chief investment officer said early-stage venture had a bit of a hype bubble. TPG's president mentioned startups valued at $400 million to $1.2 billion per employee and called it "breathtaking."

Why investors keep paying

Investors defending these prices usually start with Anthropic. ellipsis Ventures notes that its valuation went from $60 billion to $183 billion in about six months of 2025, and even late investors made venture-sized returns. Its revenue grew from roughly $1 billion in annual run-rate at the end of 2024 to about $47 billion now.

Neolabs also need a lot of cash early. Analyst Jamesin Seidel writes that their research depends on huge amounts of compute, often bought through multi-year contracts, and that they're competing with OpenAI, Meta, DeepMind and Anthropic for the same researchers. His numbers show a slower pace than the headlines. Across 106 rounds at 23 neolabs, the median gap between raises was 7.6 months and the median price increase was 3.53x. Goldman strategist Peter Oppenheimer said this month that he doesn't see a valuation bubble, though there may be an earnings bubble.

Ineffable, for its part, is open about the odds. Its website says the company faces a significant chance of failure in exchange for a shot at spectacular success.

Watching for the turn

The railroad and dot-com booms both lost investors fortunes, even though the technology behind them turned out to matter a great deal. It's possible for AI to go the same way.

Right now, though, a valuation in an AI funding announcement doesn't tell you much about what the company is worth. It may have been set partly with recruiting in mind, or paid by a strategic investor expecting the money back in sales, or by a fund that plans to sell its shares at the first chance.

The first real test will probably come when a well-known neolab needs more money and can't get a higher price than last time. Blended valuations turning up in filings, or Nvidia and the cloud companies writing fewer checks, would be early warnings too.