AI Startups Are Selling the Same Equity at Two Different Prices to Manufacture Unicorn Status

VCs Invented a New Way to Create Instant Unicorns

A new valuation trick is spreading through the AI startup world, and it is making companies look far more valuable than they actually are. Lead venture capital firms are now splitting their investment into two tiers within a single funding round: a large chunk at a lower valuation and a smaller portion at a much higher "headline" valuation. The result? Startups get to call themselves unicorns while the lead investor pays significantly less per share than the number suggests.

Until recently, the hottest AI startups raised multiple rounds in quick succession at escalating valuations. But because constant fundraising distracts founders from building products, lead VCs have devised this new structure that consolidates two fundraising cycles into one, with two different price tags for the same equity.

How the Two-Price Trick Works

The mechanics are straightforward. A lead VC invests the bulk of their capital at a lower, more realistic valuation. They then invest a smaller portion at a significantly higher price. Other investors who want in are allowed to participate, but only at the higher price point. The startup then announces the higher number as its official valuation.

Take Aaru, a synthetic-customer research startup. Redpoint invested a large portion of its check at a $450 million valuation, then invested a smaller amount at $1 billion. Other VCs joined at the $1 billion price. Aaru got to announce itself as a unicorn, even though Redpoint's blended price was well below that.

Similarly, Serval, an AI-powered IT help desk startup, had Sequoia invest at $400 million while announcing a $1 billion headline valuation for its $75 million Series B.

Why VCs and Founders Love This

For lead VCs, the strategy is a competitive weapon. As Jason Shuman, a general partner at Primary Ventures, put it: "If the headline number is huge, it is also an incredible strategy to scare away other VCs from backing the number two and number three players." The inflated valuation creates the perception of a market winner before the company has proven anything.

For founders, the benefits are equally attractive. A unicorn valuation helps recruit top talent who want equity in a billion-dollar company, attracts corporate customers who view the startup as a market leader, and generates media attention that further reinforces the narrative.

The Bubble Warning Signs

Not everyone is impressed. Wesley Chan, co-founder and managing partner at FPV Ventures, views this as a symptom of bubble-like behavior: "You cannot sell the same product at two different prices. Only airlines can get away with this."

The real danger lurks in what comes next. These companies must raise their next round at a valuation higher than the headline price, not the blended price. If they cannot justify the inflated number, it becomes a painful down round that dilutes employees and founders, erodes confidence among partners and customers, and scares away future investors.

The 2022 Lesson Nobody Learned

Jack Selby, managing director at Thiel Capital, warns that chasing extreme valuations is a dangerous game, pointing to the painful market reset of 2022 as a cautionary tale. "If you put yourself on this high-wire act, it is very easy to fall off," he said. Many startups that inflated their valuations during the 2021 boom spent the next two years doing painful down rounds or shutting down entirely.

The Bottom Line

The two-tier valuation trick is clever financial engineering, but it is also a red flag for the AI startup ecosystem. When lead investors are paying $450 million for a company that announces itself as a $1 billion unicorn, the gap between perception and reality is not just large, it is potentially dangerous. Multiple investors told TechCrunch they had never seen this structure before, which means the industry is inventing new ways to inflate valuations faster than it is inventing new technology. That rarely ends well.