VCs deploy ‘kingmaking’ strategy to crown AI winners in their infancy

I've always been fascinated by how venture capital shapes the startup world, and this piece highlights a bold shift that's hard to ignore. DualEntry, a young AI ERP player, just snagged a whopping $90 million Series A at a $415 million valuation, backed by heavyweights like Lightspeed and Khosla. But whispers of their revenue being surprisingly low—around $400K ARR just months ago—raise eyebrows. The co-founder pushes back, claiming it's grown significantly, yet the real story here is the strategy at play: kingmaking.

This isn't your grandparents' VC game. Investors are pouring massive sums into early-stage contenders in hot categories like AI-driven enterprise planning, betting big on one to dominate and crush the competition. Think Uber and Lyft in the ride-sharing wars, but happening way sooner—right after seed or Series A, not later rounds. Competitors like Rillet and Campfire are fueling their own arms races with back-to-back raises, from $25M to $70M in quick succession. It's a pattern rippling through AI apps, IT management, and beyond, where data between rounds is scarce, but the cash is flowing freely.

Critics question if this aggressive funding makes sense when many startups are still in single-digit million ARR territory. Sure, history has flops like Convoy's collapse or Bird's woes, but VCs are undeterred. The perks? Overfunded teams look unbreakable to enterprise buyers, snagging those lucrative deals faster. It's a high-stakes power law play—get in early on the potential Uber of AI ERP, and you can't overpay if it hits. Entrepreneurs, take note: in this environment, traction matters, but picking the right backers might be the real edge.

Curious how this early firepower is rewriting the rules? Check out the full article for the deep dive into these funding frenzies.