In early October, AI enterprise resource planning (ERP) startup DualEntry announced a $90 million Series A round led by Lightspeed and Khosla Ventures, valuing the one-year-old business at $415 million.
The company aims to replace traditional software like Oracle NetSuite with products that can automate routine tasks and provide predictive insights. A huge funding round from a top VC suggests the startup is likely to see impressive revenue growth.
However, one venture capitalist who declined the investment told TechCrunch that DualEntry's annual recurring revenue (ARR) was only about $400,000 when the deal was considered in August. DualEntry co-founder Santiago Nestares denies that number. Asked about the proceeds at the close of the transaction, Mr. Nestares said, “It was significantly higher than that.”
Still, commanding very good valuations relative to earnings is becoming an increasingly popular investment strategy among top VC firms. This tactic is known as “kingmaking.”
This approach involves pouring large sums of money into a single startup in a highly competitive category, with the goal of giving the chosen company a bank account advantage large enough to create a market advantage and overwhelm its rivals.
Kingmaking is not new, but its timing has changed dramatically.
“Venture capitalists have always evaluated their competitors and bet on who they think will win in their category. The difference is that they do it much earlier,” said Jeremy Kaufman, partner at Scale Venture Partners.
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This early aggressive fundraising is in contrast to previous investment cycles.
“The 2010s version of this was just called 'capital as a weapon,'” said David Peterson, partner at Angular Ventures. He pointed out that while the big funding for Uber and Lyft are classic examples, the capitalization of ride-sharing companies didn't begin until they reached a Series C or D round.
As with Uber vs. Lyft, investors in DualEntry competitors Rillet and Campfire are clearly eager to see their bets pay off with the help of substantial capital. In early August, Rillet raised a $70 million Series B led by a16z and Iconiq, just two months after the company closed a $25 million Series A led by Sequoia.
Similarly, Campfire AI has raised two consecutive funding rounds. In October, the company secured a $65 million Series B, just months after announcing a $35 million Series A round led by Accel.
AI ERP is just one of several AI application categories where startups are raising funding in quick succession. “There is no new data between rounds. Series Bs routinely occur 27-60 days after Series A,” Jaya Gupta, a partner at Foundation Capital, posted on X last month. Beyond AI ERP, she wrote, this pattern is also seen in categories such as IT service management and SOC compliance.
While some startups like Cursor and Lovable have reportedly grown at a breakneck pace between successive rounds, some VCs told TechCrunch that's not all. According to these investors, ARR for AI ERP and several other categories of startups that have raised multiple rounds of funding in 2025 will still be in the single digits.
While not all VCs agree that kingmaking is a sound investment strategy, there are several reasons why providing large amounts of capital can be beneficial even if a startup maintains a moderate burn rate. For example, well-funded startups are perceived as more likely to survive by large corporate buyers and are the preferred vendors for large software purchases. It's a strategy that has helped legal AI startup Harvey attract clients from big law firms, investors said.
Still, history shows that big capital has no guarantee of success, and there have been high-profile failures, such as the bankruptcy reorganizations of logistics company Convoy and scooter company Bird.
But these precedents don't faze major VC firms. They like to bet on categories that they think are good for AI, and as Peterson said, they like to invest early. “Everyone has completely learned the lesson of the power law. In the 2010s, companies can grow faster and become bigger than almost anyone realized. If you were an early Uber investor, you couldn't overpay.”
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