Key Takeaways:
A new generation of venture investors is rewriting Silicon Valley's rules — paying up for late-stage stakes and holding for years to capture outsized returns.
Spark Capital turned a $75 million bet on Anthropic into a stake worth roughly $7 billion, as the AI company's valuation surged to $965 billion, redefining how venture firms generate outsized returns.
"The amount of money that's available is astronomical compared to yesteryear," said Michael Moritz, who co-ran Sequoia Capital for 16 years and led its investments in Google, PayPal and Yahoo. "The business has changed entirely."
U.S. startups raised $321 billion last year, up from $84 billion in 2016, according to PitchBook. Average late-stage Series D rounds have swelled to more than $1 billion so far this year, compared with $65 million a decade ago. Companies now remain private for well over a decade, locking public-market investors out of key wealth-creation phases.
The shift carries risk — paying high prices for late-stage stakes leaves less margin for error if growth disappoints. But for firms like Spark, Gigafund and Greenoaks, concentrated bets on AI and space technology have generated returns that rival or exceed those of traditional early-stage venture capital.
The Late-Stage Pivot
Yasmin Razavi, a general partner at Spark Capital, wrote two investment memos before convincing her partners to lead Anthropic's Series C in May 2023. The company had no product and no revenue at a $4 billion valuation — a price that deterred most of Silicon Valley. Razavi, then 33, argued that more than one AI model developer could succeed. Spark invested $75 million, the largest check it had ever written to a company at the time. Today, that stake is worth about $7 billion, people familiar with the matter said.
The bet elevated both Razavi and Spark. In June, the firm announced it had raised $3.3 billion for two new funds, the most capital it has ever raised.
Concentrated Bets, Concentrated Rewards
Luke Nosek made one of the earliest and riskiest such wagers. The PayPal co-founder and his firm Founders Fund invested $20 million in SpaceX in 2008 — roughly 10 percent of its second fund — when the rocket company was worth about $400 million and had yet to prove it could launch affordably. At least one limited partner refused to invest in the firm's next fund over the bet. Nosek later co-founded Gigafund, which invested more than $1 billion in SpaceX. The stake has ballooned to tens of billions of dollars following SpaceX's $75 billion initial public offering in June.
Greenoaks, led by Neil Mehta, has followed a similar playbook. The firm first invested in Anthropic earlier this year and co-led the funding round that valued the company at $965 billion just months later. Mehta, 42, previously worked at hedge fund D.E. Shaw before co-founding Greenoaks in 2012. The firm has also backed Safe Superintelligence, founded by OpenAI co-founder Ilya Sutskever, and Sierra, the customer-service AI startup led by former Salesforce co-CEO Bret Taylor.
The new model represents a radical departure from venture capital's traditional approach. Firms like Sequoia Capital and Kleiner Perkins once wrote smaller checks, worked alongside startups and took them public within five years — a structure designed to acquire large stakes at low prices. Today's investors often buy in later, pay higher prices and exert less influence over the companies they back.
Howard Morgan, a venture capitalist for nearly 50 years who co-founded First Round Capital in 2004, said the flood of capital has made the business harder. "There was much less money in venture capital in those days," Morgan said. "You have to be more selective and more selective about what you're going to pay for something."
The question now is whether the model can be replicated. Some of the firms scored their windfalls due to their closeness to founders like Elon Musk, raising doubts about whether they will have the same access to future entrepreneurs. There is also concern about how firms will monetize their holdings, turning paper profits into actual gains, said David Mann, chief executive of the Mannsion Group, which invests in late-stage private companies.
This article is for informational purposes only and does not constitute investment advice.
