Recently, my company, XPANCEO, closed a $250 million Series A round at a $1.35 billion valuation. It was the largest Series A ever raised in the MENA region, and the largest in the AR\/VR and wearables spaces worldwide.<\/p>\n
But the real story here is what this round reveals about the state of venture capital today. Raising $100 million has, in many ways, become easier than raising $1 million.<\/p>\n
Venture capital has quietly inverted. The early-stage checks that once launched bold ideas have gradually disappeared, while capital continues to flow, if you can survive long enough to earn it.<\/p>\n
The venture capital hourglass<\/p>\n
In the 2000s and 2010s, small funds and angel syndicates thrived. Tens of millions of dollars were freely distributed, and founders armed with a pitch deck and big dreams could walk out of a meeting with $250,000. The assumption was simple. In a fast-growing internet economy, a small bet on the right team could scale into something extraordinary.<\/p>\n
Conviction funding is gone. Investors now expect founders, especially in deep tech, to show working hardware, patents, early traction, and a clear roadmap just to be considered. This is what I call the \u201chourglass effect.\u201d At the top, massive pools of capital remain eager to back proven winners. At the bottom, scrappy individuals still chase ideas. The middle \u2014 traditionally where seed and early Series A funding helped promising startups survive the \u201cvalley of death\u201d \u2014 has thinned out. Instead of nurturing bold concepts through this early stage, investors are now implicitly asking that entrepreneurs crawl through it alone.<\/p>\n
From conviction to caution<\/p>\n
Why is early-stage funding dwindling? First, the market matured. Two decades ago, a startup could add millions of new users. Today, Facebook competes with platforms like Twitch and Reddit for the same finite base. Growth now comes from stealing market share, not from adding new users. The same is true across industries \u2014 content platforms, computers, or smartphones.<\/p>\n
Second, scandals have scarred the system. Ventures like Theranos and Nikola became shorthand for unchecked hype. Investors began to fear not only fraud, but also the \u201cserial fund-raiser\u201d \u2014 a founder who raises capital, lives off it, burns cash, and repeats the cycle without ever turning a profit or building durable value.\u00a0<\/p>\n
Finally, safer, faster-growing alternatives emerged. Why wire $250,000 into a seed-stage company when it feels like a gamble and you could ride a rocket in the public markets with Tesla<\/a> during COVID or with NVIDIA now?\u00a0<\/p>\n Market inevitability as the only proof<\/p>\n For deep tech founders, the stakes of this early-stage funding crunch are higher. A software startup can point to user \/ revenue metrics to demonstrate \u201cproduct-market fit.\u201d Deep tech ventures cannot. Their only path is demonstrating market inevitability. You need to show that the problem you are solving must be solved, and that your approach is credible enough to get there.\u00a0<\/p>\n Here, evidence is what gets founders through the door. Patents, prototypes, and scientific validation don\u2019t necessarily prove that there is a market today, but they prove you can move from theory to execution. This trust and credibility have become the way into serious conversations.<\/p>\n The recent wave of nine-figure rounds \u2014 OpenAI, Perplexity, Anthropic \u2014 reflects this extreme filtering. Larger amounts of capital come from investors who are willing to pay a higher risk premium for a company that has already proven to have solid odds of success. This is driving the boom around AI.<\/p>\n The ladder of needs<\/p>\n These biggest players now sit at the top of what I describe as a ladder of needs, together with hardware manufacturers. Around them is XR, positioned as the interface layer for the next generation of computing. AI is treated as the foundation, so to say as a system that interacts with users through multiple interfaces.<\/p>\n Capital follows accordingly. Valuations in the hundreds of billions and investments in the hundreds of millions (sometimes billions) are justified by the hope that these ventures will be ultimately acquired by larger companies.\u00a0<\/p>\n The effects of this reach beyond the capital markets. At a recent wedding, I met several people who had moved to Los Angeles during the pandemic. Now, driven by AI FOMO, they are looking to move back, either to get jobs at firms like Google<\/a> or to build their own AI ventures. At least there\u2019s a silver lining \u2014 San Francisco\u2019s housing market is heating up again, so now the overpriced coffee isn\u2019t the only thing thriving.<\/p>\n How the companies of 2030 can survive the first \u2018valley of death\u2019<\/p>\n