Why Do Seed Deals Assume a Trillion Dollar Outcome?

Ramtin Naimi says seed prices follow a moving goalpost for how big a startup might become, and the current goalpost is a trillion-dollar outcome. In 2016, when he started early-stage investing, people priced every company as if the best case were a $10 billion outcome. Toward 2021, Stripe, Databricks, Airbnb, and DoorDash approached $100 billion valuations, and investors priced other companies as if a $100 billion best case applied to them. Only the companies already on track to be worth $100 billion in 2021, give or take two or three more, actually got there.

SpaceX, Anthropic, and OpenAI are three trillion-dollar companies. He bets there might be two to three more, not 40, yet people now look at companies as if a trillion-dollar outcome is the best case. A $1 billion entry valuation gets framed against that trillion-dollar scenario.

He says investors who put most of their capital into the most obvious trade do poorly in bad vintages. Firms that filled 2021 portfolios with SaaS deals at 100 times revenue are probably in the bottom quartile, or the bottom 75 percent, of funds from that vintage. Great founders working on obvious ideas draw sky-high prices in a frothy market. He says the returns come from backing great founders on ideas that are not yet obvious, because the best founders are usually early to a market rather than in a bad one.