VCs scramble for hot AI startups: origami term sheets, Ferrari rides, and preempted rounds at Decagon
Sep 24, 2025
Key Points
- Decagon, valued at $1.5 billion after raising $230 million, is fielding unsolicited offers up to $5 billion as VCs preempt every funding round before the company fundraises.
- The top 10 AI startups captured 41% of the $200 billion US startups raised this year, versus less than 10% last year, concentrating capital among companies investors believe can dethrone tech giants.
- VCs are competing with Warriors tickets, Ferrari track days, and origami term sheets to win allocations, signaling that deal scarcity has made the marginal experience the tiebreaker when capital is abundant.
Summary
VCs are competing fiercely for top AI startups, and the dynamic has reversed. Investors now pitch founders instead of the other way around, spending lavishly to win allocation.
Decagon, a two-year-old AI customer service platform, shows how far this has gone. All four of its funding rounds, totaling over $230 million, were preempted. Andreessen Horowitz and other firms offered to invest before the company even started fundraising. Just three months after a $1.5 billion valuation, Decagon is fielding unsolicited offers as high as $5 billion.
The wooing has become elaborate. Decagon CEO Jesse Zhang, 28, has received Warriors tickets, an autographed Khabib Nurmagomedov poster, and an origami crane mosaic of the company's logo with a term sheet hidden inside. That last one worked. Investors are also offering Ferrari track days, private jet rides, and box seats to sporting events.
US startups raised roughly $200 billion this year, but 41% went to just 10 companies. Last year, the top 10 captured less than 10% of total funding. This concentration reflects investor belief that a handful of AI companies can dethrone tech giants. Rising favorites include legal startup Harvey, customer service firm Sierra, coding company Cognition, and AnySphere, which makes the AI coding tool Cursor.
According to Bennett Siegel, cofounder of investment firm A Star and an early Decagon investor, the best companies are getting preempted every round and the time between rounds is shrinking.
Competitive pressure has sparked joking but revealing discussion about how aggressively VCs should bid. One suggested framework allocates roughly 10% over the valuation for gifts and experiences on smaller rounds. For larger bets, the calculus shifts. If a $300 million round is competitive, an extra 10% of check size still nets outsized returns if the company reaches 10x. This logic has spawned more aggressive ideas. One host proposed buying a racetrack, gifting a private jet for use until IPO, or acquiring a high-end cattle farm as bait. Another mentioned a VC attempting to recruit a founder by offering to serve as a dedicated business development resource for months, essentially staffing the founder's network activation rather than writing a passive check.
The absurdity is somewhat intentional. These overtures signal to founders that a firm is serious and creative enough to compete for the best deals. The real dynamic is structural. When capital is abundant and deal flow is scarce, the marginal dollar or experience becomes the tiebreaker.