I wish I could have gotten to that company early.

With AI company valuations acting like rocket ships, it’s easy to play the “what if” game.

The reality is that the process is not as simple as writing a check and watching your money multiply many times over. (Although it may seem like it).

Take anthropic. The AI ​​giant, valued at $1.2 trillion in secondary marketsIt seems like an obvious investment now, but it wasn’t always that way. In 2023, it was generating no revenue, had no public model, and was far behind the behemoth that is OpenAI. The sale price? A valuation of $4.1 billion.

Menlo Ventures partner Matt Murphy spoke with BI’s Ben Bergman about how the venture capital firm had to break many of your own rules to give the green light to investment. A few rounds later, Menlo’s $1 billion investment is now worth about $14 billion.

But what seemed inevitable now seemed far from certain when the first check was issued.

“There was definitely some heartburn within the company,” Murphy told Ben.

The anthropic remains the exception, not the rule.

They don’t call them unicorns because they are easy to find. For every billion-dollar-plus startup, there are thousands that never came close.

The odds have never been great (if it were easy, everyone would do it), but they’re going to get worse.

Here’s why:

The entry barrier is almost on the ground: AI does it easier than ever to build a startup. Thanks to vibe coding, even people who think C++ is a new kind of degree can easily turn an idea into a company without an army of developers. If you thought it was hard to rank a bunch of startups, things are about to get worse.

There is a lot of new money: Big acquisitions and record-breaking IPOs mean millionaires are being minted every day. Founders love to become investors and there will be a lot of money to spend.

The FOMO effect: For all the people who are succeeding, there are many more who might have missed the boat. That’s the kind of thing that can motivate a person to take advantage the next time they have an opportunity. Doubling up on the next one to make up for the loss of the last one can be a dangerous game and drives up the price for everyone looking for deals.

So how does it all end? Venture capitalists are made to make bets that mostly won’t pay off. Your job may become more difficult, but it won’t be a death sentence.

But for the rest of us? Public markets are much more ruthless than private ones. So when some of these gems finally hit the big time, mom-and-pop investors could be the ones left short.