By Ellie McDonald
Venture headlines often suggest that seed rounds have dramatically evolved, citing billion-dollar raises for newly founded companies and massive initial funding rounds. However, the data tells a different story. At Bison Ventures, with deep experience in biotech, we find that large first rounds are often necessary due to high costs but usually yield modest returns, with only about 1% of $100 million-plus seed rounds delivering venture-scale returns. Although AI companies like OpenAI and Anthropic may improve this trend, their early investor returns are still much lower than historic blockbuster investments like Google or Uber, driven largely by higher entry prices.
Despite the surge in seed rounds exceeding $50 million, traditional-sized rounds remain prevalent and continue to generate strong outcomes as seen with AI startups like Cursor and ElevenLabs that began with smaller rounds but reached billion-dollar valuations. Raising colossal seed rounds does not guarantee superior returns; in fact, it can restrict upside potential due to high entry valuations. The proven strategy across tech waves remains purchasing substantial ownership in capital-efficient companies at reasonable prices, a tactic less flashy but historically successful. While some mega-seeded AI companies will succeed, betting on these rare cases has often resulted in losses, highlighting the importance of focusing on consistent patterns rather than exceptions.
Ellie McDonald is a principal at Bison Ventures with extensive experience in infrastructure and technology investments, supporting frontier tech entrepreneurs.
