tech
December 6, 2025
VCs deploy 'kingmaking' strategy to crown AI winners in their infancy
While VCs have long used big investments to spur category winners, they are taking this strategy to new extremes.
TL;DR
- DualEntry, an AI ERP startup, received a $90 million Series A, valuing it at $415 million, signaling rapid growth.
- A VC investor noted DualEntry's ARR was around $400,000 in August, though the company disputes this.
- The "kingmaking" strategy involves heavily funding one startup in a category to overpower competitors and create an image of market dominance.
- This aggressive early funding is a shift from the past, where similar "capital as a weapon" tactics were employed later in a company's funding rounds.
- Competitors in the AI ERP space, like Rillet and Campfire AI, have also raised significant funding rounds in quick succession.
- This pattern of rapid funding is also observed in other AI application categories.
- Well-funded startups are perceived as more stable by enterprise buyers, which can lead to preferred vendor status.
- Despite historical failures of heavily capitalized companies, VCs are betting on early funding, driven by the "power law" principle.
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