In the current AI boom, companies are raising subsequent funding rounds at the same high revenue multiples as previous ones, months apart. This is because growth rates aren't decelerating as expected, challenging the wisdom that valuation multiples must compress as revenue scales.

The VC model thrives by creating liquidity events (M&A, IPO) for high-growth companies valued on forward revenue multiples, long before they can be assessed on free cash flow. This strategy is a rational bet on finding the next trillion-dollar winner, justifying the high failure rate of other portfolio companies.

Mercor's Series B valuation of $2B on $20M ARR (a 100x multiple) seemed high but was justified by their track record of hypergrowth. They had consistently grown 50% month-over-month and accurately projected massive future revenue milestones, giving investors confidence in a valuation that priced in future performance.

Investing in a high-growth company like ClickHouse at a $15B valuation isn't complex; it's a direct bet on "growth persistence." The entire financial model hinges on the assumption that the recent, extreme growth rate will continue for another 2-3 years. Any premature deceleration invalidates the entry price.

The bar for early-stage funding has shifted dramatically. While 3x year-over-year growth was once impressive, investors now seek unprecedented acceleration, often modeling companies that go from $1M to $100M ARR in a year. This leaves many solid, compounding businesses unable to secure traditional venture capital.

Despite its massive price tag, Anthropic's valuation is justifiable on a forward revenue multiple basis. If they achieve another year of hypergrowth, their NTM revenue multiple would be lower than public tech companies like Palantir, making the current round look inexpensive.

Venture capitalists may value a solid $15M revenue company at zero. Their model is not built on backing good businesses, but on funding 'upside options'—companies with the potential for explosive, outlier growth, even if they are currently unprofitable.

Venture capitalists don't value companies on current revenue. They assess the management team and market disruption potential, pricing the company today at what they believe it will be worth in 18-24 months. This creates a valuation disconnect with strategic acquirers.

Public market investors view revenue multiples as a shortcut to estimate a company's future earnings. A 6x revenue multiple implies a 20x earnings multiple once the business reaches 30% margins. This mental model shows that profitability and cash flow, not just revenue growth, are the ultimate drivers of valuation.