Tomasz Tunguz Blog · 2025-02-03 · 486d

AI Company Valuation Premium in Private vs Public Markets

AI startups now represent 70% of B2B Series A funding and command a 40% valuation premium over non-AI companies in private markets, though this is significantly lower than the 2-2.5x multiple gap seen in public markets. The valuation differential reflects higher growth rates, greater buyer interest, and AI's potential to disrupt labor-intensive workflows across the $1.5 trillion IT spend landscape.

12 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

AI Series A Valuation Premium

40%

mean

Compared to non-AI companies in private markets

AI Startup Market Share in Series A

70%

current

B2B Series A funding rounds as of February 2025

AI Startup Market Share in Series A

40%

historical

B2B Series A funding rounds as of early 2024

Forward ARR Multiple - AI (25th percentile)

8.3x

p25

AI software companies as of January 31, 2025

Forward ARR Multiple - AI (75th percentile)

13.6x

p75

AI software companies as of January 31, 2025

Forward ARR Multiple - AI (Median)

11.2x

median

AI software companies as of January 31, 2025

Forward ARR Multiple - Software (25th percentile)

3.1x

p25

Non-AI software companies as of January 31, 2025

Forward ARR Multiple - Software (75th percentile)

8.5x

p75

Non-AI software companies as of January 31, 2025

Forward ARR Multiple - Software (Median)

5.5x

median

Non-AI software companies as of January 31, 2025

IT Spend Moved to Cloud

40%

estimated

Percentage of $1.5 trillion total IT spend

Public Market AI/Non-AI Multiple Ratio (Median)

2.1x

median

AI vs non-AI publicly traded software companies

Software Spend as % of Operating Expense

10%

max

For many businesses