VCs deploy ‘kingmaking’ strategy to crown AI winners in their infancy
The Rise of Kingmaking: How VCs Are Deploying Massive Funding to Crown AI Winners
In the world of venture capital, the game of kingmaking has long been a strategy employed by top-tier firms to identify and back the next big winner in a particular category. However, the timing and approach have shifted dramatically in recent years, particularly in the realm of artificial intelligence (AI). The latest example of this strategy is DualEntry, an AI enterprise resource planning (ERP) startup that raised a whopping $90 million Series A round in October, valuing the one-year-old business at $415 million.
A Kingmaking Strategy in the Making
DualEntry's massive funding round, led by Lightspeed and Khosla Ventures, is a prime example of the kingmaking strategy. This approach involves deploying massive funding into one startup in a competitive category, aiming to overwhelm rivals by granting the chosen company a bank-account advantage so significant that it creates the appearance of market dominance. While this strategy is not new, its timing has shifted dramatically, with investors now betting on winners much earlier in the game.
The Power of Early Aggressive Funding
The 2010s version of this strategy was simply called "capital as a weapon." Massive funding into Uber and Lyft was a canonical example of this, but the capital weaponization for the ride-sharing companies didn't begin until they reached their Series C or D rounds. In contrast, the kingmaking strategy of today involves deploying massive funding much earlier, often in the Series A or B rounds.
A Pattern of Rapid Succession
The kingmaking strategy is not limited to AI ERP. Other categories, such as IT service management and SOC compliance, are also seeing a pattern of rapid succession, with startups raising multiple rounds in quick succession. While some startups, like Cursor or Lovable, have reportedly grown at a breakneck pace between their back-to-back rounds, several VCs told TechCrunch that's not the case for all. AI ERPs and several other categories of startups that raised multiple rounds in 2025 still have annual recurring revenues (ARRs) in the single-digit millions, these investors said.
The Benefits of Well-Funded Startups
While not all VCs agree that kingmaking is a sound investment strategy, there are reasons why offering large amounts of capital could be beneficial even when the startup maintains a modest burn rate. For instance, well-funded startups are perceived as more likely to survive by large enterprise buyers, making them the preferred vendor for significant software purchases. That's a strategy that helped legal AI startup Harvey attract large law firm customers, investors say.
The Risks of Kingmaking
However, history shows that massive capitalization offers no guarantee of success, with notable failures, including the logistics company Convoy and the bankruptcy reorg of scooter company Bird. Despite these precedents, major VC firms prefer to bet on a category that seems like a good case for AI, and they would rather invest early because, as one investor put it, "Everybody has fully internalized the lesson of the power law. In the 2010s, companies could grow faster and be bigger than almost anybody had realized. You couldn't have overpaid if you were an early Uber investor."
The Future of Kingmaking
As the kingmaking strategy continues to evolve, it's likely that we'll see more startups raising massive funding rounds in the early stages of their growth. While this approach can be beneficial for well-funded startups, it also raises concerns about the sustainability of this model and the potential risks of over-capitalization. As the landscape of venture capital continues to shift, it's essential to stay vigilant and monitor the impact of kingmaking on the startup ecosystem.
Implications for Startups and Investors
For startups, the kingmaking strategy presents both opportunities and challenges. On the one hand, securing massive funding can provide a significant advantage in the market, allowing startups to scale quickly and establish themselves as leaders in their category. On the other hand, the pressure to deliver results can be intense, and the risk of over-capitalization can be significant. Startups must carefully consider their funding options and ensure that they have a solid plan in place to manage their growth and resources.
For investors, the kingmaking strategy presents a unique opportunity to identify and back the next big winner in a particular category. However, it also requires a deep understanding of the market and the ability to navigate the complexities of early-stage investing. Investors must carefully evaluate the potential risks and rewards of each investment and ensure that they have a clear strategy for managing their portfolio and mitigating potential losses.
Conclusion
The kingmaking strategy is a complex and multifaceted approach to investing in startups. While it presents both opportunities and challenges, it has the potential to drive significant growth and innovation in the startup ecosystem. As the landscape of venture capital continues to shift, it's essential to stay vigilant and monitor the impact of kingmaking on the startup ecosystem. By understanding the implications of this strategy, startups and investors can make informed decisions and navigate the complex world of early-stage investing.
