AI startups are getting expensive again.
DeepSeek is reportedly raising $7.4 billion at a $74 billion valuation, up from a valuation of more than $50 billion in June. The company plans to use the capital for research, development and computing infrastructure, with a potential Shanghai IPO next year.
But here’s the number I’d pay more attention to:
$500 million.
That’s DeepSeek’s reported annual recurring revenue.
The valuation gets headlines. Revenue tells you whether there’s a business underneath the headline.
And DeepSeek isn’t operating in a vacuum. Today, AI startup Instinct is reportedly raising $250 million at a $2.5 billion valuation, bringing its total funding to roughly $350 million. Socure raised $156 million at a $5.2 billion valuation and acquired agentic AI company Fravity. OpenAI is also launching a new $400 million venture fund, using its own capital rather than outside LP money.
That’s a lot of capital chasing AI.
Which brings me to a mental model from Mental Models: How to Think, Act, and Win:
The mental model: Second-Order Thinking
The first-order question is obvious:
“How big can this company get?”
The second-order question is harder:
“What has to be true for that outcome to happen?”
For an AI company, that might mean asking:
How much compute will it require?
How quickly will inference costs fall?
How durable is customer demand?
What happens when competitors offer similar capabilities for less?
And perhaps most importantly, does revenue grow faster than the cost of delivering the product?
That’s where today’s funding numbers get interesting.
A $74 billion valuation doesn’t tell you whether the business is durable. A $500 million recurring revenue base gives you a much better starting point for asking the question.
At /mkt, we’re building in a regulated market, which creates a similar discipline. You can’t just ask whether customers want the product. You have to ask what has to be true across compliance, distribution, infrastructure and market structure for the product to work.
That’s slower.
It can also force better thinking.
My contrarian take: AI founders shouldn’t be afraid of capital. They should be afraid of capital masking weak economics.
The next phase of AI won’t be won by whoever raises the most money.
It’ll be won by whoever converts extraordinary technical capability into an extraordinary business.
This is for informational and educational purposes only. It isn’t investment, financial, legal, tax, or regulatory advice, and it isn’t an offer or solicitation to buy or sell any security or financial instrument. Reported funding amounts, valuations and revenue figures may change or remain unconfirmed.
If you want the mental models behind breakdowns like this, my book, Mental Models: How to Think, Act, and Win, is on Amazon now.
This post is for informational and educational purposes only. It is not investment advice, a recommendation, or a solicitation to buy or sell any security. Funding figures, revenue, and valuation are as reported by the company, regulatory filings, and named outlets; the ~$470M valuation is a reported, time-sensitive snapshot and not independently verified. Dhoni's individual investment amount was not disclosed. The /mkt reference is a structural illustration of building in regulated markets and is not an offer or solicitation. Past performance and third-party investment decisions do not indicate future results.
