AI startup founders and venture-capital investors are using specific fundraising tactics to artificially inflate company valuations despite having no revenue [1].

These practices allow companies to secure unprecedented amounts of capital before they have a functional product or a sustainable revenue stream [1]. This trend creates a disconnect between the perceived market value of AI firms and their actual financial performance [2].

Reports from May and June 2026 highlight two primary methods used to "juice" these valuations [3]. Some founders reportedly inflate their Annual Recurring Revenue (ARR) to make the company appear larger to potential investors [3]. Other deals involve venture capitalists investing at wildly different prices within the same funding round, which creates a price gap that pushes the overall valuation higher [1].

These tactics have been appearing in deals since December 2025 [3]. In one instance, the AI startup Serval reached a valuation of less than $400 million in a private deal with Sequoia [4].

Critics argue that these maneuvers create a misleading environment for the broader market. Scott Stevenson, co-founder and CEO of Spellbook, said, "The reason many AI startups are inflating their revenue figures is a huge scam that misleads investors and the market" [3].

While some investors accept these terms to secure a stake in promising technology, the lack of transparency regarding actual earnings remains a point of contention. The pressure to achieve "kingmaker" status in the AI race has led to these aggressive accounting and funding strategies [3].

“AI startups with no revenue are using inflated ARR figures or multi-price funding rounds to artificially raise their valuations.”

The emergence of these valuation tactics suggests a speculative bubble in the AI sector, where the fear of missing out (FOMO) outweighs traditional financial due diligence. By decoupling valuation from revenue, the industry risks a significant correction if these startups cannot transition from artificial valuations to actual commercial viability.