In November 2025, David Silver, the renowned former scientist at Google DeepMind, dialed into a Zoom meeting with a venture capital firm to pitch his new startup Ineffable Intelligence. Silver, who spent over a decade at Google, believed the current approach to training AI models wouldn’t work long term. He spoke for 30 minutes about creating digital environments where AI systems could learn on their own, without any human data or input. Eventually, he told the investors on the call, AI will get so good that it will learn to use things in the physical world. “We can put AI in our toasters,” an investor recalls him saying. That seemed like a stretch. “I was so excited for that pitch and it was just so absurd,” the investor says. “He just rambled, no deck, no memo.” By the end of the pitch, the VC wasn’t convinced. “We left that pitch with more questions than answers. And it's so jarring to hear that from somebody with such merit and stature in the industry,” they say. Despite no near-term plans to launch products, let alone make any money off them, Silver ultimately raised $1.1 billion in seed funding for Ineffable Intelligence. The fundraise, which was touted as Europe’s largest seed round ever, valued the nascent startup at a whopping $5.1 billion valuation. At least, that’s what the headlines said. In reality, the company raised funding in two tranches. In the first, Ineffable raised $11 million from Sequoia and other investors, valuing the startup at about $55 million pre-money, according to company filings. But within a month or so, the company raised an additional $1.1 billion at a much, much higher valuation of $4 billion pre-money — the price paid by investors like Lightspeed, Index Ventures and DST Global. That’s over 70 times the price for the same company, just weeks apart. Sequoia got a significant discount by buying into the first tranche, though it also invested in the second one as well. The majority of the capital Sequoia invested was at the higher valuation, according to a person familiar with the deal. Sequoia and Ineffable Intelligence declined to comment.Tranched rounds like this have become increasingly common in the AI funding frenzy, especially for neolabs— companies that raise billions of dollars right out of the gate to focus on frontier research instead of developing products. Building an AI lab requires tons of GPUs, meaning they need to raise massive amounts of capital right out of the gate to carry out serious research. Because these founders need to raise so much, lead investors wanted better terms in return, says Zach DeWitt, a partner at Wing VC. “At some point there'll be some pushback from VCs, but the market's so hot right now that you have no other choice really if you want to get exposure to some of the best companies,” he says. But tranched rounds are now also prevalent across other types of AI startups like infrastructure and application business. Baseten, which provides infrastructure and compute to businesses building and running AI tools, recently raised $1.5 billion in funding across two tranches, one at a $11 billion valuation and another at a $13 billion valuation. Other buzzy AI startups like Aaru and Serval have also raised funding in this manner, multiple sources told Forbes. “It’s very common among valuation maximizing founders,” one venture capitalist says. “In a market where fundraising runs on vibes, a billion-dollar headline is worth a lot more than an accurate one.”