Q1 2026 w/Carta: What you need to raise a Series A. | Peter Walker, Head of Insights at Carta

LLM Hype And Bubble Warning

Peter Walker 0:00

There is no more consensus theme right now than LLMs are good. We should have more LLMs. Like it's not really a question of this business is gonna work out. It's like, do I have the capital and the access to play in this space or don't I? I have a feeling that what's gonna happen is a lot of these companies are gonna flop and we're gonna do what we did in 2021 with some major, major outliers that really work. And maybe that's the whole point, but I think there's pain coming for this. Like if the valuations have gone up at least on the median basis, not just even the high flyers, have gone up almost 2x over the last call of three years. So that's a massive difference. You know, it used to be that the amount raised was maybe more like eight to ten million dollars in a series A, and now it's much more, call it 13 to 15. So that's a 50% increase in the capital.

Pablo Srugo 0:42

I mean, what I'm telling founders is it used to be good enough. You get to an A and you got to pitch this past to 100 million ARR. Like it's just not enough. You have to go in at Series A with a couple, you know, two, three million. I think the meaning is like three and a half million or ARR or whatever, and you got to pitch a story of half a billion, if not a billion, of ARR for you to be interesting enough to some of these guys.

Peter Walker 1:00

There's just a concentration where higher valuations, more capital, but fewer companies. And that's happening at stage after stage after stage. So it takes a lot to get to series A. It takes way more than it used to. The growth rates are higher, the competition is higher, the expectations from investors are higher, and that will definitely push people out along the way. In general, I think the bar for series A is something like 2x what it was a couple of years ago. I mean, we're in a bubble.

Pablo Srugo 1:25

Like we're 100% in a bubble, right? So 100%.

Peter Walker 1:28

Yes. What do we usually do with the bubble? It usually pops.

Pablo Srugo 1:31

The question is when?

Peter Walker 1:32

You got a great S1 out there, a great, maybe not as great as people were expecting for SpaceX. We'll see. I expect that IPO to go well. And then the next two, maybe later this year, maybe the year after, I don't know. If one of those IPOs really flops, it's gonna be a serious problem.

Previous Guests 1:47

That's product market fit. Product market fit, product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit.

Pablo Srugo 1:59

Do you think the product market fit show has product market fit? Because if you do, then there's something you just have to do. You have to take up your phone. You have to leave the show five stars. It lets us reach more founders and it lets us get better guests. Thank you.

Five Stars Then We Begin

Pablo Srugo 2:13

Peter, welcome back to the show, man.

Peter Walker 2:15

Oh man, great to be with you.

Pablo Srugo 2:17

Apologies in advance for the uh the raspy voice here. All good, man. Excited to see uh what the data has in store. As I think all you know, Peter, by now, famous on not just LinkedIn, but uh everywhere in the startup world for the charts, visualizations, and just the quality of the data, honestly, which has been before you and Carta really hard to get a hold on. So let's start at the top, man. Let's chat a little bit about Q1 2026. I mean, it's a crazy market out there. Lots of things happening. I think everybody knows valuations are high. There's a lot of activity, but that's the headline stuff, and we'll we'll kind of dig in further. So maybe let's start with just like the trend on valuations, you know, focusing on early stage, pre-seed, seed series A, and how that's shaping up, you know, this last quarter.

Seed Prices Spike In AI Infra

Peter Walker 3:02

Well, depending on where you are, it's kind of gone like parabolic, man. It's like it's it's kind of tough to keep track of because so much of the attention is being driven by 10, 15, 20 names within privates. Or even if you're just talking about like seed stage, there's always this cohort of mostly candidly AI infrastructure companies that are building foundational models or building like the tech around foundational models. And they are getting valued at just astronomical numbers. You know, like call it a 160, 170, 180, 200 million dollars post money on a seed stage, which is just bonkers. And that just affects everybody else's like mood and vibe.

Pablo Srugo 3:42

This is like the category of where you see like a $2 billion seed kind of falls into this as well, right? X Open AI, a person.

Peter Walker 3:49

100%. You know, it's always, we talked about this before, it's always the legible founders. They're spinning out of the right places, they're building something that is like there is no more consensus theme right now than LLMs are good. We should have more LLMs. Like it's not something that you have to fight over. And so it doesn't become a it's not really a question of this business is gonna work out. It's like, do I have the capital and the access to play in this space or don't I? If you're a fund manager. And that's just a different kind of thing. Like seed stage is not usually about that, but it's so, I don't know. I have a feeling that what's gonna happen is a lot of these companies are gonna flop and we're gonna do what we did in 2021 with some major, major outliers that really work. And maybe that's the whole point, but I think there's pain coming for this. I really do.

Pablo Srugo 4:34

The 2021, I don't know, I'm gonna get more into the numbers for the rest of the market, but it's one I've been thinking a lot about a lot. Like for me, for what it's worth personally, you know, I was VC through 2021, 22, and obviously now as well. And it's lived differently in a way where I'm way more receptive to higher valuations now than I was then. Like back then, my play was ignore a lot of the hype, and that might mean I do you talked about legibility, like founders who maybe are missing that spark on the fundraising side, but still have something solid in terms of the business, and you kind of try to play that game, which is not an easy game to play at all, and it's got its pros and cons, but just paying so much for a lot of companies that were fundamentally like there's a whole fintech thing, which was like, oh, we have this fintech innovation and really it was just cheap interest rates, like that was a huge category. And then you had other companies that were, you know, selling a dollar for 90 cents and getting growth that way, just something was broken about the model. Whereas this time, you think, you know, great founder with clear value prop and the AI kind of wave behind them. And a lot of times I'm finding myself saying, you know what, maybe it is worth paying what seems at like an absurd price, not 150 million, but still above median price, just because the opportunity of creating these hundred million dollar AR businesses seems clearer than ever.

Peter Walker 5:47

So you don't think that people are selling dollars for 90 cents right now?

Pablo Srugo 5:52

Well, not in the same way. I guess to the extent that your your margins are tight because of the tokens and these sort of things, like there I have more of a belief that, you know, the token price will just continue to drop and you'll hit a point at which whatever you need to deliver crosses that good enough threshold for a certain number of tokens. And then that goes down in a way that if you were doing it in the physical world before, taking like a normal physical business and just being like, oh, now we're gonna, you know, do it for less, or doing something in finance and not mining the numbers, there wasn't like a clear technological shift happening behind that.

Peter Walker 6:25

Yeah, I think you're right. And I think that the the debate about margins in this AI world, I think is candidly a little overdone, like pretty early. There's every indication that the economics might continue to change. I do think that some of the valuations are just completely off kilter, but it's also there's tons of competition. I mean, if you are a hot engineer spinning out of open AI, you have turn sheets coming left and right, you know? So like everything is priced to perfection and there's megaphones with billions to deploy. This is the market you get. I think it's kind of an output of the inputs that we have currently.

Pablo Srugo 6:59

So if you're a founder right now, let's say not in that AI infra category, but you're in AI, AI neighbor started like most are, and you're raising a pre-seed, seed Series A, what can you expect?

2026 Benchmarks For Pre-Seed To A

Peter Walker 7:10

So pre-seed, I mean, it depends on the definition here. You're still raising probably less than $2 million for an AI application company. We would call that a pre-seed. You're talking about a $10 million to $12 million cap. Hasn't changed that much. Maybe it's gotten a little higher. If you're talking a seed round, you're raising between four and five million bucks. You're probably valuing the company at 20 to 22 post. You know, that's expensive. That's expensive relative to history, but it's nowhere near the AI infra stuff. So it kind of feels cheap at the moment. And then series A, you're getting pretty, you know, these are hefty rounds. Like you're talking $14, $15 million raised, you're talking $75 million or so post-money valuations on that. So that's already big money. Um, and you're only at Series A. And then I have to question for the investors if you raised your fund two years ago and these round sizes have gotten so much larger, does the portfolio construction still work? Or like how do you adjust for the new size of rounds?

Pablo Srugo 8:09

So the series A is the part of the market that is most interesting to me right now because it's changed so much. Just to get a handle on the data, like two, three years ago, five years ago, like what's been the trend of series A sizes and series A valuations? My mind remembers them being like very different.

Peter Walker 8:23

Yeah, they're almost doubled. Like if the valuations have gone up at least on the median basis, not just even the high flyers, have gone up almost 2x over the last call it three years. So that's a massive difference. The amount raised, you know, it used to be that the amount raised was maybe more like $8 to $10 million in a Series A, and now it's much more, call it 13 to 15. So that's a 50% increase in the capital. I agree with you. It's kind of the most interesting part of venture because it hasn't grown as much as the seed rounds, but it's also the part that as a seed manager, I'm always wondering how are they justifying the pro rata or follow-ons into these series A's if it's gonna cost another three, four, five, six million dollars? It's very expensive and you haven't really learned that much. It's still a series A company. Like I know they're growing fast, but it kind of feels like everybody's growing fast. So where's the defensibility? I I struggle. Some of these numbers like shock me still.

Pablo Srugo 9:17

Is that the seed valuation you're saying also doubled or more than doubled in the last three years?

Peter Walker 9:21

Yeah, and the seed valuations are actually going up higher. Uh, Series A saw a really significant decline, or at least a decent one, substantial one from the old 2021 marks. Seed really didn't. I don't know, man. Maybe this is maybe all the stages are getting kind of silly and we should just break it up by how much did you raise?

Series A Doubles And Exit Math

Peter Walker 9:36

I'm actually experimenting with a lot more charts about how much did you raise versus what stage were you in, because I think the dilution tends to map out to close to the same if you just do it on a fundamental capital raise basis versus a stage name basis. And maybe we just get rid of the stage names altogether because they're confusing. But in aggregate, I think Series A is the place that I would be most cautious about investing right now because the money is really high and these are still very young, very, very unproven businesses.

Pablo Srugo 10:05

It's funny, Series A has gone to me as being like the most the best place to invest to not the worst, but like a very risky place to invest today because you know, it used to be, and now we're going way back, but I remember Series A's, let's say eight years ago at you know, seven on you know, 30 sort of thing. Like these, these kind of things. And and then you're like, okay, well, the business went from not having product market fit to clearly having product market fit, from having like no ARR to having one, two million ARR. Like there's a big shift in the risk you're taking, and you still position yourself with good ownership, even in a hundred multi-hundred million dollar type exit. Now it's like some of these, you know, these series A's, meaning series A coming in at post of 80. And I'm doing the math on that. I'm like, you think every series A you do has to be like a five billion dollar outcome, you know, net of dilution, I think, to make it make sense. Because at a billion, that's a 10x without dilution, used to do 50% dilution to exit, even from the A. Now you got like a 5X, like that's not worth the risk of investing in series A. So the mindset of what an exit has to be must have, and I don't know if people doing this math or not doing this math, but like implicitly, this is kind of what's going on.

Peter Walker 11:12

I hope they're doing this math. It's not like that complicated. I'm with you that I think the number one thing that's changed in venture over the last call two years is a radical usizing and what potential exits could be. And like, how can you argue with that given what SpaceX and Anthropic and OpenAI are gonna do? Um, I think it's fair. The question is how many companies can get to that level? Because you're right to say that getting to a billion dollars, if you're investing at this kind of series A, it doesn't even come close to returning the fund. You know, unicorns are not the vibe anymore. It's decacorns plus.

Pablo Srugo 11:45

That's why I mean what I'm telling founders is it used to be good enough. You get to an A and you gotta pitch this path to a billion, pitch this path to 100 million ARR. Like it's just not enough. I mean, you have to you have to go in at Series A with a couple, you know, two, three million. I think the meaning is like three and a half million of ARR or whatever, and you got to pitch a story of half a billion, if not a billion, of ARR for you to be interesting enough to some of these guys.

Peter Walker 12:06

Yes, exactly. And I think it pushes founders to do that, you know, like they're the the climate is to keep pushing, keep pushing, keep pushing. And maybe that's gonna leave a lot of, you know, stranded startups along the way.

Pablo Srugo 12:17

Yeah, I mean, this is the key question. And it's a feature, you know, of venture is that when there's a big opportunity like there is with AI, everybody just pets on the cast pedal and some people really get there in a massive way, and a lot of people are left to die versus some kind of in-between situation where you don't get these insane home runs, but a lot of more companies kind of make it or something like that, right? It's just venture is like not optimized for that at all.

Peter Walker 12:38

No, it's the exact opposite. And maybe that's I can't tell if that's better or worse for like society at large.

Pablo Srugo 12:44

That's a deeper question.

Peter Walker 12:45

Yeah, exactly. I think it's worse for individual investors, but I think it might be better for America. I'm not sure. I could be convinced of either side of that.

Pablo Srugo 12:52

What else are you seeing in in the data?

Bay Area Gravity And Valuation Gap

Pablo Srugo 12:54

Like, what else struck you in Q1?

Peter Walker 12:56

The concentration within not just a theme, which is AI, but then the infrastructure versus application layer has become two completely separate markets. And then the second one is just the concentration and location. I mean, the Bay is a gravity magnet for talent, for founders, for high valuations, for capital. All the stuff that we talk about, the $500 million post-money seed rounds, they don't exist anywhere else. 90% of them are in the Bay Area. So it's like this, you know, agglomeration of this little like amoeba that just keeps growing and growing and growing in San Francisco. And everywhere else has to either play that game or decide not to play that game. I mean, I think that there's I think there's a lot of opportunity outside of the Bay right now that just isn't getting the level of uh attention that probably it deserves.

Pablo Srugo 13:45

Do you have a sense of like the median seed or A valuations if you just strip out like the Bay Area from the data set?

Peter Walker 13:52

Yeah, that I mean they're 30% lower. Like, you know, the median series A in the Bay right now is 85 million post money. The median in Austin is probably more like 65.

Pablo Srugo 14:02

Okay.

Peter Walker 14:02

Median in DC, probably more like 60 and on down the line. So the Bay is a completely different beast. Like it just it functions in different ways. And the Bay is probably at least a quarter, if not close to a third, of all series A's. So it's higher, and there's far more of them, um, which is it's kind of weird. You would expect maybe the dip the opposite, but it is the center of things right now.

Pablo Srugo 14:23

But that means also for seed, like if the median is 20, the the median out, if you're not in the Bay Area, your median is probably like 15. That's more realistic in terms of target. Yep. It's wild to see like all the remote, all the like venture going different places, everybody getting super excited about building ecosystems, and none of it, none of it really shows up. None of it really matters.

Peter Walker 14:43

It didn't stick at all. And it makes me wonder like, what's the right advice to founders in terms of should they move, should they care, all that kind of stuff. My instinct is to say they shouldn't unless they absolutely have to or really, really, really want to. But I could be wrong. I could be, you know, there is such a thing as the ecosystem sort of defining the limits of your ambition. And certainly there's a lot of ambition in the bay. Although there's a lot of play acting at ambition here too. It's not a perfect place.

Pablo Srugo 15:11

Well, I mean, the the question, and I don't know how how this could or could not show up in the data, but you know, can you get the benefits of the Bay without being in the Bay? Like, can you go to the Bay every quarter or every six months or just enough that you're like kind of there without really, you know, having to relocate there and you build a little bit of a network? Like, I've seen this happen, but it's kind of these one-offs. So I don't know if this is a true story, but it's like, you know, person from Toronto building real business. Okay, time to fundraise. Cool. I'm going to the Bay Area for a month. My numbers are great. People are gonna take the meeting, and I'm gonna get more or less the Bay Area valuation as a result because I'm gonna build the same kind of FOMO, the same sort of process. And that works maybe at the 90th percentile of what you might get if you were like in the Bay and get 100% of it. But you don't have to be there.

Peter Walker 15:49

I think it's a great strategy. I think that more founders, I don't think you should move, but I do think you should visit, is the way that I've been telling founders lately.

Pablo Srugo 15:57

Yes. And then the other thing I want to touch on is the graduation rate. We're talking about the series A, especially, like how is that trending from C to A? And what does it take? You know, what are you seeing in the data in terms of what it takes to raise an A? Who's getting it?

Peter Walker 16:11

I mean, it's getting a little bit better. So that's good. There are more companies graduating from recent cohorts. If you look at like, all right, we're sitting here, it's it's call it the end of Q1, beginning of Q2, 2026. You've got the companies that raised about a year ago, so Q1 of 2025 or so, how many of them have gotten to series A so far? It's something like 10 to 11%, which in a year is actually pretty good. It's much better than it was in 2022 or 23, where it was like down to like four or five percent. Well, it's not where we were back in 2021. So the frenzy isn't quite there. And that's because the other half of your question, there's just a concentration where higher valuations, more capital, but fewer companies. And that's happening at stage after stage after stage. So it takes a lot to get to series A. It takes way more than it used to. The growth rates are higher, the competition is higher, the expectations from investors are higher. And that will definitely push people out along the way. We can talk about what those like stranded seed companies do, but in general, I think the bar for series A is something like 2x what it was a couple of years ago.

Pablo Srugo 17:17

It's what like the median, I think, from from SVB is like three and a half million ARR. Is that about right?

Peter Walker 17:21

Yep.

Pablo Srugo 17:21

It used to be like again, like you go back. The 7 million A's I'm talking about, you needed a million ARR for. So a million dollars, right, exactly. That was always the benchmark. So it really is like the tripling. I mean, now you get more bit more than twice the money, and you need, you know, more than twice the ARR.

Peter Walker 17:35

Well, then there's there's cohort, you know, those AI infrastructure companies might be earning zero dollars and they're raising hundreds of millions because they're they haven't, you know, come out with their new world model yet or whatever it is. It's um, it's very weird. It's a weird time.

Pablo Srugo 17:47

Oh, you're such a selfish person. I actually can't believe how selfish you are because like you've been listening to the show, you listened to this episode, you loved it, you've listened to a bunch of other episodes, and you haven't told anyone about it. You haven't told any of the many founder friends that you have about it. Think about how many founders have helped you out when you're building your startup. So don't be selfish. Tell your friends about this episode, tell them about the show, and help me help them. Those are, I mean, yeah, those are almost have to, like you said, like they have to be treated completely differently. Because I and I they just don't apply, I think, for for most, like unless you're in that world, most founders are not building those sorts of sorts of businesses.

Defensibility Gets Harder In AI Apps

Pablo Srugo 18:22

And and so they suffer from, you know, one of the things that I'm seeing mainly like even growth is not the same as it used to be, in the sense that like growth alone isn't even enough now. Like in terms of that bar for Series A, not only do you need like three and a half million of ARR, not only do you need to have gone there very fast, you also need to have a reason for why you can compete, for why like not everybody else is gonna do this, because now everybody can build product, everybody's moving super fast. Like, what do you have that others don't? And in a sense, the AI infra ones, they don't suffer from that in the same way. Like there's something about the DNA that from the get-go is supposed to make them differentiated. So it's part of that origin story. Whereas a lot of these AI apps, it's like, yeah, I'm gonna solve this problem for this. Oh my god, it's working. Oh my god, I'm growing so fast. And now I gotta figure out how come, you know, 10 other founders aren't gonna eat my lunch and like, you know, tell this story so I can raise a series A.

Peter Walker 19:11

What's the story that you hear from founders that how that they can do that? Because I don't, I'm with you. I think the defensibility has never been lower.

Pablo Srugo 19:18

It's totally case by case. A lot of this I do think is just straight up like story in the sense that part of how you're going to outcompete is gonna be around capital and execution. So you got to get the capital to get the like, let's say you're selling something that people truly want. People are really buying it. Go to market is a matter of execution, like doing it right and putting in the energy, and capital. Like the fact is, if if your competitor can go to 10 events and you can go to one, that's going to have an impact, even if you do much better at that one event, right? Same with search spend or whatever other channel that you're gonna drive at. So capital becomes part of that thing. And then like that creates a brand. And we're simplifying here because obviously you can be underfunded and still win. But I'm just kind of as a rule. So you almost have to like find a way to be compelling enough as a storyteller, sell a vision that captivates the minds of VCs enough that by the way, they also they know is a story, like they're not stupid, but they also think, well, if they can captivate my mind, then maybe they can captivate talent in the same way and customers in the same way. So fine, I'll give you a bunch of money to go do that. Which, if you can kind of use that wisely, gets you to the next step. And if you're just like a couple of steps faster than the next person behind you, maybe that's enough, right? And maybe it isn't, but like for many AI apps, you're not building your own model. Why would you? And the product we all know can be copied relatively easy in most cases. So, what else do you really have?

Peter Walker 20:49

I think it's a really deep question. And I think it's very hard for many founders to paint the right picture of expanded defensibility. The other thing that's happening very clearly is that a lot of these startups are expanding into use cases quicker than they used to. So, like the product suites in a world where product is less than, or you know, I wouldn't say trivial, but less difficult to build than it used to be. They just kind of overlap with each other again and again and again. And so it's more competitive and the defensibility is lower. And like you said, maybe the premium to capital is higher. But you can also get to a point where it looked like you were on a hockey stick growth, you have one bad six-month period and you just kind of get wiped. Yeah, I am impressed with people building AI application companies and then choosing to take adventure capital.

Pablo Srugo 21:36

Well, yeah, but the thing is if you don't, then the risk is like if you're not the winner in that category, then you're kind of fighting for scraps. And if you're fully bootstrapped, like you can make a lot of money doing this too. So, like maybe it's fine, and who cares? Like, yeah, they're a billion or two billion or three, and I'm a fifty million dollar exit, but I own 100% of it. Like, I don't care. That's totally fine. But to the extent that you're trying to compete for that number one or two position, at some point it's Like it's all relative. And you might show up and be like, dude, I grew like one to four last year. Obviously, I'm raising. And then they're like, Yeah, but your competitors at 30, right? And they grew 10 to 30. So actually, like, you're number two, or maybe you worse than number three. Why do you deserve to get funded? Like, and and you just get caught in this vicious. I guess that for me, that's the big thing is on that side, the competitive front, how do you get yourself into that virtuous cycle where you start winning, you leverage that to get more capital, get more talent, so you win more. And at some point, it's this self-fulfilling prophecy where you're just like the winner versus you aren't able to kind of get that capital, which makes it harder to get the talent, which then puts you in a place where you're you're like, oh, my product's so good. My customers love me, but I'm not signing the biggest enterprise. They're signing it. I'm not signing 10, I'm signing one for every nine that they sign. And then it just gets harder and harder. Not to say this is like the Clarence the Holy Grail, but there's something to that mindset, I think, that that can get you to be that category leader. And all of a sudden you're out competing because you're out executing.

Peter Walker 22:55

Yeah, it's a good question as to whether or not the returns will flow to places two through five in a lot of these industries. I think historically, even though we said they were winner take all, we never actually believed it. Like you can do pretty well as number two. Now I think that is an open question, especially at the scale that you need to back again to the decacorn plus kind of scale. If you are not the clear market leader, the worries like compound on themselves a lot faster.

Smaller Teams Solo Founders Talent Shifts

Pablo Srugo 23:22

And then you have data on the employee front, like team sizes. I know that's been a trend. Obviously, people talking a lot about, you know, the single person, unicorn, which I know is more kind of story than reality. But what are you seeing in terms of team sizes, you know, Aesop, all these sort of things?

Peter Walker 23:37

Well, I don't know. Maybe uh, you know, the open claw founder got there. We don't know. We don't know what the purchase was, but that's true.

Pablo Srugo 23:44

Perhaps one out of seven billion has accomplished it. Yes. Great, right. Outlier case for sure.

Peter Walker 23:49

Team sizes are getting smaller. We're seeing like the median seed stage company on Carta has four employees, not counting the founders. Um, the median series A company probably has between 15 and 17, but probably closer to 12 to 15 by the end of the year. So definitely the case that they're doing this with fewer people.

Pablo Srugo 24:09

Do you know what it might have been like three, five years ago for median seed, median, median A? Yeah, median C would have been more like six or seven.

Peter Walker 24:15

Median A would have been more of 25.

Pablo Srugo 24:17

Okay. Yeah. Four is small. Like I, and again, I think I think it's great if we end up with more seed companies. Each one is smaller, right? Like that would that would be the best possible outcome, in my opinion.

Peter Walker 24:28

I hope that's the case. I mean, the data from Stripe Atlas suggests that that is the case. Like we're seeing it, you know, more and more companies are signing up for card at our launch stage where they're not, you know, they're they're getting it for free until they raise a million bucks. I think it's a big question as to more companies are not being venture backed.

Pablo Srugo 24:44

Oh, interesting.

Peter Walker 24:45

So it's uh it's a question of do you just like is the thousand flowers blooming mostly bootstrapped angel funded companies, or is it gonna be VC-backed companies as well? Because we really haven't seen the VC part of the market change all that much. It hasn't experienced the same sort of rapid growth that the bootstrap side of the market has. So I think there's I think that's an open question. And then as you said, yeah, each one of those companies is gonna be smaller in terms of headcount, but net will they employ more people? The employment question is everyone's favorite one. You know, I go back and forth on the day about what I think the impact of AI is going to be on employment, but right now it's seems like it's hiring is at a low ebb across VC backed startups. So maybe that'll change, but I'm not sure.

Pablo Srugo 25:26

I mean, my completely like my and fully anecdotally backed kind of thesis is assuming you can get the more or less the same done because of AI, you're all else equal, better off with four people at seed than seven in terms of those odds of success, just because not only is potentially your burn lower, though, it depends on the salaries, but not only is potentially a burn lower, just in terms of the overhead that it means, like you and two other people in a room is one world, you and six other people potentially not even in a room is a different world, and obviously a 20 and so on. But every single time you at, you double the team size. It might seem like a small difference, four or seven, but it's almost a doubling of the team size. The amount of communication, the amount of interpersonal problems, the amount of non-related to finding product market fit issues you might have just grow. And so, again, all else being equal, I like the odds better if all seed startups somehow are able to do it at four versus needing seven in terms of their ability to figure something out.

Peter Walker 26:22

I do too. I think it's probably better overall and more capital efficient and a lot of old things. I think it's just a question of is that enough net employment for for startups as a whole? I mean, I guess, you know, it's not it's not the job of an individual founder to care about that. But across the industry, you know, there's a lot of worries. There's just a lot of anxiety. I don't know if you feel this as much. But in SF, it's exciting, yes, but people are really anxious too. There's just like an undercurrent of uneasiness that is all over tech right now, it feels like.

Pablo Srugo 26:52

Uh yeah, I I think there is. I think it goes like again, it's not where my given what I do, like where I spend most of my time thinking about, but and there's also a wide spectrum though of like how much people, especially outside of tech, really leverage these things and use them and rely on them. Like, I mean, we're in a bubble. Like we're 100% in a bubble, right? So 100%.

Peter Walker 27:10

Yes.

Pablo Srugo 27:11

What do we usually do with the bubble? It usually pops at some point.

Peter Walker 27:15

It usually pops. Question is when you got a great S1 out there, a great, maybe not as great as people were expecting for SpaceX. We'll see. But I don't know. I expect that IPO to go well, and then the next two, maybe later this year, maybe the year after, I don't know. Um, and then then it's all on the table. Like if one of those IPOs really flops, there's gonna it's gonna be a serious problem.

Pablo Srugo 27:37

Yeah, for sure. But it's hard to imagine, like you look at open like the amount of interest in my again, no expert, but like open AI, anthropic, plus the numbers, and the multiples on those numbers are high, but not crazy high relative to their growth. So it's like it's not as clear as like 99 type bubble stuff. Like, we're just not the multiples, at least, are not at that level. Now, what could happen is it just plateaus, like that's where things really hit the fan because all of a sudden a multiple looks great when you're 10xing, looks absolutely ridiculous when you're growing 10, 20% a year, right? We saw it in SaaS, like we just saw it in SaaS. So, so that could happen, but who knows? The other thing I was gonna ask about is uh if you have any data on solo founders, like that's related to that other question, but that's been a big topic, especially for potentially non-technical people. You know, I went for this, I went through this not long ago, where it's like you start playing with coworker Claude, and all of a sudden you're building an app. And it was a shitty little app I'm never gonna deploy. But I'm like, man, I've never built anything on my own. It's a true zero-to-one moment. And I can imagine, you know, many different founders across the world saying, holy shit, like I don't need anybody else. I can just do this. 100%.

Peter Walker 28:39

We're seeing a lot of that. We have, I think at last count in 2026, something like 36 or 37% of the companies on Carta that joined us this year are solo founded. A lot of those companies will end up not being venture backed. So the venture-backed percentage, it's probably more like a quarter, maybe. Um, but that's still very high relative to where it was 10 years ago. And I just think we're gonna continue to see that expand. What I hope.

Pablo Srugo 29:05

And what are we talking about? What would it have been five, 10 years ago?

Peter Walker 29:08

Um, for the venture backed, it would have been like 10%. So it's it's more than doubled.

Pablo Srugo 29:11

And what about the non, like if you just look at let's say three years ago, number of companies started by solo founders, venture backed or not, what would that have been like instead of 37%?

Peter Walker 29:20

That would have been more like 25%, 26%, and now it's 35%, 32%.

Pablo Srugo 29:25

So it's still a 50% increase.

Peter Walker 29:27

Yeah, over the last five years. Material increase for sure. What I hope is that these companies, what I haven't seen so far, or what I hope happens, is that these companies that are being built by a solo founder grant equity to their early team in a different way. Like there are just higher levels of equity granted to those founding engineers, et cetera. We really haven't seen it. I was expecting it to be like interesting, the main way that a solo founder got to throw around their weight differently. Like it's a competitive advantage. Yes. But I haven't seen it very much. So that's a shout to solo founders. Like, you know, if you have that extra 40% of equity, use it on the early team.

Pablo Srugo 30:04

And even in the uh, you know, I I could see that in the non, but if you look at the solo founders, the 25% that do end up venture-backed, in that group, you're still not seeing a difference in terms of those first few grants relative to your normal venture-backed company? Not massively.

Peter Walker 30:19

I mean, they're a little bigger, they're not a lot bigger. Maybe the fact that they're a solo founder doesn't really play into that compensation conversation. Like there's other criteria. But I think it probably eventually should if you're competing with the same equity resources for another fantastic candidate that some other startup is super interested in. Um, or maybe I'm I'm missing a part of the market.

Pablo Srugo 30:40

I would agree with you, but I would also understand, again, and this is like you look at the data first and you explain the story, but like it does make sense to me that it wouldn't just happen right away because a solo founder is certainly not gonna think, oh, I've got extra equity, like let's give it away. It's just not the mindset. They're gonna say, I don't care what I started with. What does it cost me to get, you know, ahead of sales or ahead of engineering or whatever it is that I need? Okay, it costs this, I'm giving that. Like that's what I'm giving. But what might happen over time is the fact is, if you give more, you can get more in terms of the bar, right? Like that's just you know, you pay more, you can get better talent. That's a very obvious thing. And so, like, I'll give you an anecdote to tie back to this. I had a solo founder who's a salesperson. You know, they they build, they have a few engineers that are doing this stuff, great, great engineers. And then it just became obvious that they needed like a VPN, ahead of engine. And it was funny talking to trying to recruit someone and obviously talking to other founders to get like, hey, who do you know that's great? And some people said to me, This this is a seat stage startup, dude. Like, why are you looking for a VPN? Just way too early for a VPN. I'm like, you have to understand that this was a technical founder. Like, you're a technical founder. Not only that, like if you think about your average startup in your mind, you're thinking there's two or three founders, and one of them is a CTO or technical founder, in which case, yeah, a seat stage is way too early to hire a VPN. But you have to think of this more like if you're starting a company as you're as a sales business person, it's very classical advice to get a technical co-founder, very classical advice. So if you're not gonna do that because you don't need to and you don't want to part with 30%, you're gonna need to fill that gap. Like there's just a bigger gap for you than somebody else. And then the question is, are you gonna go for like your average? Let's say, let's say the grant is like 2% normally for a VPN. But if you're kind of this hybrid co-founder and you just need to fill that gap more, you can maybe reach up. That's the competitive dynamics that you're talking about, and do a 5% grant, maybe that becomes an edge. But like it'll take time for, I'm sure some fabrics are doing that, but it's like for that to show up in the data because it becomes the standard thing that people do. I could see how that would take time. But it seems like a natural endpoint.

Peter Walker 32:40

Yeah. I mean, I I I agree. The logic seems to make perfect sense to me. And I don't know why we haven't seen it more, but maybe as you said, maybe it'll take time. The other point on teams that I think is interesting is that um there was a little bit of a wave that went through private tech when the windsurf stuff happened and like what it means to be part of an early team. I mean, I just think that startup employees, at least the ones that are super in the know, are like, hey, what is the advantage of me not starting my own company? You know, I think the the best alternative used to be work at Google, whatever. And now it's start your own thing. And I think that uh like I I think hiring the number one, number two, number three engineer of the business has almost never been harder because the alternatives are so obviously like hitting you over the head. If you can be a founding engineer at a startup, why couldn't you be a founder?

Pablo Srugo 33:29

Although, why like actually walk me through that? Because my thinking has been AI has changed product. It hasn't really dramatic, like obviously, AI agents, you can use them for go to market and stuff. But like I would argue getting a customer is not easier because competitively everybody's doing it. So like getting customers no easier today than it was five years ago. It's still just as hard. What's gone easier is building the product. If you're a technical engineer, you're a technical founder, building a product's even easier than it used to be, let's say, because it helps you, but like getting customers, you know, I don't see how that's changed.

Peter Walker 34:00

I think that they kind of underrate how hard it is to get customers overall. Yeah, that's a different thing. That's probably one thing, which is a good point. Um, the other part is just that it's not so much the equation has changed on how hard it is to be a founder or build a good business. The equation has changed on how valuable it is to be in the early team. You know, if if we get acquired, and for some reason, I'm not a part of the golden circle that gets taken to the next place, and I've accepted a lot of risk, even if my equity grant is high. It's not, it's kind of like a different sort of another variable on the equation. And I think it's there's a lot of acquisitions happening right now, mostly for AI talent. So I think there's uh candidly, I think there's a lot of companies quietly not saying it that are quietly being built to get acquired earlier.

Pablo Srugo 34:44

I think that's a good point. I mean, frankly, the the monetary advantage of being an early employee has always been questionable. Like that's just the reality of it. And then when you see acquisitions, kind of like side acquisitions that happen in a way where not everybody's compensated the same way, it just adds like feel to a fire that's already it was not like a crystal, like I would say it's way more fun to work at a startup. I'm like all about small teams, you have more agency. There's a lot of upside, but like money is not one of the you will make more money at Google more easily doing less. You just will.

Peter Walker 35:16

The expected value is much higher at Google.

Pablo Srugo 35:18

Way higher. Yeah. Awesome, man.

VC Fund Shakeout And Final Share Ask

Pablo Srugo 35:20

Anything else that we didn't touch on? Anything else? Any other trends you're seeing that you're that you're digging into?

Peter Walker 35:24

I think there's a there's a lot of conversation right now about what happens to the traditional $200 to $400 million Series A fund and whether or not those fund managers need to go down earlier, whether they can compete with the rounds from the mega funds. Everyone seems to have assumed that mega funds will continue to attract the most money and that super early funds have an advantage. And so, like what happens in the middle is one of the bigger conversations around venture managers that I'm listening to right now.

Pablo Srugo 35:52

Well, actually, on that, I was gonna ask, like, we're seeing you're seeing more companies created than you mentioned, but not necessarily more companies being backed. What do you see in terms of fund formation, like number of funds and total dollars raised? What does that look like?

Peter Walker 36:04

I mean, it's okay. It's definitely down from prior years. There's a there's a group of funds that are being started that are under 50 million that are, you know, it probably is gonna come into about equal to last year, maybe slightly down from last year, at least in our data. But in general, you know, I think one of the stories of the last couple of years has been a lot of VCs who got started in 2020 and 2021, they're on their last funds and they're they're not gonna be able to raise again.

Pablo Srugo 36:29

So, I mean, in a sense, you've got way more founders chasing the same or maybe smaller number of VCs. Sure, some of those VCs have massive AUM, which maybe makes your total dollars available be high, but they're not gonna, they're not gonna spread them, probably. You know, if you have one mega fund, it's just not gonna be able to spread it as as far as a hundred or a thousand little funds, which each one's gonna do 30 deals.

Peter Walker 36:53

Yeah, exactly right. Is that good or bad for the ecosystem? I don't know, but it's definitely on the mind of a lot of emerging managers who are finding this market pretty frigid.

Pablo Srugo 37:02

Well, I think I think it's just for me, like again, I go back to the founder mindset. Like, it just this is the bar. Like you see the headlines, you see the medians, like wow, like 15 million A at 80 post money, like the world couldn't be any better. I just got to get there. But getting there, like just understand what that means because of all these dynamics. The bar is just it's just very high. Air is one of those things, growth is another, competitive dynamics is another one, the size of your potential exit, like all these things really have to align for you to be the one that gets counted in that meeting. Because by the way, everybody that didn't raise an A is not part of that data set. So bingo.

Peter Walker 37:36

It's a rough, rough world out there.

Pablo Srugo 37:38

Listen, Peter, it's been uh great having you on the show. I'll let you rest your voice a little bit, man, and uh appreciate you sharing the insights with us today. Yeah, dude. Always good to see you. All right, dude. Chat's in. So picture this it's months from now, years from now, and one of your founder friends, a really close founder friends of yours, guess what? Their startup went bankrupt. And it turns out, if you had just shared the product market fit show with them, they would have learned everything they needed to to find product market fit and to create a huge success. But instead, their startup has completely failed. You have blood on your hands. Don't let that happen. You don't want to live like that. It is terrible. So do what you need to do. Tell them about the show. Send it to them, put it on WhatsApp, put it on Slack, put it where you need to put it. Just make sure they know about it and they check it out.