Major venture capital firms managing more than $10 billion are rapidly expanding into seed-stage investing, completing deals at nearly four times the broader market pace, according to new data from Murph Capital using Harmonic analytics. The shift is being driven by aggressive capital deployment into artificial intelligence, but also raises concerns about declining deal quality as volumes surge.
Large funds dominate seed-stage activity
The analysis of 20 leading firms across the SaaS, zero interest-rate, and AI periods shows that their seed-to-series B conversion rates outperform the wider market by 3.7 to 4.2 times. However, this advantage weakens when deal activity accelerates too quickly.
In the current AI cycle, median seed rounds involving these firms have reached $6.2 million, more than four times the U.S. median of $1.4 million. Valuations at the top end have surged, with the 90th percentile hitting $93.7 million by early 2026, roughly double levels seen four years ago.
Firms such as General Catalyst, a16z, Sequoia, and Accel rank highest on a composite “Danger Index,” reflecting a mix of high deal volume, large early-stage allocations, and elevated round sizes.
Deal volume surges as capital scales
Early-stage activity has expanded sharply over the past decade. Annual seed transactions per major fund have more than doubled from 10.6 in the 2015–2019 period to 23.9 in the AI era, with 17 of 20 firms increasing their pace.
Some platforms now operate at industrial scale. a16z completes roughly 76.8 seed deals per year, General Catalyst 62.1, and Khosla Ventures 30.9. Combined assets under management among the five largest firms have grown from $34 billion to $249 billion over the same period, underscoring a structural shift rather than a temporary cycle.
Seed investing has also become a core strategy. Early-stage allocation has climbed from 20–30% of total activity in the SaaS era to as high as 50% today for several firms, signaling a permanent institutional focus on earlier entry points.
Two-tier market emerges in deal structures
Seed rounds led by large platforms now fall into two distinct categories. Some firms, including Lightspeed and Accel, operate across a wide range, from typical $5–8 million rounds to occasional “super-seed” deals exceeding $50 million. Others, such as Greylock and Founders Fund, remain tightly concentrated within the mid-range band.
In practice, these firms operate almost entirely in the upper quartile of the market, with only about 25% of U.S. seed deals meeting their entry thresholds.
Leadership in deals is also increasing. During the AI period, 13 of the 20 firms led a greater share of seed rounds than before. Lightspeed leads about 63% of its deals, while a16z and General Catalyst lead large portions of their expanding pipelines, even as they participate widely in rounds they do not price.
AI concentration drives capital allocation
Artificial intelligence has become the dominant focus, accounting for 42% of early-stage activity among the analyzed firms. Enterprise AI spending has surged from $1.7 billion in 2023 to $37 billion in 2025, fueling rapid scaling among startups.
Some companies have reached significant revenue milestones within months of launch, while others have achieved extremely high valuations despite relatively modest profitability. Average gross margins for AI-native startups remain around 25%, indicating a strong emphasis on growth over efficiency.
Outside AI, participation drops notably. Sectors such as climate, logistics, and property technology attract fewer large funds and see lower deal sizes, while cybersecurity remains a more active segment. Defense and aerospace show strong engagement rates but involve fewer major players overall.
Performance gap narrows as volume rises
Historically, companies backed by large funds have demonstrated higher progression rates. During the SaaS era, 36.7% of such firms reached series B compared with 9.8% of the broader market. However, conversion rates have declined as deal volume increased.
Most major firms saw significant drops. Sequoia’s rate fell from 46% to 14%, while a16z declined from 42% to 16%. Greylock was a notable exception, maintaining a steady deal pace and improving its conversion rate.
The data suggests that disciplined deployment remains closely tied to outcomes, even as capital scales.
Crypto and broader markets reflect similar trends
The concentration of capital into AI mirrors patterns seen in digital asset markets, where dominant narratives attract disproportionate inflows. This feedback loop is now evident in venture activity, where capital both reinforces and is reinforced by the AI growth story.
AI also led seed-stage crypto funding in 2026, attracting $109 million and highlighting the overlap between sectors. At the same time, the number of active crypto-focused venture firms has dropped sharply to 651 in the second quarter, down nearly 75% from its 2022 peak.
Venture funding into the broader Web3 sector has declined 47% year over year in early 2026, indicating a clear rotation of capital.
Risks of concentration and signs of rotation
The heavy focus on AI, combined with rising deal velocity and falling conversion rates, points to potential overheating. The high “Danger Index” scores for several major firms reflect pressure to deploy large pools of capital, which may weaken diligence standards.
Meanwhile, underfunded sectors could present alternative opportunities as competition declines and valuations remain lower. Public market data shows that excluding AI and energy, the S&P 500 has posted negative performance in 2026, reinforcing how narrowly gains are concentrated.
The sustainability of current dynamics depends heavily on continued capital inflows. With AI startups prioritizing growth over profitability, any disruption in funding could have cascading effects across the ecosystem.
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