The Information: AI startups' multi-tranche rounds draw investor pushback as founders cite compute funding needs

[The Information] Nearly every AI startup financing these days has multiple tranches in which different investors get in at different valuations, according to The Information. At first, two tranches were unusual; now extra-hot funding rounds with three or more tranches are appearing. Some investors are unhappy with these multi-tranche rounds, specifically those who cannot get in at the lower valuation. They argue the practice allows bigger venture capital firms to flex their power and force smaller VC firms into the second, more expensive tranche. They also say it allows the startup to claim a bigger valuation even though some or most of the new capital came in at a lower price. But founders and many investors told The Information that the unique capital needs of AI companies, which are eternally starved of enough servers, are driving these unusual structures.