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NewsMaterial3 min readDisconfirmAI Editorial

Three VC Partners Break Down the Series A Market in the AI Era: Cumulative ARR is a Red Flag, Negative Gross Margins Pass via Market Ceiling Logic

Shailendra Singh of Peak XV, Jahanvi Sardana of Index Ventures, and Jenelle Teng Wade of Bessemer discussed the current Series A funding market at TechCrunch Disrupt in the United States. Singh pointed out that cumulative ARR charts are a red flag; Sardana referred to tranche-based pricing as 'tranchopalooza'; and Teng Wade used Anthropic as an example to explain how negative gross margin AI companies can pass by relying on market ceiling logic.

2026-10-22 23:15 GMT+8

Managing Director Shailendra Singh of Peak XV, Partner Jahanvi Sardana of Index Ventures, and Partner Jenelle Teng Wade of Bessemer took the stage together this year at TechCrunch Disrupt in the United States to discuss Series A fundraising. The consensus among the three was that there is no single metric defining what constitutes a Series A in the current market, nor is there a standard path. Singh stated, "Seed and venture, I’ve never seen it as dysfunctional as it is now," adding that this is one of the hardest markets he has seen for raising capital.

A specific manifestation of this dysfunction is dispersed pricing. Singh described the heavy burden of convincing a top-tier firm that you are among the few special companies capable of breaking out, and noted that once convinced, the dispersion in terms, capital raised, and valuation conditions is extremely wide. He observed that it is now common for a company to attempt to close a round with as many as three different prices simultaneously, calling it "a crazy sign of market froth." Sardana termed this practice of splitting financing into multiple independent batches with separate pricing "tranchopalooza."

Beyond signals of a bubble, Singh provided a specific analytical tool: cumulative data charts are a red flag. "If you show a chart which shows cumulative revenue or cumulative ARR, that is a massive red flag," he said. "It means that your time series data is not good because cumulative data is a big lie." By this, he meant that cumulative data obscures the true state within time series data. In a market where ARR figures are widely inflated to support high valuations, insisting on presenting period-by-period data serves as a test of intellectual honesty.

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Teng Wade illustrated how AI companies with negative gross margins can succeed using the early evaluation of Anthropic by her firm, Bessemer. At the time, Anthropic had negative profit margins and was investing heavily in compute power. A partner on her team believed that AI would be "bigger than everything we’ve ever expected in terms of price premium on the frontier models" and would become "a substitute for other types of software." The logic was that even with money-losing margins, if the market is large enough and the company can reach the top three positions, returns will cover the losses. Anthropic is reportedly preparing for an IPO at a valuation of approximately $2 trillion; the company informed investors this month that it had achieved profitability on an adjusted basis, though this measure excludes certain costs.

Singh’s warning regarding market prospects was: "The market is full of false positives because it can’t be that every company is going to be successful. This is as optimistic as I’ve seen the venture world in two decades, and normally it’s a sign. I think 2027 will be different. I think we will see a correction." This is his personal judgment, without providing a quantitative model or trigger conditions. Sardana’s concern points to another aspect: "It feels like founders are deciding what to build based on what’s getting funded, which is really scary." Teng Wade admitted that her past advice to founders to quote conservatively no longer holds water in the current market; she now says, "Just be audacious in your ask," see how the market responds, and then adjust accordingly.

For readers, the discussion among these three partners offers two transferable judgment tools: first, using the integrity of cumulative data as a red-flag test for a founder's intellectual honesty; second, in an environment of high AI compute costs, negative gross margins themselves do not constitute a veto, but one must answer whether the market ceiling is large enough and whether the company can enter the leading tier. The common premise for both is that the dispersed pricing and structural anomalies (tranchopalooza) in the current market mean that traditional Series A evaluation frameworks have partially failed, requiring more specific verification standards.

Sources

  • techcrunch.comTechCrunch↗
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