Generative A.I. in particular is becoming increasingly popular with investors rushing to get in early on the next big thing. But how much are they actually paying? And why do they think it’s worth it? I recently took a closer look at just how crazy generative A.I. valuations have gotten—and why not all kinds of A.I. startups are fetching such high prices. As I reported: 

[David] Beisel [co-founder and partner at NextView Ventures] likens the current moment for generative A.I. to a transitional shift, akin to “a browser moment” or “a social networking moment.” And given one look at the data, he’s clearly not alone. 

According to PitchBook data provided to Fortune, the median pre-money valuation for generative A.I. firms soared to $90 million so far this year, based on nine deals PitchBook has tracked through March 29, up from $42.5 million for 2022. Those big numbers are boosted by big deals for the likes of Anthropic and Tome, and early stage A.I. startups addressing use cases like software, customer experience, and media generation are seeing high valuations. While it’s still early days in 2023, that data “suggests that investor momentum will be on early stage startups in this new wave of A.I., rather than supporting late stage vendors” and those using more classical (and older) models, Brendan Burke, a senior emerging technology analyst at PitchBook, who covers A.I., told Fortune. In fact, in a recent report on generative A.I., PitchBook analysts predicted that at a 32% compound annual growth rate (CAGR), the market could reach $98.1 billion by 2026.  

VCs are salivating over how fast innovations are happening in the large language model space, and how good the technology is. They see applications in a variety of other areas, including consumer and enterprise use cases for things like marketing and software (as I recently wrote about). And Gaurav Gupta, a partner at Lightspeed Venture Partners, made his case for why these prices could be justified: With the recent release of GPT-4, OpenAI’s latest system, and other innovations in the space, it’s “becoming more and more clear that all of these existing software categories can be disrupted by the tech,” he told me.  

For the full breakdown of the data and more in-depth insights from VCs, you can dig into my deep dive here. But one thing’s for sure: Given how much cash investors are chipping in at steep prices for these generative A.I. startups, it is a gamble. As Gupta told me, “there’s gonna be a lot of money lost.” 

We’ll have to wait and see whose bets pay off. 

Tiger Global looks for the exit: In true 2023 slowdown fashion, mega tech investor Tiger Global Management has reportedly been trying to sell off some of its stakes in venture capital firms in recent months, per a report from The Information. According to the report, Tiger partners had committed at least $80 million to VC funds including Better Tomorrow Ventures, Chapter One Ventures, and Moxxie Ventures last year (it’s unknown if they sold any stakes yet). Notably, Tiger’s reported move comes as the firm is also aiming to raise a smaller amount for its venture fund, as the Wall Street Journal reported in February that Tiger is currently looking to raise $5 billion, down from $6 billion last year. 

See you tomorrow,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
Submit a deal for the Term Sheet newsletter here.

Correction: The online version of yesterday’s newsletter has been corrected to reflect that Crunchbase plans to become profitable in the next two years, not four to five.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- X Shore, a Stockholm-based climate technology and electric boat company, raised €26.6 million ($29 million) led by SEB Investment Management. 

- OXOS Medical, an Atlanta-based safe X-ray solutions developer, raised $23 million in Series A funding. Parkway Venture Capital and Intel Capital invested in the round. 

- M^ZERO Labs, a Berlin-based decentralized infrastructure company, raised $22.5 million in funding. Pantera Capital led the round and was joined by Road Capital, AirTree, Standard Crypto, The SALT Fund, ParaFi Capital, Distributed Capital, Kraynos Capital, Mouro Capital, and Earlybird.

- Mojo Vision, a Saratoga, Calif.-based micro-LED company, raised $22.4 million in Series A funding co-led by NEA and Khosla Ventures.

- Vytelle, a Kansas City-based cattle herd optimization company, raised $20 million in Series B funding. Forage Capital Partners led the round and was joined by Mountain Group Partners, Grosvenor Food, Ag Tech Fund, KCRise Fund, Open Prairie, Fulcrum Global Capital, and Serra Ventures.

- Magenta Mobility, a Bangalore- and Mumbai-based electric mobility solutions provider, raised $11 million in funding from bp ventures. 

- Hype, formerly known as Pico, a New York-based marketing and payments platform for creators and small businesses, raised $10 million in Series A funding. King River Capital led the round and was joined by Bullpen Capital, Precursor Ventures, Bloomberg Beta, Tapestry VC, and Sterling Road. 

- Tally Health, a New York-based consumer biotechnology company, raised $10 million in seed funding. Forerunner Ventures led the round and was joined by L Catterton, G9 Ventures, and Second Sight Ventures. 

- LightMetrics, a San Jose-based video telematics business, raised $8.5 million in funding from Sequoia Capital India.

- Roboto.ai, a Seattle-based startup data infrastructure provider for robotics companies, raised $4.8 million in seed funding. Unusual Ventures, AI2, and FUSE Ventures invested in the round.

- Alga Biosciences, a San Francisco-based kelp-based feed additive company, raised $4 million in funding. Collaborative Fund led the round and was joined by Y Combinator, Day One Ventures, Cool Climate Collective, Pioneer Fund, Overview Capital, and others. 

- Flyby Robotics, a Los Angeles-based drone automation and delivery company, raised $4 million in seed funding. Mac Venture Capital led the round and was joined by Weekend Fund, Anthemis, and Evening Fund. 

- Native AI, a Cincinnati- and New York-based market intelligence platform, raised $3.5 million in seed funding. JumpStart Ventures and Ivy Ventures co-led the round and were joined by 11 Tribes Ventures and Connetic Ventures.

PRIVATE EQUITY

- Savvy Games Group, backed by the Saudi government’s Public Investment Fund, agreed to acquire Scopely, a Los Angeles-based game publisher, for $4.9 billion.

- Blue Point Capital Partners recapitalized Europa Eyewear, a Vernon Hills, Ill.-based eyewear frames designer and manufacturer. Financial terms were not disclosed.

- Grace Hebert Curtis, backed by Bernhard Capital, acquired Bullock Tice Associates, a Pensacola, Fla.-based architectural firm. Financial terms were not disclosed.

- Hunter Point Capital acquired a minority stake in Inflexion, a London-based mid-market private equity firm. Financial terms were not disclosed.  

- Mill Rock Capital acquired Asbury Carbons, an Asbury, N.J.-based carbon additive solutions provider. Financial terms were not disclosed.

- Sky Island Capital acquired a majority stake in Kaufhold’s Kurds, an Ellsworth, Wis.-based cheese curd company. Financial terms were not disclosed.

OTHER

- Fors Marsh acquired Brunet-García, a Jacksonville-based social impact marketing firm. Financial terms were not disclosed. 

- GoodBelly, a Portland, Ore.-based gut health company, and Cheribundi, a Portland, Ore.-based sports nutrition company, merged into NextFoods. Financial terms were not disclosed.

- Learneo acquired LanguageTool, a Hamburg and Potsdam, Germany-based multilingual writing platform. Financial terms were not disclosed.

- The Raine Group acquired Code Advisors, a San Francisco-based independent merchant bank. Financial terms were not disclosed. 

PEOPLE

- HarbourView Equity Partners, a Newark, N.J.-based alternative asset management firm, hired Carlos Cruz as managing director and head of capital markets. Formerly, he was with Fifth Third Bank.