It’s likely safe to say—creative accounting’s been around for as long as accounting itself.
In 1494, for example, mathematician and ‘father of modern accounting’ Luca Pacioli wrote of Venetian merchants willfully rendering their ledgers illegible. In the Gilded Age, inflating assets and understating liabilities was standard practice across a booming system. And who can forget the “channel stuffing” of the 2000s?
And, because some things are eternal, this era naturally has its own creative accounting practices, which I published a feature on this past weekend. Right now, some of the most clear shenanigans are going on around ARR, or “annual recurring revenue.”
“The problem is that so much of this is essentially vibe revenue,” one VC told me. “It’s not Google signing a data center contract. That’s real shit. Some startup that’s using your product temporarily? That’s really not revenue.”
ARR was a favorite metric of VCs throughout the software-as-a-service (SaaS) era, widely accepted as a trusted proxy for a stable and growing startup. Now, founders are trying to apply ARR to the AI boom—and it doesn’t fit. These days, founders are counting pilots, one-time deals, or unactivated contracts as recurring revenue, six VCs told Fortune. The push comes from somewhere very human, from a desire to keep up with the competition.
“There is all this pressure from companies like Decagon, Cursor, and Cognition that are just crushing it,” said another VC. “There’s so much pressure to be the company that went from zero to $100 million in X days.”
At the center of all this is an essential truth: That we’re going to need to evolve metrics with AI, and how AI companies actually work.
And in the meantime, it’s worth saying: Creative accounting has been around as long as businesses were counting, but that doesn’t mean it’s good practice. That doesn’t mean it’s safe or healthy for the system. And it doesn’t mean there won’t be consequences for some down the line.
Term Sheet Podcast…This week’s guest is Hans Tung, managing partner at Notable Capital. Hans first became a VC in his 20s and has gone on to invest in some of the most successful companies of our time: household names like Airbnb, Slack, Coinbase, and Peloton, among others. He was an early backer of Musical.ly, the app that became TikTok. Hans talks about what makes a good investor, his take on AI bubble anxieties, and more. Listen and watch here.
See you tomorrow,
Allie Garfinkle
X:@agarfinks
Email:alexandra.garfinkle@fortune.com
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Venture Deals
- CerebrasSystems, a Sunnyvale, Calif.-based AI chipmaker, raised $1.1 billion in Series G funding. FidelityManagement & Research Company and AtreidesManagement led the round and were joined by TigerGlobal, ValorEquityPartners, 1789Capital, and others.
- Vercel, a San Francisco-based AI-native infrastructure building platform, raised $300 million in Series F funding. Accel and GIC led the round and were joined by BlackRock, StepStone, KhoslaVentures, Schroders, and others.
- StarTherapeutics, a South San Francisco-based biotechnology company developing antibodies for bleeding disorders and other diseases, raised $125 million in Series D funding. SanofiVentures and VikingGlobalInvestors led the round and were joined by others.
- Eve, a San Mateo, Calif.-based legal AI platform for plaintiff law firms, raised $103 million in Series B funding. SparkCapital led the round and was joined by existing investors AndreessenHorowitz, LightspeedVenturePartners, and MenloVentures.
- AxiomMath, a San Francisco-based superintelligence platform, raised $64 million in seed funding. BCapital led the round and was joined by Greycroft, Madrona, and MenloVentures.
- Scorability, an Austin, Texas-based athlete recruiting tool for college coaches, raised $40 million in funding. BluestoneEquityPartners led the round and was joined by others.
- RunBuggy, a Tempe, Ariz.-based platform designed to connect car shippers and haulers, raised $37 million in Series B funding. CentanaGrowthPartners led the round and was joined by OMICapital.
- Descope, a Los Altos, Calif.-based external IAM platform, raised $35 million in a seed extension from existing investors NotableCapital, LightspeedVenturePartners, DellTechnologiesCapital, and others.
- Commcrete, a Tel Aviv, Israel-based developer of satellite communication systems, raised $29 million in funding across seed and Series A rounds. GreenfieldPartners led the $21 million Series A and was joined by RedseedVentures and existing investors. ProfessorAmnonShashua led the seed round and was joined by QFund and angel investors.
- MAI, a San Francisco-based platform designed to automate and optimize performance marketing, raised $25 million in seed funding. KleinerPerkins led the round and was joined by GaorongVentures, UpHonestCapital, and others.
- Zania, a Palo Alto, Calif.-based agentic AI company for security governance, risk, and compliance, raised $18 million in Series A funding. NEA led the round and was joined by AnthologyFund, PalmDriveCapital, and others.
- Tie, a Miami, Fla.-based AI-powered identity platform, raised $10 million in Series A funding. InnovatingCapital led the round and was joined by Stage 2 Capital, HawkeVentures, and others.
- Notch.cx, a Tel Aviv, Israel-based AI customer support platform, raised $7 million in seed funding. LightspeedVenturePartners led the round and was joined by JibeVentures, LionTree, Phoenix, and MunichReVentures.
- Clarifeye, a Paris, France-based platform designed for enterprises to build expert AI agents at scale, raised €4 million ($4.7 million) in pre-seed funding. EQTVentures led the round and was joined by DrysdaleVentures, and others.
- Hupside, a Washington, D.C.-based developer of tools designed to measure originality in employees, raised $1.7 million in pre-seed funding. RuxtonVentures led the round and was joined by angel investors.
Private Equity
- CatchmentCapital agreed to acquire a majority stake in FidusSystems, an Ottawa, Canada-based electronic system design and development company. Financial terms were not disclosed.
- Nuveen acquired a majority stake in AllyEnergySolutions, a Overland Park, Ks.-based energy solutions provider. Financial terms were not disclosed.
- SunstonePartners acquired a majority stake in Clearwater, a Nashville, Tenn.-based provider of cybersecurity and compliance solutions for the healthcare industry. Financial terms were not disclosed.
People
- Antler, a Singapore-based venture capital firm, hired ChristopherWalsh as a partner. Formerly, he was with 7 Global Capital.
