|
You’re receiving Dealmaker for free. Upgrade to a paid subscription to access all of our award-winning tech and business journalism. Subscribe to The Information here for 25% off your first year (normally $399). Welcome back! Sequoia Capital is planning to double down on Harvey, which uses artificial intelligence to automate work for lawyers, less than two years after first investing in the startup. The reason probably has something to do with its revenue growth. Harvey expects to raise about $300 million at around a $3 billion valuation in a round led by Sequoia Capital, according to people with direct knowledge of the fundraising. This would come about a month after the company surpassed $50 million in annual recurring revenue, a third person tells me. That was up from about $10 million in ARR a year prior and would make Harvey one of the biggest generative AI startups in terms of revenue, nearly as big as search startup Perplexity, according to our Generative AI database. The revenue figures haven’t been previously reported. Bloomberg earlier reported news of the round. And it is another example of the kind of insider-led deal that is becoming more common in the chaotic world of AI startup investing. Startups and venture capital firms are dancing with the ones who brought them. The deal would value the company at about 60 times forward revenue. Anthropic, for context, is in talks to raise funding at about 66 times forward revenue. It’s a big moment for Harvey, founded in 2022 by former Meta Platforms AI researcher Gabe Pereyra and Winston Weinberg, a former lawyer at O’Melveny & Myers. Customers include legal teams at KKR, PwC, Orrick and Lowenstein Sandler, according to Harvey’s website. We’re hearing that insiders are doing most of the round, but some first-time investors are squeaking in: Coatue Management is making its first investment into Harvey, according to someone familiar with the matter. We’ve seen a wave of these types of deals over the past year, in which an early investor with deep pockets leads a later round of an AI startup that’s growing quickly. IVP led the round last month that more than tripled the valuation for Perplexity. Thrive Capital led a new financing earlier this week for Anysphere, which develops the Cursor AI coding assistant and which the New York–based firm had also backed last year. Startups like EvenUp, a Harvey competitor, and Scale AI, a data labeling firm, also raised big new rounds last year led by existing investors. The trend causes a lot of grumbling behind the scenes from venture capitalists who can’t get into these deals and who wish startups would think more about diversifying their shareholder bases. For now, these inside rounds have seemingly shed their negative taint from prior eras of tech investing, when they sometimes indicated the startup needed propping up by existing investors because it was unable to secure an outside lead. The trend is likely to continue. Marquee VC firms that get to lead early rounds of promising startups now have deeper coffers, which they can dedicate to grabbing bigger stakes of the maturing startups, or they are raising special purpose vehicles to land some coveted allocation. Those firms have a lot of dry powder and not that many revenue-generating AI startups. Backing companies they have seen up close may seem like as good a bet as any. | 
