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Primary Venture Partners has secured $625 million for its fifth investment fund, reinforcing its commitment to seed-stage startups despite a changing macroeconomic environment. Ben Sun, the firm's co-founder and general partner, defended the increasing scale of seed investments as a rational response to higher-quality founder talent and the massive economic potential unlocked by artificial intelligence.
Key Points
- Fund V Launch: Primary raised $625 million to target seed-stage companies, continuing its focus on early-stage innovation.
- Market Expansion: The U.S. seed market has grown fourfold over the last decade, expanding from $5 billion annually to approximately $20 billion.
- AI Opportunity: Sun argues AI expands the Total Addressable Market (TAM) from software budgets to labor budgets, potentially unlocking trillions in value.
- Talent Shift: Larger seed rounds are driven by experienced founders exiting scaled tech companies to start new ventures.
Rationalizing Larger Seed Rounds
While the venture capital landscape has seen fluctuations in valuation and deal volume, the seed stage has undergone a structural transformation over the last decade. According to Sun, the average seed round size has quadrupled, moving from $1 million ten years ago to roughly $4 million today. Total capital deployed at the seed stage in the U.S. has similarly jumped from $5 billion to $20 billion.
Speaking to Bloomberg Technology, Sun pushed back against the notion that these larger rounds represent a bubble or irrational exuberance. Instead, he argued that the market has become more efficient, pricing in the higher pedigree of modern founders.
"People look at historical data, and they say, 'Well, the round size has gotten bigger, so it hasn't become irrational.' The reason why we have become bigger is because it's become more rational... A lot of the talent are coming from best-in-class tech companies that have gone from zero to a billion-dollar type outcomes... the scale and the quality of their ideas are just getting better and better."
This shift suggests that today's seed investments are backing "second-generation" talent—founders who learned how to scale at companies like Uber, Airbnb, or Stripe and are now applying those lessons to new ventures. Consequently, investors are willing to pay premiums for what they perceive as de-risked execution capabilities.
AI and the Trillion-Dollar Unlock
Beyond human capital, Primary's investment thesis for Fund V is heavily influenced by the transformative potential of Artificial Intelligence. Sun suggests that AI is fundamentally altering how venture capitalists calculate the Total Addressable Market (TAM) for startups.
Historically, enterprise software startups were capped by corporate IT budgets—a market measured in the hundreds of billions. However, because AI agents and infrastructure can perform tasks traditionally handled by humans, startups are now attacking the much larger labor market.
"Before, we used to talk about TAM as software budgets. AI is replacing or augmenting human labor. And when you think about that type of replacement augmentation, we're talking about a market that's trillions of dollars, not hundreds of billions of dollars."
Primary intends to deploy its new capital across a diverse range of sectors poised for this disruption. Sun highlighted fintech, healthcare, and industrials as key areas where AI infrastructure and applications can drive efficiency at both the enterprise and SMB levels.
With $625 million in fresh capital, Primary is positioning itself to capture the "step function" growth in outcomes that Sun predicts will define the next generation of startups, driven by the convergence of experienced talent and generative AI technologies.
