---
title: "The Sudden Repricing of Startups in Early 2024"
description: "Explore how AI is creating a valuation divide in startups, with AI companies commanding 2.5x multiples and 63% faster growth vs traditional SaaS in 2024."
categories: ["fundraising"]
keywords: ["Theory Ventures","AI startups","venture capital","SaaS valuation","early stage funding","software growth rates","Tomasz Tunguz","AI market trends","public market multiples","investment strategies"]
ai_summary: "AI startups are commanding higher valuations and growth rates compared to non-AI companies in early 2024."
date: 2024-02-09
lastmod: 2026-07-21
canonical_url: https://www.tomtunguz.com/the-ai-premium-multiples-2024/
author: "Tomasz Tunguz"
---

We're entering a new pricing environment for software: AI vs non-AI. It's only happened in the last few weeks.

Recent earnings have pushed some of the most important companies to all-time highs.  

| Company | Performance | 
| --- | ---: | 
| Confluent | 34% | 
| Cloudflare | 21% | 
| ServiceNow | 20% | 
| Microsoft | 14% | 

This dynamic doesn't favor everyone. 

Theory created a public market AI index to track software companies who have significant product plans or current AI businesses.


![image](https://res.cloudinary.com/dzawgnnlr/image/upload/ktiz1moff42mtyvdsynk.png)

AI companies trade at 2.5x the multiple of non-AI companies in the public market. 

This yawning difference should compound over time as the adoption of AI is still relatively early - we're only 18 months into it. In addition, the productivity gains & the concomitant willingness to pay for them is just getting started. 

Microsoft & ServiceNow have reported 70% & 50% improvement in productivity in their organizations.  

This dynamic is permeating the early stage private markets just as rapidly with the return of the 100x ARR multiple for AI companies.

| Type | Mean Projected Growth Rate | 
| --- | ---: | 
| Non-AI | 14% |  
| AI | 23% | 

The reason is the expected growth rate. AI software companies are projected to grow 63% faster in 2024 than non-AI software companies because of customer demand.

We should expect an elevated valuation environment in Q1 & Q2 as the buyer population expresses strong demand for AI.