Good day. Artificial-intelligence startups often wedge their way into initial customers through pilots. But how often do small-scale deployments lead to large-scale rollouts and sustainable revenue? As competition intensifies in AI, how can startups position themselves to generate durable revenue? Please email responses to vcnews@wsj.com.

Last week, we noted that topics of conversation at the Primary NYC Summit ranged from the dazzling valuations many AI startups are scoring to the struggles the rest of the market is enduring. We asked how you are dealing with the investment gulf between the haves and have-nots, and how startups left out of the frenzy can cope. Here are some of your responses, edited for length and clarity.

• Hemant Mohapatra, partner with Lightspeed India Partners Advisors: “Founders should tune out the AI fundraising frenzy and stay focused on solving widespread and pertinent problems exceptionally well. Startups in any industry will always stand out if they can zero-shot processes that previously took 10 steps and do in a few cents what previously cost thousands.”
   
• Lindy Fishburne, managing partner of Breakout Ventures: “We've seen this story before: Excess cash and valuations that are way ahead of true value creation rarely work out long-term, while disciplined companies forged in downturns typically outperform the frenzy. Take the opportunity to build lean and stay focused.”
   
• Larry Aschebrook, founder and managing partner of G Squared: “The bifurcation we’re seeing isn’t new—every cycle has its market favorites. Right now it’s AI, but before that it was fintech, and consumer internet before that. We underwrite to durability and long-term category leadership, not the hype cycle of the moment. For founders outside the AI spotlight, the best way to ‘cope’ is to sharpen fundamentals: show real progress on unit economics, retention and scale.”
   
• Steve Brotman, founder and managing partner of Alpha Partners: “The gap between haves and have-nots is real, but it’s also cyclical. Valuations will compress, the froth will clear and the best companies will find capital. In fact, history suggests the vintages formed in these leaner years may turn out to be the strongest of all.”

And now on to the news...

Doubling down on nontraditional tech hubs. Venture capitalist Jack Selby is ready to call the so-called geographic arbitrage strategy he launched roughly three years ago a success. Selby—part of the “PayPal mafia” and a current managing director at Peter Thiel’s Thiel Capital—raised $115 million on the thesis that startups in coastal tech hubs were overpriced and the American Southwest, particularly around Phoenix, contained a plethora of promising startups he could invest in at a discount. 

• After investing two-thirds of the first fund, mostly in Arizona, Selby said he’s doubling down on nontraditional tech hubs.
   
• In the year’s final quarter, Selby said he’ll begin raising a second fund that is at least double in size and potentially up to four times as large as the first fund.

British renewable-energy startup Octopus Energy is spinning off its artificial intelligence arm, Kraken, in what could create a stand-alone entity worth $15 billion. Kraken has operated in Octopus’s shadow but has helped power its parent to unicorn status as the startup provides renewable energy to British and European consumers. Based on its last funding round in 2024, Octopus was valued at over $9 billion.

• The company is now looking to spin off the golden goose as demand for Kraken, which serves as an AI platform designed for energy and utility companies, grows.

Workday has a plan to win over business customers with AI agents. The business software company this week announced a slew of new human-resources and finance AI agents, along with a collaboration with Microsoft to help organizations manage them across their platforms. It also launched a developer platform where customers can build their own AI agents on Workday. Additionally, the Pleasanton, Calif.-based company said that it is acquiring Sana, an AI firm focused on workplace tools, for $1.1 billion.

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Funds

Israeli cybersecurity and AI investor Glilot Capital raised $500 million in new commitments, which will be allocated across its Glilot Seed and Glilot Plus vehicles. Additionally, the firm appointed Rinat Remler as an operating partner.

People

Early-stage investor Antler appointed Hiro Kiga as partner of Southeast Asia and Japan. He previously co-founded Wallex, which was acquired by M-DAQ in 2022.

Dawn Capital promoted Shamillah Bankiya to partner, where she leads the firm’s investments in AI, infrastructure and automation. Bankiya joined Dawn in 2020 from the SoftBank Vision Fund.

Acrew Capital appointed Andrew McKinzie as an investor at the firm.

Invisible Technologies, a San Francisco-based AI software platform, scored $100 million in growth funding. Vanara Capital led the round, which included participation from Acrew Capital, Greycroft and others. Hayden Lekacz, managing partner at Vanara, will join the company’s board.

Irregular, a San Francisco-based frontier AI security lab, picked up an $80 million investment. Sequoia Capital and Redpoint Ventures led the round, which included participation from Swish Ventures.

Omnea, a London-based procurement intake and orchestration platform, raised $50 million in Series B funding. Khosla Ventures and Insight Partners led the round, which included additional support from Accel, First Round Capital and others.

Genomines, a Paris-based plant-based metal farming startup, landed $45 million in Series A funding led by Engine Ventures and Forbion’s BioEconomy fund strategy.

Sevaro Health, an East Brunswick, N.J.-based AI-powered neurological-care provider, closed a $39 million Series B round led by Valtruis.

Numeral, a San Francisco-based sales tax compliance platform, grabbed $35 million in Series B funding. Mayfield led the round, which included contributions from Benchmark, Uncork Capital and others.

Samara, a Redwood City, Calif.-based prefab home manufacturer, snagged $34 million in Series B funding led by Thrive Capital.

Macroscope, a San Francisco-based product development platform, raised $30 million in Series A funding led by Lightspeed Venture Partners.

Finary, a Paris-based wealth-management platform, fetched €25 million in Series B funding. PayPal Ventures led the investment, which included participation from LocalGlobe, Hedosophia and others.

Aleph, a New York-based financial planning and analysis platform, collected $29 million in Series B funding led by Khosla Ventures.

Mueon, a Portland, Ore.-based developer of semiconductor-based systems for AI and hyperscale computing, launched from stealth with $15.5 million in seed funding. Intel Capital led the round, with Managing Director Srini Ananth joining the board.

Conduct, a London-based enterprise AI startup, emerged from stealth with $12 million in seed funding led by Creandum.

GridStrong, a New York-based electric grid compliance and operations automation provider, was seeded with a $10 million investment led by Congruent Ventures.

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This newsletter was compiled by Matthew Strozier and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley and Marc Vartabedian.

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