Good day. The latest wave of technological innovation is here in artificial intelligence. But going from startup to tech behemoth is no walk in the park.

John Chambers, who led Cisco Systems for roughly two decades, says he can help. After stepping down as CEO in 2015 and as executive chairman in 2017, Chambers founded JC2 Ventures the following year to invest in and mentor startup founders. He backs companies across categories and geographies, among them AI customer-management startup Sprinklr, cloud-based government-management platform OpenGov and AI fraud-detection service Pindrop Security.

Last month, Chambers sat down with Wall Street Journal reporters and editors to discuss the direction of the tech sector and the difficulties startups face.

WSJ: What’s your take on the overall VC asset class?

Chambers: There’s still that war going on for the really hot companies and they get a lot of offers. VCs are really competing in the big, big deals. I don’t compete in those first. I haven’t got deep enough pockets, and if they bring me in, it’s more because I’m a very good adviser to the company on direction.

Competition will continue. The VC market is tough. It’s been a lousy four years for returns. Their limited partners are not very happy. There are very few exits. I think M&A will continue to pick up and IPOs feel good at the present time.

But I’m going to say a third of VCs get eliminated. I think there are going to be some firms that say, “It’s been great.” They’re going to close or they’ll get cut in half. We made a huge amount of money, VCs, but most of those were ones that made it with prior generations. The delta between VCs varies a fair amount. It’s going to transform and VCs have to have operational experience to be effective.

Read more of the interview.

And now on to the news...

Gradient Ventures spins out of Google. Gradient Ventures has spun out of Google to better position itself to win deals in the fast-moving early-stage AI market, according to people familiar with the situation. Gradient Ventures is now operating under a new management company, according to a regulatory filing. Several limited partners, in addition to Google, are investing in its new venture fund, the people said. Darian Shirazi and Zach Bratun-Glennon remain managing partners of Gradient.

• Google formed Gradient Ventures in 2017 to back AI startups, becoming an early mover in the emerging category. Gradient was one of three venture firms fully funded by Alphabet.

A new crop of European tech founders is seeking to raise their first checks across the Atlantic, and in some cases moving their fledgling businesses there too. The U.S. has long wooed European startups with a deeper pool of capital and a more risk-tolerant culture. But with AI’s heavy upfront costs for powerful computing infrastructure and specialist talent, founders say the pull of America is greater than ever. That’s a concern for Europe, which wants to establish itself as a global AI hub to rival the U.S. and China.

Investigators at the Securities and Exchange Commission have recently probed Chicago-based startup Dream Exchange and its ties to the Church of Scientology. Former employees have spoken to investigators from the SEC’s Chicago office in recent weeks, people familiar with the matter said. The investigators asked about a whistleblower’s allegations that the startup stock exchange had misappropriated investor funds, the people said. They also asked about other connections with Scientology-affiliated organizations, the people said.

• Dream Exchange’s lawyer, Dan K. Webb, said that “claims made against Dream Exchange and its founder are false and meritless.”

Funds

Copenhagen-based 55 North, a dedicated quantum technology venture-capital fund, held the first €134 million close of its inaugural fund, which has a €300 million target.

Paris-based Serena has raised €200 million for its fourth flagship fund, which will focus on applied AI and energy transition.

Yu Galaxy, a firm making early-stage investments across sectors including healthcare, defense, automation and AI, closed on $90 million for its Yu Star Fund III and a special purpose vehicle.

Deep tech-focused Wave Function Ventures closed its debut fund at $15 million.

People

Fintech investor Portage appointed Rory MacMillan as an associate based in London. He was previously at Atempo Growth and Maven Capital Partners.

Cypher Games, an Istanbul-based mobile interactive entertainment startup, closed a $30 million Series A round led by The Raine Group and Play Ventures.

OpenSolar, a Sydney-headquartered software platform for solar installer businesses, has raised $20 million in funding from investors including 2150.

Serenis, an Italy-based provider of mental health and wellbeing services, landed a €12 million investment led by Angelini Ventures.

Cirrus Therapeutics, a Cambridge, Mass.-based startup focusing on the treatment of age-related macular degeneration and other chronic blinding diseases, closed an $11 million seed round led by ClavystBio.

PEAK:AIO, a U.K.-based data infrastructure startup, picked up more than $6.8 million in seed funding. Pembroke VCT led the investment, which included participation from Praetura Ventures.

Nozomio, a San Francisco-based startup providing a context augmentation toolkit for coding agents, was seeded with a $6.2 million investment from CRV, LocalGlobe, Y Combinator and others.

Mesta, a San Francisco-based cross-border payments startup, was seeded with a $5.5 million investment led by Village Global.

Lunos AI, a New York-headquartered startup building AI agents for accounts receivable, collected $5 million in pre-seed funding led by General Catalyst and Cherry Ventures.

Gullie, a San Francisco-based employee relocation platform, secured $2 million in seed funding from investors including B Capital and Gold House Ventures.

• OpenAI, AMD Announce Massive Computing Deal, Marking New Phase of AI Boom
   
• OpenAI’s Hunger for Computing Power Has Sam Altman Dashing Around the Globe
   
• The Self-Taught Engineer Going Head-to-Head With Elon Musk and Jeff Bezos
   
• Apple Drops ICE-Tracking Apps From App Store
   
• Delays to Trump’s U.A.E. Chips Deal Frustrate Nvidia’s Jensen Huang
   
• Behind Job Weakness Are Hints of a Productivity Revival. Is AI the Reason?
   
• AI Investors Are Chasing a Big Prize. Here’s What Can Go Wrong.
   
• AI Doom? No Problem.
   
• Startups Are Eating Big Food’s Lunch

• AI Startup Valuations Raise Bubble Fears as Funding Surges (Reuters)
   
• AI Is Dominating 2025 VC Investing, Pulling in $192.7 Billion (Bloomberg)

This newsletter was compiled by Marc Vartabedian 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.