Good day. Investor heads are spinning from sudden market shifts like the software-stock selloff and releases of new AI models with attention-grabbing capabilities.

“There isn’t solid ground,” said Jake Saper, general partner at Emergence Capital.

Assumptions about where markets are going and how to invest have to be constantly reexamined, Saper said.

“It’s total panic mode,” is how Jenny Fielding, co-founder and general partner at Everywhere Ventures, described the mood among her venture peers after cloud-software stocks sank earlier this month. “Everyone is rethinking their thesis,” she said. “In terms of the market, it feels like quicksand where you are unsure exactly where to step. We are not changing our thesis around vertical AI, but we are spending more time understanding the moats.”

Hemant Taneja, chief executive of General Catalyst, said now is “the hardest time" to invest in AI, because of the amount of capital required and the “stunning” rate of progress by AI models, speaking at a recent conference hosted by The Wall Street Journal.

As venture investors take stock of their companies’ market positions and defensibility, they are also trying to stay even-keeled.

It’s not just an intellectual challenge. “It’s also an emotionally taxing time,” Saper said.

Saper said he has turned to the gym and to spending more time outdoors as a way to ground himself. “I’ve been lifting heavier weights for better or worse. Hopefully I won’t hurt myself.”

Deedy Das, partner at Menlo Ventures, said that being an early investor in Anthropic helps Menlo better understand where the AI labs are heading. On a personal level, Das said, a habit of writing daily about technology for the past five years has helped him not get too unsettled by market changes. “So it doesn’t bother me too much that I have to update my priors on the technology,” Das said.

And now on to the news...

AI startup valuations. A fundraising tactic has grown increasingly popular for sought-after startups and top-tier venture-capital firms in recent months: A startup sells a stake of its company to a leading investor at one valuation and, either soon after or at the same time, offers additional shares to other backers at a much higher valuation. Several VC investors and outside accounting professionals said the back-to-back or multitiered deals are novel and raise questions about how much startups are really worth in an age of frenzied AI investing.

Cryptocurrency companies and fintech startups dream of breaking into the mainstream financial system. Some think they may have found a shortcut: Buy a bank. These companies see bank acquisitions as a quick way to gain access to the clients, deposits and stature that traditional financial institutions enjoy, rather than applying for a charter and building a bank from scratch, according to bankers and lawyers. Such deals still have to win approval from regulators.

The U.S. on Friday welcomed India as the newest member of Pax Silica, a group of nations that aims to counter China’s influence in new technology and artificial intelligence. U.S. and Indian officials didn’t mention China by name when announcing India’s inclusion in the bloc. But they pointed to Beijing’s efforts to weaponize its dominance in rare earths and other supply chains as major pressures in a tech world already dealing with heavy demand from AI.

Funds

Peak XV Partners closed on $1.3 billion in commitments across its India Seed, India Venture and Asia-Pacific funds.

People

Boulder, Colo.-based venture firm Massive appointed Matthew Klein as partner and promoted Maggie Rodney to partner.

Pepper, a New York-based technology platform for independent food distributors, secured $50 million in Series C funding. Lead Edge Capital led the round, which included participation from Iconiq, Index Ventures, Greylock, Harmony Partners and Interplay.

Freeform, a Hawthorne, Calif.-based AI-native manufacturing startup, closed a $67 million Series B round from investors including Founders Fund and Threshold Ventures.

Vizzia, a Paris-based provider of video surveillance technology for local authorities in the fields of public safety and illegal waste dumping, completed a €30 million Series B round led by Base10 Partners.

Ownwell, an Austin, Texas-based property tax monitoring and appeal services provider, landed $50 million in Series B funding, including $30 million in equity led by Alpha Edison and Mercato Partners.

Metafuels, a Swiss sustainable aviation fuel technology startup, collected a $24 million investment led by UVC Partners.

Stacks, an agentic platform for enterprise finance, snagged $23 million in Series A funding led by Lightspeed.

Inscope, a San Francisco-based AI-powered financial reporting platform for enterprises and accounting firms, raised $14.5 million in Series A funding. Norwest led the round, which included participation from Better Tomorrow Ventures and others.

Potpie AI, a San Francisco-based startup building a foundational context layer to make AI agents usable inside real-world engineering systems, nabbed a $2.2 million pre-seed round led by Emergent Ventures.

• Google Is Exploring Ways to Use Its Financial Might to Take On Nvidia

• Theft of Trade Secrets Is on the Rise—and AI Is Making It Worse

• Microsoft’s Head of Gaming to Retire After 38 Years at Company

• Could AI Disruption Fears Trigger a Software M&A Boom?

• The Hong Kong Investor Putting American Money Into China’s AI Push
   
• It’s Called the ‘Fitbit for Farts’—and It’s No Joke

This newsletter was compiled by Matthew Strozier and Zachary Cole.

Share your tips, comments and questions: vcnews@wsj.com

The team: Matthew Strozier, Yuliya Chernova, and Brian Gormley.

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