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What Route Works Best in VC: Specialist, Generalist or ‘Nestled’?
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By Matthew Strozier, WSJ Pro
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Good day. A new report from Deloitte examines a longstanding question in venture capital: Which firm and fund approach is more effective—specialist or generalist? Among its findings, Deloitte notes a growing trend of firms choosing both by embracing a “nestled model,” in which generalist firms embed specialist teams to leverage the best of each. "This hybrid structure may offer the most resilient path forward in a market that demands both focus and flexibility," the report said.
We would like to hear from you: What do you think about the specialist vs. generalist question in today's market? How has it evolved in response to the intense focus on artificial intelligence? How do you see firm and fund structures changing in the future? Please email responses to vcnews@wsj.com. (Note: Question of the Week will next appear on July 11 due to the Fourth of July holiday.)
Last week, we asked how the Securities and Exchange Commission's easing of regulations on private funds, including potentially relaxing restrictions on access to funds-of-funds for retail investors, might affect venture capital. Here are responses, edited for clarity and length:
Pete Soderling, founding partner, Zero Prime Ventures: “The SEC’s decision to ease proposed rules is a welcome signal for early-stage venture firms like ours. While investor protections are important, overly burdensome regulation can stifle innovation and limit access to capital for emerging managers. A more balanced approach helps ensure the ecosystem remains vibrant and competitive.”
Jake Gibson, founding partner, Better Tomorrow Ventures: “I will say relaxing the fund-of-fund rules for retail investors is going to mean a lot of [low-quality] assets being pushed to retail. [Private-equity] firms have been making a big push into retail and retirement accounts, and the cynical view is they have a lot of overpriced assets on the books and need to get liquidity. This would be an extension and expansion of that, I fear.”
Aakar Vachhani, managing partner, Fairview Capital: "It’s honestly hard to predict with any regulatory changes early on...There have been stops and starts in these directions for a while and not a ton has changed. But you never know, so truly we’re just waiting to see."
Bob Ackerman, managing partner and co-founder of DataTribe and founder, managing director and chairman, AllegisCyber Capital: "Venture capital has demonstrated an ability to outperform public markets by financing breakthrough innovation and associated value creation. Unfortunately, access to these investment opportunities has been limited to institutional investors for too long. Opening the door to opportunity for retail investors levels the playing field."
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And now on to the news...
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Indoor farm Plenty filed for bankruptcy earlier this year. PHOTO: CARLOS BARRIA/REUTERS
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Wilting returns. From venture-capital and private-equity firms to celebrities such as Justin Timberlake and Martha Stewart, many meal tickets backing the indoor growing of fruits and vegetables have experienced wilting returns, WSJ Pro reports.
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What not long ago amounted to billions of dollars in U.S. venture capital pouring into indoor farming has dropped to millions. After falling to $277 million last year, activity has dried up so far this year to five deals totaling $57 million, data tracker PitchBook says.
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The bubble-bursting coincides with bankruptcies of Plenty, which had been backed by SoftBank, Walmart and One Madison Group, and at least five other indoor farming businesses including one that filed in April.
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A couple of other financial backers have disclosed sobering news during the past few months about their indoor farming interests.
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3
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The number of OpenAI researchers that Meta Chief Executive Mark Zuckerberg has poached to join his superintelligence efforts.
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Nico Rosberg Draws on Racing Experience as a Venture Fund Investor
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Nico Rosberg spent 10 years as a Formula One racing driver, a sport considered among the most physically and mentally demanding in the world. He won the circuit’s World Championship in 2016 and promptly retired at age 31. That same year, the German driver founded Rosberg Ventures, a venture-capital firm in Monte Carlo, Monaco, that invests the wealth of high-net-worth European families in other venture managers’ funds. WSJ Pro spoke to Rosberg on the sidelines of the recent SuperReturn International private-equity industry conference in Berlin about his firm, the market and how his former life informs his current one.
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CoreWeave in Talks to Buy Core Scientific
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CoreWeave is in talks to acquire Core Scientific, according to people familiar with the matter, after the AI company’s unsuccessful attempt to buy the digital-infrastructure firm about a year ago, The Wall Street Journal reports. A transaction could be finalized in the coming weeks, as long as the talks don’t hit any snags, the people said. The exact terms being discussed couldn’t be learned, but Core Scientific has been growing rapidly and would likely command a healthy premium. It has a market value of close to $3.7 billion, after its share price dropped roughly 15% year to date.
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Funds
Aria Growth Partners, a growth-equity firm focusing on consumer brands, closed its second fund with $152 million in commitments.
Sorenson Capital launched its third early-stage fund with $150 million in commitments to continue investing in cybersecurity and business-to-business software companies.
People
Amber Yang joined Lightspeed as a partner. She was previously at CRV and Bloomberg Beta.
Exits
Rubrik agreed to acquire Predibase as the Palo Alto, Calif.-based cybersecurity company aims to accelerate agentic-AI adoption from pilot to production at scale.
IFS, a provider of enterprise cloud and industrial AI software, acquired TheLoops, an autonomous AI agent technology startup.
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Xona, a Burlingame, Calif.-based satellite navigation startup, picked up $92 million in new funding, including a Series B round led by Craft Ventures.
Certify, a New York-based healthcare provider data intelligence startup, secured $40 million in Series B funding led by Transformation Capital.
Niural, a professional employment organization platform, raised $31 million in Series A funding. Marathon Management Partners led the round, with Gokul Rajaram joining the company’s board.
Bonfy.AI, a startup whose AI technology detects risks in any content or unstructured data, emerged from stealth with $9.5 million in seed funding led by TLV Partners.
Sitch, a New York-based AI matchmaking app, was seeded with a $5 million investment led by M13.
RevEng.ai, a U.K.-based startup building foundation AI models for identifying security threats and vulnerabilities in software, closed on nearly $4.2 million in seed funding led by Sands Capital.
Lux Aeterna, a reusable satellite platform, landed $4 million in pre-seed financing led by Space Capital.
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Microsoft Chief Executive Satya Nadella and OpenAI Chief Sam Altman, appearing at a conference by video in May. PHOTO: JASON REDMOND/AGENCE FRANCE-PRESSE/GETTY IMAGES
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