Good day. Investment firm Cambridge Associates advised limited-partner investors to “moderate commitments to seed-focused venture capital strategies in 2026” in a recent note.

For most investors in 2026, “we advocate for limiting new commitments to exceptional pre-seed and seed-stage-focused strategies, given the maturation of the seed asset class, heightened early-stage valuations, and the elevated bar to go public,” wrote Zach Gaucher, senior investment director for venture capital at Cambridge Associates. The firm works with endowments, foundations, pension plans and other institutions.

Gaucher acknowledged that, historically, early-stage funds produced the best risk-adjusted returns and that Cambridge Associates expects that to continue and isn’t advocating an abandonment of seed funds. At the same time, the risks in seed are rising. 

“There are so many seed funds today, it’s become very very crowded,” said Theresa Sorrentino Hajer, head of U.S. venture-capital research at Cambridge Associates.

More than 4,200 venture funds have been raised in the U.S. since 2022, the firm noted, many of them in the under $100 million range, citing data from PitchBook Data. These funds are competing with each other, as well as against multistage funds, and driving seed valuations higher.

Meanwhile, the time it takes for a venture-backed company to go public has increased. And the size of IPO candidates has gone up, in terms of their median revenue. That means that the chance of having a company that eventually reaches that scale in a seed fund portfolio is declining.

“The probability of having a home run in your portfolio can be pretty slim,” Hajer said about current market dynamics for seed funds.

Investors, Hajer said, should be “thinking about allocating your dollars not only to seed, which means away from seed in some cases.” Seed should still play a role in LP portfolios, alongside late-stage and multi-stage funds, Hajer added.

Investors, Hajer said, should be thinking about allocating dollars away from seed, even as seed should still play a role in LP portfolios alongside late-stage and multistage funds.

Michael Kim, founder of fund-of-funds manager Cendana Capital, said that, in fact, seed funds don’t need to wait for IPOs. “Seed funds can and have generated substantial liquidity through secondary sales,” he said.

This is especially possible now with the AI native startups that are raising back-to-back financings quickly at higher valuations, Kim said. He said that Cendana has had both younger and older seed funds return more than the amounts they raised through secondaries.

And now on to the news...

Luminar Technologies, which makes sensor technology for self-driving cars, filed for bankruptcy after losing a supply contract with Volvo Cars.

• The technology company said it has entered chapter 11 with the support of 91% of its first-lien noteholders and 86% of its second-lien noteholders to sell its LiDAR business that makes scanners that use pulsed lasers to sense distances to nearby targets.
   
• Quantum Computing has separately agreed to acquire another subsidiary, Luminar Semiconductor, in an all-cash transaction valued at $110 million, Quantum said Monday.

JPMorgan Chase’s asset-management arm has raised $1.44 billion for its latest flagship vehicle to invest in private-equity buyout and growth funds, exceeding a $1.25 billion target. The private-equity group within J.P. Morgan Asset Management will focus on backing small and midmarket investment vehicles with its new fund, PEG Global Private Equity XII, through a mix of general partners as well as co-investment opportunities. JPMorgan plans to deploy the latest fund across buyout, growth and early-stage venture-capital strategies through primary investments, secondary transactions and co-investments.

The U.S. government has tried to address the long decline in stock-exchange listings by relaxing the rules for small public companies. But this approach creates a persistent risk: more stock scams. The quandary is on display now at the Securities and Exchange Commission. Its chairman, Paul Atkins, is pushing to further ease the reporting obligations for many smaller companies under a 2012 statute called the JOBS Act. The law gives special treatment to “emerging growth companies,” or EGCs, including exemptions from many accounting, auditing and disclosure requirements. At the same time, Atkins is leading a fresh attack on stock frauds targeting individual investors. Since late September, the SEC has suspended trading in 12 companies’ stocks. That is more suspensions than in the previous four years combined. The SEC cited potential manipulation that appeared to be aimed at inflating the stocks’ prices and volume.

Funds

Lightspeed Venture Partners closed on more than $9 billion across six funds, including a $3.3 billion opportunity fund. The firm was founded in 2000 and manages over $40 billion in assets.

Dragoneer closed its seventh venture capital fund above its target with $4.3 billion in commitments. The new vehicle brings the firm’s assets under management to $30 billion.

Israeli firm Viola Ventures raised about $250 million across two new funds. Viola Ventures 7 Early-Stage Investment Fund will make early-stage investments focusing on vertical AI, enterprise AI, fintech, AI infrastructure, cyber, quantum and defense technology. Viola Conviction Fund I, which raised $100 million, will invest through secondary transactions in outlier portfolio companies.

Swish Ventures raised a $100 million opportunity fund, bringing the firm’s total assets under management to $300 million. The new vehicle will target approximately eight investments across cybersecurity, infrastructure and AI, deploying an average of $10 million per deal.

People

Taxbit, a tax and accounting compliance platform for digital assets, appointed Robin Melnick as chief revenue officer. She previously served as CRO at Vanilla.

Octane, a New York-based end-to-end digital buying experience provider, closed a $100 million Series F round led by Valar Ventures.

PolyAI, a London-based provider of customer experience AI agents, landed $86 million in Series D funding. Georgian, Hedosophia and Khosla Ventures co-led the round, which included participation from NVentures and others.

Mirelo, a Germany-based startup enabling users to generate synchronized sound effects for videos, was seeded with a $41 million investment co-led by Index Ventures and Andreessen Horowitz.

Axion, a New York-based customer quality intelligence platform, scored $37 million in Series B funding. Salesforce Ventures led the round, which included additional support from Bessemer Venture Partners and others.

Echo, an Israel-based secure software infrastructure startup, collected $35 million in Series A financing. Led by N47, the round included contributions from Notable Capital, Hyperwise Ventures and SentinelOne’s S Ventures.

MEQ Solutions, an Australia-based startup that evaluates red meat quality and yield, raised $15 million in Series A funding led by Insight Partners.

Dux, a New York-based agentic exposure management platform, emerged from stealth with $9 million in seed funding led by Redpoint Ventures, TLV Partners and Maple Capital.

AIR, a New York-based credit intelligence platform, grabbed $6.1 million in seed funding co-led by Work-Bench and Lerer Hippeau.

Navier, a San Francisco-based startup building autonomous engineering teams for hardware design and development, nabbed $5.6 million in seed funding from investors including GV.

Soverli, a Switzerland-based cybersecurity startup, fetched $2.6 million in pre-seed funding led by Founderful.

• Ford Takes $19.5 Billion Hit in Detroit’s Biggest EV Bust
   
• JPMorgan Steps Further Into Crypto With Tokenized Money Fund
   
• Roomba Maker Declares Bankruptcy, but Tries to Ease ‘Bricking’ Fears
   
• Breach at South Korea’s Equivalent of Amazon Exposed Data of Almost Every Adult
   
• Juventus Shares Climb After Agnelli Holding Company Rejects Bid From Tether
   
• ChatGPT and a Murder-Suicide

• In AI Boom, Venture-Capital Firms Are Raising Loads More Money (NY Times)
   
• Viola Ventures Raises $250 Million to Back Israel’s Next Tech Wave (CTech)

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.

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