Good day. Big checks. Fast paydays. What’s not to love for investors in companies whose founders are recruitment targets in the AI talent game? Turns out many investors are wary.

Investors are getting nervous that founders of their portfolio companies could become targets of stupendous recruitment offers in the intense competition for talent in artificial intelligence. Even if shareholders end up making money, it is sometimes less than they bargained for, or the exit comes earlier than expected.

In short, the deals might be more lucrative for the founders than the shareholders. Some of the most promising startups, some investors fear, are being defanged before they reach what investors believe is their full potential.

“It’s concerning,” said Salil Deshpande, general partner and founder of venture firm Uncorrelated Ventures. “We funded the guy’s dream and somebody else convinced him to give up on that dream,” he said about the scenarios unfolding in Silicon Valley.

“We invest in people at the early stages, we expect them to create value in the company we are investing in,” he said. “If someone will pay them enough to abandon what they are working on, that’s a risk. It’s a big risk. I’m not happy about that.”

On the bright side, some recent deals that accompanied big hires allowed shareholders to generate strong returns.

Earlier this month, Google hired the founders of coding startup Windsurf, as well as part of its team, and cashed out the startup’s shareholders for a total of $2.4 billion. A venture firm that first backed Windsurf in its seed round, for example, returned about 50 times invested capital, according to a person familiar with the situation. Another VC that came in at the Series B into Windsurf got a return of four times investment, according to another person.

And now on to the news...

Musk allies to raise up to $12 billion for xAI chips. Elon Musk is pulling every financial lever he can to keep pace in the artificial-intelligence arms race.

• Just weeks after Musk’s xAI raised $10 billion through sales of stock and debt, the startup is working with a trusted financier to secure up to $12 billion more for its ambitious expansion plans, people familiar with the situation said.
   
• Valor Equity Partners, an investment firm whose founder, Antonio Gracias, has close ties to Musk, is in talks with lenders to raise the capital. The money would be used to buy a massive supply of advanced Nvidia chips that would be leased to xAI for a new jumbo-sized data center meant to help train and power the AI chatbot Grok.

The tech A-listers were giddy. They had visited the White House to sit down with Treasury Secretary Scott Bessent to talk economics. A podcast served as their hall pass. “It was one of the best days of my life,” said David Friedberg, a former Google executive who is one of the hosts of the “All-In” podcast. “We went to all of the private rooms.”

The weaknesses that led xAI’s Grok to make violent and antisemitic posts can be managed, but only if people want to do so.

You may have heard that the AI chatbot for X this month posted instructions for breaking into a politically active attorney’s home and assaulting him, and also said its last name was “MechaHitler.”

It has been less publicized that the episodes apparently resulted from a known vulnerability of large language models, and that the way Grok was tuned at the time of the episode seems to have made it particularly susceptible. The problem, called indirect prompt injection, occurs when models are influenced by inappropriate, erroneous or hostile content that they have retrieved online without the tools or rules to screen it out.

Read the full column.

Funds

Glade Brook Capital Partners exceeded the $450 million target for its fourth strategic growth fund with $515 million in commitments.

RA Capital Management held the final close of its inaugural $120 million Planetary Health Fund to back startups advancing resource availability, energy innovation and industrial productivity.

Betaworks closed on $66 million for its Betaworks Fund 3.0 to make pre-seed and seed-stage investments.

People

Philadelphia-based venture studio and startup incubator United Effects Ventures appointed Paula Fontana as chief marketing officer.

Deals

HData, a Birmingham, Ala.-based startup providing data intelligence to the energy sector, will acquire Insight Engine for an undisclosed amount.

Ashby, a San Francisco-headquartered recruiting software provider, scored $50 million in Series D funding. Mark McLaughlin at Alkeon Capital Management and Lachy Groom co-led the round, which included participation from F-Prime Capital and others.

xLight, a Palo Alto, Calif.-based startup building lasers for use in semiconductor manufacturing, closed a $40 million Series B round led by Playground Global.

Inforcer, a software platform for managed service providers, raised $35 million in Series B funding. Dawn Capital led the round, which included additional support from Meritech Capital. Evgenia Plotnikova, general partner at Dawn Capital, will join the company’s board.

Delve, a San Francisco-headquartered security and compliance automation platform, gathered $32 million in Series A financing led by Insight Partners.

Composio, a San Francisco-based startup building learning infrastructure for AI agents, landed $25 million in Series A funding led by Lightspeed Venture Partners.

Asylon, a Norristown, Pa.-based robotic perimeter security technology provider, completed a $24 million Series B round led by Insight Partners.

4screen, a Munich-based startup connecting automakers, brands and drivers through native vehicle displays, closed a $21 million Series B round led by Bosch Ventures.

Poseidon, a Palo Alto, Calif.-based full-stack decentralized data layer built for AI training workflows, picked up a $15 million seed investment led by a16z crypto.

Provectus Algae, an Australian agtech startup developing an algae-based feed supplement for livestock methane reduction, collected $10.1 million in Series A financing. At One Ventures led the round, with Founding Partner Tom Chi joining the board.

Nevoya, a San Francisco-based electric trucking carrier, was seeded with a $9.3 million investment led by Lowercarbon Capital.

Connectd, a platform connecting startups with fractional executives, added $7 million in funding from investors including Anker Capital Management.

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• Trump goes to bat for Big Tech in global trade talks
   
• Banks hate ‘buy now, pay later’—and may penalize its users
   
• AI search is growing more quickly than expected
   
• Ubisoft sales miss forecasts as Rainbow Six Siege glitch takes toll

• Amazon buys Bee AI wearable that listens to everything you say (The Verge)
   
• A vibe coding horror story: What started as 'a pure dopamine hit' ended in a nightmare (ZDnet)

This newsletter was compiled by Yuliya Chernova 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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