Good day. Venture investors are going bonkers for a select few startups, mostly in artificial intelligence, giving them outsize valuations straight out of the gate in some cases.

“A lot of unicorns are not created, they are born unicorns,” said Mar Hershenson, founding managing partner of Pear VC.

This year, AI lab Thinking Machines, AI healthcare startup Tala Health and Periodic Labs, which is developing an AI scientist, received seed funding at billion-dollar valuations, according to data provider Crunchbase.

The “early unicorn” count, which includes companies reaching a billion-dollar valuation in a seed or Series A round, reached its apex in 2021, when 34 such deals took place, according to Crunchbase. That was also the year when the most unicorns across all stages were created, causing many issues for their venture backers when the market turned.

Seed and Series A companies valued at $1 billion or more reached their highest share of all new unicorns last year, accounting for more than 20% of unicorn births, per Crunchbase’s data. That share stood at about 11% in the first three quarters of this year, well above average since 2013.

And it’s not like AI startups are particularly efficient businesses. AI companies are burning more cash per dollar of revenue, and generating less revenue per employee, than non-AI companies, for example, according to a report by Silicon Valley Bank.

Clearly investors are betting that with sufficient funds the right teams will see growth rates and outcomes that will justify those high-priced tickets. Or maybe it’s just FOMO.

And now on to the news...

AI ROI. Few companies today have widely deployed AI agents and gotten value back, one of many reasons that concerns are growing over the astronomical spending on artificial intelligence. But don’t overlook those early adopters who say the payoff is looking good, according to WSJ CIO Journal's Steven Rosenbush.

• The pack could appear prudent in the not-so-distant future for waiting to see how agents mature, or the first movers might gain a long-term, sustainable advantage. "I have tried to be open to either outcome, or some combination of the two," Steven says. It could be that the vanguard crew, the fast followers and the laggards all have good reasons for taking different approaches, and that as long as they execute well on their own time frames, things will work out.
   
• But now, as more AI agents come out of the pilot stage, there is evidence to support the early adopters. Steven had the opportunity to speak with two of them last month at the Gartner IT Symposium/Xpo in Orlando, Fla., where he participated in a panel pointedly called “Agentic AI: Is it Real?”

The finances of Silicon Valley’s two largest artificial-intelligence startups show their diverging approaches to the AI boom, with Anthropic on a pace to turn a profit far more quickly than rival OpenAI, according to documents obtained by The Wall Street Journal. Anthropic, which has a growing number of business users because of the capabilities of its Claude chatbot in coding and other arenas, expects to break even for the first time in 2028, the documents show. By contrast, OpenAI forecasts its operating losses that year to swell to about $74 billion—or roughly three-fourths of revenue—thanks to ballooning spending on computing costs. The ChatGPT-maker also expects to burn through roughly 14 times as much cash as Anthropic before turning a profit in 2030.

Yann LeCun, the artificial-intelligence pioneer who led Meta Platforms’s AI efforts for more than a decade, has talked to associates about leaving Meta and launching a startup, according to people familiar with his plans. As part of those efforts, LeCun has recruited colleagues and spoken to investors, the people said. The new startup would focus on developing so-called world models, a different path from the large language models that Meta is currently pursuing as an avenue to superintelligence, or AI that is smarter than humans.

People

Decisive Point, an investor focused on national security, industrial capacity and energy independence, appointed Matthew Williams as a partner. He previously served in multiple combat deployments with the U.S. Army Special Forces.

Intrepid Automation, a creator of modular, industrial-scale additive manufacturing systems, appointed Rich Carone as the company’s new chief executive. He previously served in leadership roles at Burke Porter Group and Korvis Automation.

Exits

Montreal-based music and video distributor Stingray Group agreed to acquire TuneIn, a live audio streaming provider, for up to $175 million.

Wonderful, an Amsterdam-based startup building an enterprise agent platform, landed $100 million in Series A funding. Index Ventures led the investment, which saw participation from Insight Partners, IVP, Bessemer Venture Partners and Vine Ventures.

Sweet Security, a Tel Aviv-based enterprise cloud protection platform, scored $75 million in Series B funding. Evolution Equity Partners led the round, which included participation from Munich Re Ventures, Glilot Capital Partners and Key1 Capital.

Tenzai, a Tel Aviv-based penetration testing platform using agentic AI, launched out of stealth with $75 million in seed funding from investors including Greylock Partners, Battery Ventures and Lux Capital.

Beside, an AI receptionist startup, has raised $32 million in Series A and seed funding from investors including EQT Ventures and Index Ventures.

Attentive.ai, a startup developing AI-based software for preconstruction and field-service workflows, secured $30.5 million in Series B financing. Insight Partners led the round, which included contributions from Vertex Ventures, Tenacity Ventures and InfoEdge Ventures.

Joy, a San Francisco-based AI-powered parenting platform, collected $14 million in Series A funding co-led by Forerunner Ventures and Raga Partners.

Uare.ai, a Palo Alto, Calif.-based startup building intelligent digital twins, was seeded with a $10.3 million investment led by Mayfield and Boldstart Ventures.

Theo Ai, a Palo Alto, Calif.-based predictive engine that forecasts the outcome of legal disputes, added a $3.4 million investment led by Run Ventures.

• The AI Cold War That Will Redefine Everything
   
• OpenAI’s CFO on the Power of Getting Personal
   
• Private Credit Gives Large Firms’ Quarterly Fundraising a Boost
   
• Three AI Megadeals Are Breaking New Ground on Wall Street

• How Founders Can Prepare for Their Late-Stage Fundraises From the Start (TechCrunch)
   
• The Little-Known Search and Browser Startup Generating $100 Million in Annualized Revenue (The Information)

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.