Good day. The artificial-intelligence transition is eroding profitability for older private software companies. And that could be worthwhile in some cases.

Software companies have been busy altering their products and sales approach now that an “AI story” is needed for any venture-backed company to raise new capital and sell its products.

In some cases, that meant reversing the drive to profitability for now and likely delaying potential initial public offering plans.

A year ago, Ev Kontsevoy, co-founder and chief executive of Teleport, which provides identity services to secure computing infrastructure, was guiding the company toward being cash flow positive. Now, he is expecting to increase Teleport’s burn rate by tripling his engineering team next year to design new AI-related features.

“We decided to go on the offensive. It’s a once-in-a-lifetime opportunity,” Kontsevoy said.

Oakland, Calif.-based Teleport was founded in 2015 and raised $170 million in venture capital to date, with its last round in early 2022 valuing the company at $1.1 billion. The company has 241 employees.

Kontsevoy said the company’s efficiency metrics will decrease during this period, but the investment is worth it because customers are ready to use Teleport’s products once they are released.

In recent years, many venture-backed companies founded in the pre-AI era focused on becoming self-sustaining because venture capital was harder to come by. And that strategy bore fruit.

About a third of U.S.-based venture-backed tech companies with revenue in the $25 million and above range were profitable as of early this year, up from less than 15% in 2022, according to Silicon Valley Bank, a division of First Citizens Bank.

The AI transition, however, is putting pressure on this profitability mantra.

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And now on to the news...

IBM strikes $11 billion deal for Confluent. International Business Machines said Monday it agreed to acquire data-infrastructure company Confluent for around $11 billion. IBM agreed to pay $31 a share for Confluent. The Wall Street Journal reported Sunday evening that IBM and Confluent were in advanced deal talks.

• Confluent provides technology that helps manage streams of real-time data used in big artificial-intelligence models. An AI boom has boosted the need for its capabilities from companies in sectors including retail, technology and financial services.
   
• An acquisition of Confluent would be the biggest deal for IBM in recent memory as it repositions its business around AI. Last year, it agreed to buy cloud-software provider HashiCorp for $6.4 billion, in a deal that pushed it further into fast-growing cloud and AI offerings.

Anthropic and Accenture struck a three-year partnership to sell artificial-intelligence services to businesses, seeking to help them obtain a return on investment that has so far been elusive for many. The partnership also makes Accenture one of Anthropic’s three largest enterprise customers, Anthropic said. Accenture said it would train about 30,000 of its employees on Claude, Anthropic’s flagship AI model. The companies declined to share financial terms behind their partnership.

When OpenAI CEO Sam Altman made the dramatic call for a “code red” last week to beat back a rising threat from Google, he put a notable priority at the top of his list of fixes. The world’s most valuable startup should pause its side projects like its Sora video generator for eight weeks and focus on improving ChatGPT, its popular chatbot that kicked off the AI boom. In so doing, Altman was making a major strategic course correction and taking sides in a broader philosophical divide inside the company—between its pursuit of popularity among everyday consumers and its quest for research greatness.

People

New York-based AI contract startup SpotDraft, appointed Alon Waks as chief marketing officer and Amit Sharma as chief financial officer.

Saviynt, an identity and access management startup, raised $700 million in a Series B funding round. The round, which was led by private-equity firm KKR, boosts the Los Angeles-based startup’s market valuation to about $3 billion. The other two investors were Sixth Street and Carrick Capital Partners. The raise comes seven years after Saviynt’s previous funding round, a $40 million Series A led by Carrick. 

Haven Energy has raised a total of $40 million in equity and debt financing to install more solar panels in California homes with batteries that it leases. Giant Ventures led a $15 million investment that was also backed by the California Infrastructure and Economic Development Bank and Comcast Ventures, among other investors. Turtle Hill Capital, a private-credit firm focused on clean energy, provided an additional $25 million in debt, Haven said.

Ostium, a financial tech startup, raised $24 million in new funding, including a $20 million Series A round co-led by General Catalyst and Jump Crypto.

Aether Biomachines, which combines artificial intelligence and robotics to design proteins that act like molecular assemblers, said it has raised $15 million in additional Series A financing led by Tribe Capital. The new financing brings its total funding to $64 million. Aether plans to use the funding in part to expand its Protein Function Model to rapidly design and optimize proteins for industrial and environmental applications.

• The Accounting Uproar Over How Fast an AI Chip Depreciates

• Trump Says U.S. Will Allow Nvidia H200 Chip Sales to China, Get 25% Cut

• Paramount Made a Hostile Bid for Warner After Netflix Deal. What Happens Next?

• Maker of ICE-Tracking App Says Trump Officials Violated Free-Speech Rights

• Nvidia Takes Top Spot in the List of Best-Managed Companies of 2025

• Tiger Global launches new fund eyeing $2.2 billion raise as it takes more disciplined approach (CNBC)
   
• AI battle for India heats up with radical approach: free access (Bloomberg)
   
• Here’s what you should know about launching an AI startup (Wired)

This newsletter was compiled by Marc Vartabedian and Matthew Strozier.

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.