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AI-Era Venture Funds Are Following a SaaS Pattern
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By Matthew Strozier, WSJ Pro
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Good day. Venture capitalists often say the artificial-intelligence revolution will be a supercycle resembling the internet in its scale. But that doesn’t mean AI investment will play out the same way.
In a recent report, private-market investment firm Hamilton Lane noted some key differences between venture investments in the AI and dot-com eras. “The dot-com period, for all its hype, never had great overall performance,” the report says. “There were some big winners but, overall, it was a dismal investment experience.”
While it is early, Hamilton Lane says this AI investment wave most closely resembles the software-as-a-service era from 2010 to 2018. The AI-era data is drawn from 2023 through the third quarter of last year.
Hamilton Lane found that the median internal rate of return for venture funds turned positive in the AI era after about two years, roughly the same time it took funds from the 2010-2018 software era. Both eras were far ahead of IRR for the 1997-2006 internet years.
Hamilton Lane also looked at funds from the 2007-2009 financial crisis and from 2019-2021, which it labeled the Covid phase.
Fast-growing revenue at AI startups helps explain why returns have been good early in this cycle, the Hamilton Lane report says: “The reality is that many of these companies have more and faster-growing revenue streams than we have seen in prior, venture-oriented cycles.”
Miguel Luiña, managing director and co-head of venture capital and growth equity at Hamilton Lane, said AI, in terms of initial expectations, presents an opportunity similar to the dot-com revolution.
But when it comes to traction for startups, he said the AI cycle is much closer to the SaaS cycle, in which the quality and the scale of the revenue surpassed expectations from early on. With AI, he said, “even though there were high expectations coming into it, the revenue streams are really kind of exceeding expectations.”
Still, Luiña said, it’s early.
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And now on to the news...
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Plaid headquarters in San Francisco. PLAID
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Biding its time. Stock-market volatility has largely upended what was supposed to be a blockbuster year for initial public offerings, but Plaid’s finance chief says her company can afford to wait for the right moment to go public. As IPO preparations continue, Seun Sodipo is focused on growth, and the fintech company is seeing results: Annual recurring revenue last year climbed 40% from the year earlier, to more than $500 million. That’s up from a pace of 27% in 2024. Sodipo, who joined Plaid in October, previously served as finance chief at Glossier, and before that held senior roles at fintech company Stripe. Here are edited excerpts of a recent conversation she had with CFO Journal.
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This Ex-Physicist Might Be the Future of Music. He’s Also Enemy No. 1
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The scariest man in music these days is a trim, antsy, matter-of-fact ex-physicist named Mikey Shulman. He didn’t have enough talent to make it beyond college jam bands. But he does have a gift for artificial intelligence and a vision for music where talent matters less. Does music generated by AI have the same value as that created by the human spirit? This is the question hanging over Shulman, the co-founder and CEO of AI music-generator Suno, who thinks anyone with a laptop should be able to create music—piano or guitar lessons be damned.
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Private Credit's Software Industry Exposure Is Bigger Than Advertised
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Many private-credit fund managers are playing down their exposure to software as fears spread about threats from artificial intelligence. A detailed analysis revealed four large funds marketed to individual investors by Apollo Global Management, Ares Management, Blackstone and Blue Owl Capital have more exposure to the software industry than their filings suggest.
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People
Linear Health Sciences, a developer of proprietary breakaway safety valve technology for medical tubing, appointed Robert C. Robbins as chief medical officer. He most recently served as president of the University of Arizona.
Luma Health, an operational AI platform for healthcare organizations, appointed Puneet Arora as chief growth officer.
Guideway Care, a startup that guides patient behavior for improved outcomes, named Farooq Anjum as chief AI & systems officer.
Exits
Autodesk has agreed to acquire construction workforce management company Rhumbix.
Rapid7 acquired agentic AI security platform Kenzo Security. The cybersecurity company said adding Kenzo would enhance its Rapid7 Command Platform.
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Keynes, a connected television advertising platform, scored a $40 million minority investment from Volition Capital.
Notch, a New York-headquartered AI platform for regulated industries, picked up a $30 million Series A round. Headline led the investment, which saw participation from Lightspeed Venture Partners and others.
Blossom Health, a New York-based AI operating system for psychiatrists and psychiatric nurse practitioners, raised $20 million in combined seed and Series A funding. Headline led the Series A portion, which included participation from Village Global, TA Ventures, Operator Partners and Correlation Ventures. Mathias Schilling, managing partner at Headline, will join the company’s board.
Scalvy, an Austin, Texas-headquartered distributed power delivery startup, landed $13.9 million in Series A funding from investors including Silicon Badia, Azolla Ventures, Climate Capital and SkyRiver Ventures.
Cauldron Ferm, an Australia-based biomanufacturing startup, secured nearly $13.3 million in Series A2 funding. Main Sequence Ventures led the investment, which included contributions from Horizons Ventures and SOSV.
Conntour, an AI video intelligence platform, was seeded with a $7 million investment from General Catalyst, Y Combinator, SV Angel, Liquid 2 Ventures and others.
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Jeff Dean at an Nvidia conference in San Jose, Calif., this month. JASON HENRY FOR WSJ
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