Good day. It’s that time again: Venture capitalists—never short on takes about where the market is headed—have predictions for the new year.

Predictably, responses contained a healthy dose of optimism about artificial intelligence. But investors also warned broadly that 2026 could be the year the market begins to weed out many young application-layer AI startups. Startups with thin margins and little market edge could meet their demise, investors said.

At the same time, investors said 2026 is the year AI platforms and agents transition from being mere shiny dashboards and nice-to-have chatbots to competent autonomous workers managing entire workflows. The measure of success will shift from time spent in AI apps to the number of tasks the AI actually completes.

Venture capitalists also addressed the industry’s macro issues, with some expressing polarized views on its financial health. Some said a surge in exits is in store. Others fear a lackluster initial public offering market could continue to sap fund performance. Secondary markets—where employees and early investors can sell shares of still-private companies—could be the real winner, one investor forecasts.   

Here are edited excerpts of some of the predictions that WSJ Pro Venture Capital received via email. 

And now on to the news...

Hurdles for climate-technology investors. Investors in climate technology have butted up against changing regulations, a loss in support for environmental policies and the growth of artificial intelligence. In 2026, they are expecting more of the same, but there is some hope for the sector if it can adapt.

• “It’s been hard to be in an environment where climate has become a dirty word,” said Amy Duffuor, co-founder and general partner of Azolla Ventures, a Cambridge, Mass.-based early-stage investor. Duffuor said that many climate startups have struggled in 2025 to attract capital, with the shift in sentiment from the U.S. government hitting support for the sector.
   
• She said that a number of investors have renamed funds to be less climate specific, focusing instead on resilience, impact and adaptation. Others have pulled back entirely.
   
• Duffuor said that many climate startups have struggled in 2025 to attract capital, with the shift in sentiment from the U.S. government hitting support for the sector.

Workers at Butterfly Effect, an artificial-intelligence startup with Chinese roots, gathered in March to count down to the launch of a demo of a new AI-powered tool called Manus. Released in the shadow of DeepSeek, a China-built AI model that rocked the U.S. market last January owing to its advanced capabilities and low cost, Manus became an overnight hit. The product, which used models from Anthropic and others to produce detailed research reports and perform a host of other tasks, showcased the talents of China’s entrepreneurs and startups in a burgeoning global battle for AI supremacy. The assumptions that underlie the East-West divide were turned upside down Monday when Meta Platforms said it was buying Manus, which is now based in Singapore. The deal, which was valued at $2.5 billion, according to people familiar with the matter, included a $500 million retention pool for the startup’s employees, one of the people said.

Sam Altman wants OpenAI to have an app store to rival Apple’s. Early tests suggest he’s got a long way to go. If ChatGPT’s more than 800 million users want to buy groceries from Instacart, create a playlist with Spotify or find a hike on AllTrails, now they can do so inside the chatbot instead of opening an iPhone app. That is a baby step toward what some argue could be a massive shift in how we use devices in the age of artificial intelligence: Having chatbots complete tasks instead of typing into smartphone apps. In theory that threatens Apple’s impregnable walled garden. Luckily for the iPhone maker, traditional apps are too capable to be replaced quickly. OpenAI’s app strategy, launched this fall, is reminiscent of the early days of ChatGPT: An occasional wow moment surrounded by dysfunction, according to Wall Street Journal tests. 

Champ Titles, a Cleveland-based provider of digital technology to motor vehicle agencies, scored $55 million in new funding from investors including Point72 Ventures.

Biobeat Technologies, an ambulatory blood pressure monitoring system developer, closed a $50 million Series B round from investors including Ally Bridge Group and OrbiMed Advisors. Steven Plachtyna of Ally Bridge and Dina Chaya of OrbiMed will join the company’s board. Biobeat has operations in Israel and Boca Raton, Fla.

Lucidean, a Santa Barbara, Calif.-based startup developing data center optics technology, secured more than $18 million in seed funding co-led by Entrada Ventures and Koch Disruptive Technologies. The company also named James Raring as chief executive officer.

Traini, a Palo Alto, Calif.-based pet emotional intelligence startup, landed a $7.5 million investment from NYX Ventures and others.

• Tech Startups Are Handing Out Free Nicotine Pouches to Boost Productivity 
   
• Nvidia Is Getting Creative as Options to Use Its Cash Flood Narrow
   
• OpenAI Is Paying Employees More Than Any Major Tech Startup in History
   
• After a Year of Blistering Growth, AI Chip Makers Get Ready for Bigger 2026
   
• How Meta’s Reels Became a $50 Billion Business

• Fears mount that U.S. federal cybersecurity is stagnating–or worse (Wired) 
   
• Why AI didn’t transform our lives in 2025 (New Yorker)
   
• The new billionaires of the AI boom (New York Times)
   
• The 14 AI terms you couldn’t avoid in 2025 (MIT Technology Review)

This newsletter was compiled by Marc Vartabedian, Zachary Cole and Brian Gormley. 

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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