Good day. The National Venture Capital Association and its sister organization Venture Forward have filed a legal brief supporting Fearless Fund, the venture fund recently sued over its grant program for Black women entrepreneurs.

American Alliance for Equal Rights, an organization backed by conservative advocate Edward Blum, sued Atlanta-based Fearless Fund in the U.S. District Court for the Northern District of Georgia in August. AAER argued in a complaint that some of its members are excluded from applying to the program because of their race, and that because the program is open only to Black women, it violates an anti-discrimination statute in the Civil Rights Act of 1866. Fearless Fund said AAER’s claims should be denied by the court.

In a statement, Fearless Fund said that AAER “lacks legal standing to bring suit on behalf of its anonymous members.”

The lawsuit sparked concern among private investment firms and increased legal risks for firms with a diversity focus.

Blum engineered the lawsuit behind the U.S. Supreme Court’s June decision to end race-conscious affirmative action in college admissions.

The National Venture Capital Association, the venture-capital industry’s trade group, and Venture Forward on Sept. 1 filed the amicus brief backing Fearless Fund. Venture Forward supports NVCA in diversity initiatives. Amicus briefs are filed by parties that aren’t parties to lawsuits but that have an interest in their outcomes.

NVCA and Venture Forward argued in their brief that venture capital has historically excluded Black employees, particularly Black women. Too much venture capital has been concentrated in businesses on the coasts and run by nonminority entrepreneurs because of network effects and financial barriers, the brief said. The venture industry and the economy would benefit if it diversified its reach, the brief argued, adding that Fearless Fund’s program is critical in realizing that goal.

AAER asked the court for a preliminary injunction that would block Fearless Fund from selecting recipients for its next grants.

Fearless Fund filed a motion opposing the preliminary injunction for several reasons. “AAER’s claim is a full-fledged frontal assault on core First Amendment values—the rights of charitable foundations to donate to whom they want, when they want,” the fund said in a statement.

The NVCA and Venture Forward urged the court to deny the motion for a preliminary injunction.

The Black Economic Alliance Foundation, a nonprofit that promotes economic prosperity in the Black community, and the Lawyers’ Committee for Civil Rights Under Law, a legal advocacy group, have also filed amicus briefs supporting Fearless Fund.

And now on to the news...

Implementing AI. For companies deploying generative artificial intelligence, the idea of keeping a “human in the loop” is critical—but getting that human to fully understand that role can be a challenge, The Wall Street Journal reports.

• Companies say they are moving forward with AI use cases, especially in areas like code generation or summarizing documents or audio recordings, even as they acknowledge the technology’s potential for inaccurate results, bias and so-called hallucinations.
   
• Companies say they are addressing those challenges by ensuring that human workers check over everything the AI generates, but they are also concerned that those humans could start letting things slide or perhaps not fully understand the role they are required to play.

Meta Platforms is setting its sights on OpenAI, WSJ reports. The parent of Facebook and Instagram is working on a new artificial-intelligence system intended to be as powerful as the most advanced model offered by OpenAI, the Microsoft-backed startup that created ChatGPT, according to people familiar with the matter.

• Meta aims for its new AI model, which it hopes to be ready next year, to be several times more powerful than the one it released just two months ago, dubbed Llama 2.
   
• The planned system, details of which could still change, would help other companies to build services that produce sophisticated text, analysis and other output.

Instacart is targeting a valuation of roughly $8.6 billion to $9.3 billion in its imminent IPO, a fraction of what the grocery-delivery company was previously worth, in the latest sign of diminished investor enthusiasm for private growth companies, WSJ reports.

• Instacart is set to start marketing its long-anticipated initial public offering to investors as early as Monday, and plans to disclose the expected valuation range then, according to people familiar with the matter. 
   
• The expected valuation, on a fully diluted basis, is a far cry from the roughly $39 billion Instacart garnered in a fundraising round in 2021, the year it started laying the groundwork for a public listing.

Funds

500 Global raised $100 million for its third Southeast Asian early-stage fund, exceeding the target by $25 million. The firm also secured $43 million for a growth investment vehicle focusing on the same region.

European climate technology investor World Fund raised more than €50 million in fresh capital from institutional limited partners.

People

Greylock Partners promoted Seth Rosenberg to general partner. Prior to joining the firm in 2017, he was a product manager at Facebook (now Meta).

Fin Capital appointed Nicholas Cirella as general counsel and chief compliance officer. He was previously at Steadview Capital, Temasek and Farallon Capital Management.

Precision neuromedicine startup Rapport Therapeutics appointed Cheryl Gault as chief operating officer. She was previously COO at Cyclerion Therapeutics. Last month, Rapport said it raised $150 million in Series B funding.

Arduino, an Italy-headquartered open-source hardware provider, added $22 million in Series B funding, bringing the round total to $54 million. Lead investors included Anzu Partners and Large Ventures, CDP Venture Capital’s growth stage vehicle. Mario Branciforti of Large Ventures and Jimmy Kan of Anzu Partners will join Arduino’s board.

Tradeteq, a London-based marketplace for private credit and real assets, completed a $12.5 million A Plus funding round led by MS&AD Ventures.

Lydian, a Cambridge, Mass.-based climate technology startup, was seeded with a $12 million investment co-led by Congruent Ventures and Galvanize Climate Solutions. The company’s technology seeks to create fuels, plastics and other chemicals out of carbon dioxide and water instead of oil.

Spiritus, a Los Alamos, N.M.-based carbon removal startup, emerged from stealth with $11 million in funding led by Khosla Ventures.

Trident Digital Group, a Stamford, Conn.-based digital asset lender, landed $8 million in seed financing. New Form Capital and White Star Capital co-led the round, which included participation from CMT Digital.

Mindtrip, a Palo Alto, Calif.-based travel platform, closed a $7 million seed round led by Costanoa Ventures.

• Apple becomes the biggest U.S.-China pawn yet
   
• Google’s defense in landmark antitrust case hinges on lawyers who took on Microsoft
   
• It’s finally time to add some smart tech to your dumb home
   
• Artificial intelligence, steam closets, European dryers: The future of laundry has finally arrived
   
• Grindr loses nearly half its workforce after implementing return-to-office policy, union says
   
• IRS, with AI help, readies audits of large hedge funds, real estate firms
   
• Qualcomm inks deal with Apple to supply iPhone chips through 2026

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, Angus Loten and Marc Vartabedian.

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