Good day. Cerebras Systems' recent initial public offering and the expected IPOs of Anthropic and OpenAI showcase the explosive returns possible through investments in artificial intelligence. For this week's question, we want your view on AI's impact on venture firms' fundraising. How has the AI revolution affected limited partners' interest in venture capital and their expectations for this sector? Please email vcnews@wsj.com.

Last week, we asked how timelines are changing in the venture market, whether in terms of deal processes, revenue growth or even pivots and shutdowns. Here are edited excerpts of responses:

• Manthan Shah, principal at WestBridge Capital: “We are witnessing a historic rewriting of the rules for company-building and venture capital. While this shift was already underway, VC expectations regarding market size, growth rates and time-to-scale have accelerated massively. Consequently, we will see larger fundraises, higher valuations and more audacious bets. This landscape will yield one or two massive breakouts, but a bunch of companies that will also lose money. As the divide widens, identifying the winners becomes critical.”
   
• Shahin Farshchi, partner at Lux Capital: “Hard tech still takes years to build, while capital now moves in days. Most deep tech companies quietly starve; very few break out. We underwrite a decade-long technical bet on the founder’s schedule. That means intimately knowing the founders and the tech before there’s a pitch, and lining up strategic partners to create optionality post-investment. Quick to underwrite, quick to act, which takes more preparation than ever.”
   
• Raja Ghawi, partner at Era Ventures: “If anything, we've grown more diligent and cautious in this funding environment. Most use cases are quite competitive, much of the revenue is overstated, and fast growth is often offset by future churn. That said, some valuable businesses will be built in this moment for sure. The real question for VCs is, where is alpha today? Particularly, how much alpha is left in the current AI hype cycle versus other, likely meaningfully different, areas of innovation?”

And now on to the news...

‘Self-improvement’ risk. Anthropic is calling for top artificial intelligence labs to weigh slowing the pace of development, suggesting that AI systems are advancing so rapidly that they may soon be able to improve themselves without human intervention in ways that could pose significant societal risks. The ability to slow global AI development would “likely be a good thing,” the company said Thursday in a blog post that disclosed internal data documenting how quickly its most advanced models are improving.

• The post noted that model advances appear to be on a path toward “recursive self-improvement,” when AI systems can improve on their own without human intervention.

Waymo is set to repurpose its old electric-vehicle batteries as storage for solar power. The self-driving car company is partnering with B2U Storage Solutions in an effort to reuse thousands of its EV batteries, finding a new use for the old batteries as large-scale energy-storage systems that can stash power to shore up the electric grid. Waymo isn’t the first car company to recycle its batteries with B2U, but its fleet of self-driving cars go through EV batteries far more frequently than regular electric vehicles because the autonomous ride-hail cars rack up more miles more quickly.

Prime Minister Mark Carney’s government unveiled Thursday a new national AI strategy dubbed “AI for All” that includes plans for a 500 million Canadian dollar fund, equivalent to about US$360 million, aimed at closing what it called a scale-up capital gap facing the country’s most promising AI companies. The Canadian Tech Growth Fund will offer flexible capital and investment support, while also providing a platform for Ottawa to at times take equity stakes in the most promising AI firms. 

WSJ Sports: The Next Sports Economy will bring together investors, team owners, executives and advisers at Jazz at Lincoln Center’s Frederick P. Rose Hall in New York July 15-16 for conversations on the forces transforming the business of sports. Join leaders from across finance, media, ownership and operations as they sit down with WSJ reporters to explore the future of investment, governance and value creation across the global sports landscape.

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Enterprise intelligence platform Starburst appointed Paras Malhotra as chief information security officer. He was previously senior director of information security at Datadog.

Willow Wealth, a platform for retail private markets investing, appointed Tom Williams as chief investment officer. He joins the company from Morgan Stanley's Outsourced Chief Investment Office.

Suno, a platform that lets users create new songs by prompting AI, landed more than $400 million in Series D funding, bringing the company’s valuation to $5.4 billion. Bond Capital led the investment, which included participation from Menlo Ventures, Union Square Ventures, Alkeon Capital Management, Lightspeed Venture Partners and others.

OQC, a U.K.-based startup building quantum computers and a quantum-AI data center platform for enterprise and government customers, closed a £260 million (about $350 million) Series C round. Bullhound Capital led the funding, which included participation from Alpha Edison, Pentland Ventures, Adaptive Capital Partners, Chevron Technology Ventures and others.

Apex, a Los Angeles-headquartered manufacturer of satellite bus platforms used for  constellation deployments, raised over $200 million in new growth funding, bringing the company’s valuation to $2.3 billion. Investors included Glade Brook Capital Partners and Washington Harbour Partners.

Factorial, a Barcelona-based AI workforce operations platform, completed a $150 million Series D round at a valuation of $2.5 billion. General Catalyst led the funding, which included contributions from Atomico and Four Rivers.

Wordsmith, an Edinburgh-based startup building an AI platform for in-house legal teams, picked up a $70 million Series B round from investors including Highland Europe and Index Ventures.

Board, a New York-based maker of a face-to-face game console, secured $20 million in Series A funding. Union Square Ventures led the investment, with General Partner Michael Mignano joining the company’s board.

• Meta Keeps Delaying the Release of Its New AI Model to Developers

• U.S. Officials Discuss Taking Financial Stakes in AI Industry

• Tech’s Biggest Bull Was in Despair. An AI Spree Has Him Back on Top.

• Phoenix Is a Data-Center Mecca—and Test Case for How to Pay for AI’s Power Needs

• Foxconn, Intel Team Up to Develop AI Infrastructure

• How AI Is Being Trained to Do Your Job ​🎧​

• Is Silicon Valley ready to put robots in people’s homes? Hello Robot is. (TechCrunch)
   
• Jeff Bezos is funding a wild hunt for the brain’s ‘core algorithm’ (Wired)

This newsletter was compiled by Matthew Strozier and Zachary Cole.

Share your tips, comments and questions: vcnews@wsj.com

The team: Matthew Strozier, Yuliya Chernova, Brian Gormley and Sarah Klearman.

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