Good day. Venture capitalists’ appetite for artificial-intelligence deals seems insatiable. Many say it's the investment opportunity of a lifetime, and in my latest article, I described a cutthroat dealmaking environment where deals could be won—and lost—in mere days. The exuberance shows no signs of slowing down, begging the question: Is there any limit to the AI boom? At what point will new investments be late to the party? Please email responses to vcnews@wsj.com.

Last week, we asked if megafunds are distorting early-stage investing and if high valuations are making venture an even riskier bet. Responses have been edited for length and clarity.

• Rob Biederman, managing partner at Asymmetric Capital Partners: “It's very clear that early-stage technology investing has bifurcated into two disparate markets: early-stage firms managing small pools of capital and manicuring each individual investment; and megafunds that must canvas and index the market. Boutique firms provide first capital in and get the largest rewards, creating a curated pipeline for the megafunds to follow.”
   
• Nicolas Sauvage, president of TDK Ventures: “Earlier this year, I shared how VC is forking into two asset classes: smaller funds (~$200–$300 million or less) and much larger ones. Fee structures drive very different behaviors: Smaller funds often deliver true white-glove attention, while larger funds can mobilize broader platforms and services. These aren’t just different models of support—they are different asset classes, driving different levels of risk and return.”
   
• Clelia Warburg Peters, managing partner at Era Ventures: “Megafunds function almost like index funds, using momentum and market signals to identify the companies the market suggests will be winners. This creates opportunities for smaller, specialized funds to pursue the kind of artisanal investing that drove historic venture returns. For early-stage investors, the winning strategy lies in going even earlier.”
   
• Leslie Feinzaig, founder and general partner at Graham and Walker: “Megafunds are not outliers—they’re a new asset class. Remove them from the analysis and you’ll see a clear, consistent picture of a real, thriving venture ecosystem. VC has always meant small, early, contrarian, alpha-seeking bets uncorrelated with public markets. Megafunds are not picking contrarian bets, they’re picking consensus ones.”

And now on to the news...

AI safety. The Federal Trade Commission plans to study the impact of artificial-intelligence chatbots on children’s mental health and request documents from OpenAI and other tech companies, a signal that regulators are growing concerned about the unintended consequences of the AI boom. The antitrust and consumer-protection regulator is expected to evaluate whether ChatGPT and other chatbots are harming children and affecting their mental health, administration officials said. The Trump administration and Congress are under pressure from parents and advocacy groups to protect children using social-media platforms and AI chatbots.

American soldiers are starting to carry artificial intelligence in their pockets and rucksacks, the result of a $98.9 million contract between the U.S. Army and San Francisco startup TurbineOne. A four-year-old startup still in its infancy for defense work, run by a former Navy nuclear engineer turned tech executive and venture capitalist, TurbineOne isn’t the kind of company that has historically had much success winning business from the Pentagon. But a series of directives from Secretary of Defense Pete Hegseth has pushed the armed services to buy more commercial software and shed old and expensive weapons systems in favor of drones and AI.

EBay, a survivor of the first generation of internet companies, is trying to remake itself for the age of artificial intelligence. Looking to boost its business and shed its reputation as an online auction house, the company is making use of AI agents, encouraging engineers to use AI to write code and launching AI features that personalize buying and simplify selling.

Funds

Biotech-focused investor Atlas Venture closed its third Opportunity Fund with $400 million in commitments.

People

Growth equity firm Alpha Partners appointed Gal Gitter as a partner. He was formerly head of Ibex's Israel Growth Fund.

Rewards app Fetch appointed Ori Schnaps as chief technology officer. He most recently served as head of core product engineering at Reddit.

Healthcare intelligence provider Komodo Health promoted Miles Ennis to chief operating officer. He joined the company as chief revenue officer last year.

Exits

Atlassian agreed to purchase AI web browser developer the Browser Co. for about $610 million in cash.

EnergyHub, a virtual power plant technology provider, acquired electric vehicle-telematics platform Bridge to Renewables.

AI cloud company CoreWeave agreed to acquire OpenPipe, a platform for training AI agents.

Quantinuum, a Broomfield, Colo.-based quantum computing startup, picked up a $600 million investment at a pre-money valuation of $10 billion. Investors included Honeywell, Quanta Computer, NVentures and QED Investors.

You.com, a Palo Alto, Calif.-based enterprise AI infrastructure startup, scored $100 million in Series C funding at a $1.5 billion valuation. Cox Enterprises led the round, which included participation from Georgian, Salesforce Ventures and Norwest.

Augment, a San Francisco-based AI productivity platform for logistics, secured $85 million in Series A financing. Redpoint Ventures led the round, which included additional contributions from 8VC, Shopify Ventures and Autotech Ventures.

Exa, a San Francisco-based AI search infrastructure startup, landed $85 million in Series B funding at a $700 million valuation. Benchmark led the investment, which included participation from Lightspeed Venture Partners, NVentures and others. Peter Fenton from Benchmark will join Exa’s board.

ViCentra, an insulin delivery startup based in the Netherlands, completed an $85 million Series D round led by Innovation Industries.

Mojo Vision, a Cupertino, Calif.-based micro-LED platform technology provider, closed a $75 million Series B Prime round. Vanedge Capital led the investment, which included participation from New Enterprise Associates, Fusion Fund and Khosla Ventures.

Cato Networks, a network security company, added $50 million in Series G funding from Acrew Capital, bringing the round total to $409 million. The company also said it acquired Aim Security.

Etherealize, a startup building Ethereum-based products and infrastructure for the financial sector, raised a $40 million funding round led by Electric Capital and Paradigm.

Sesh+, an Austin, Texas-based tobacco-free nicotine pouch brand, has raised over $40 million in total funding, including a recently closed round from investors including 8VC.

Recall.ai, a San Francisco-based startup building an API for meeting recordings, closed a $38 million Series B round at a $250 million valuation. Bessemer Venture Partners led the funding, which saw additional support from HubSpot Ventures and Salesforce Ventures.

Sola Security, a cybersecurity AI assistant provider, fetched a $35 million Series A round. Led by S32, the funding included participation from M12, New Era Capital Partners and others.

• How Effective Is Corporate Cybersecurity Training? Not Very, It Seems

• xAI’s CFO Steps Down, Latest in a String of Executive Departures

• Paramount Calls Employees Back to Office Five Days a Week

• Amazon’s Satellite Internet Venture Signs Up Its First Airline

• Is It Safe to Upload Your Photos to ChatGPT?

• How to Make Sure ChatGPT Doesn’t Make You Dumber

• Peter Thiel-backed fintech Brex plots European expansion in push for IPO (Financial Times)
   
• OpenAI announces AI-powered hiring platform to take on LinkedIn (TechCrunch)
   
• Crypto boosters Stripe and Paradigm tease payments blockchain (Bloomberg)

This newsletter was compiled by Matthew Strozier 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 and Marc Vartabedian.

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