Good day. The Trump administration’s move to prevent Harvard University from enrolling foreign students (blocked for now by a judge) highlights a vulnerability international students face in the U.S. that could have repercussions on entrepreneurship, since foreign students become a sizable category of tech founders.

“Universities are this generation’s Ellis Island,” said Manan Mehta, founding partner at Unshackled Ventures, a venture firm that invests in startups created by immigrants. Roughly two-thirds of Unshackled’s portfolio of more than a hundred companies have founders who had been international students in the U.S., he said.

A quarter of unicorns, or venture-backed startup companies valued at $1 billion or more, had a founder who had attended a U.S. university as an international student, according to a study by the National Foundation for American Policy, which looked at the unicorn list as of May 2022. The list included founders of companies such as data company Databricks and cybersecurity company Rubrik, which has since gone public. NFAP is a nonpartisan nonprofit that researches trade, immigration, education and other issues.

Foreign students have strong potential to launch tech startups in part because immigrants, overall, are more likely to start businesses than those born in the U.S., and because they tend to study science, technology, engineering and math, or STEM, according to a paper by the Pioneer Institute for Public Policy Research, a think tank that supports free enterprise.

Mehta said Unshackled portfolio founders are persevering despite the uncertainty. A recent survey the firm conducted showed that some three-quarters of its founders feel optimistic about building businesses in the U.S., and that most feel confident about their immigration status.

“I was a little bit surprised, pleasantly, at how resilient our founders are,” Mehta said. Many immigrants are accustomed to immigration uncertainty. That has been true for decades, not just under the current administration, Mehta said. While he would like to see policies put in place to support immigrant entrepreneurs, Mehta said he still believes many will continue to seek out opportunities stateside.

And now on to the news ...

Tax hikes on endowments. House Republicans’ plan to raise taxes on university endowments could drive the biggest shift to endowments’ investment strategies in a generation, The Wall Street Journal reports.

• The GOP plan is part of the broader Trump bill that passed the House last week and now moves to the Senate for approval. If the bill passes, it would lift the tax on investment income for some of the biggest endowments from 1.4% to 21%, in line with what U.S. corporations pay. Other schools would see their taxes jump by significant amounts as well.
   
• Under the new tax plan, universities might pull back from strategies that regularly generate short-term gains and shift money into other investments such as private equity, which generally don’t realize gains for years.

A week after one of America’s largest self-driving truck companies promised the U.S. government it would stop sharing sensitive technology with Chinese partners, TuSimple transferred a trove of data to a Beijing-owned firm, WSJ reports. 

• “They want a lot of details,” Xiaoling Han, a U.S.-based TuSimple Holdings employee, said to a colleague. A leading Chinese commercial-truck manufacturer, Foton, sought the data from TuSimple’s many test drives around Texas. “It is pretty time-consuming,” Han wrote in a February 2022 chat exchange seen by The Wall Street Journal.
   
• TuSimple was a leader in the global race to develop self-driving trucks that could solve chronic driver shortages, make freight-hauling cheaper and bolster military operations. Founded by two Chinese entrepreneurs with money from a Chinese business mogul, the San Diego-based company set a record when its truck traveled 80 miles in Arizona without a human driver.

Funds

Zeal Capital Partners closed its Zeal Fund II at $82 million to invest across sectors including financial technology, healthcare and the future of learning and work. The new vehicle brings the Washington, D.C.-based firm’s total assets under management to $186 million across three funds.

EnduroSat, a Bulgaria-headquartered space infrastructure builder, picked up a €43 million investment led by Founders Fund.

Cerby, an identity security automation platform, raised $40 million in Series B financing. DTCP led the round, which included participation from Salesforce Ventures, Two Sigma Ventures and others.

Pallet, a San Francisco-based AI workforce provider for supply-chain operators, raised $27 million in Series B funding led by General Catalyst.

OpenFX, a cross-border payments startup, emerged from stealth with $23 million in funding led by Accel.

Infinity Constellation, a New York-based company that builds and scales AI-native startups, launched from stealth with $17 million in funding. Freestyle was among the investors, with General Partner Maria Palma joining the board.

Amplitude Studios, a Paris-based game developer, scored €12 million in Series A funding led by Griffin Gaming Partners.

SpAItial, a startup helping AI understand and generate 3D environments, emerged from stealth with $13 million in seed funding led by Earlybird Venture Capital.

Velocity, a London-based stablecoin infrastructure platform, collected $10 million in pre-seed funding led by Activant Capital.

Sequence, a startup developing a financial management platform for consumers and small businesses, added $7.5 million in funding led by Aleph and Emerge.

Traceloop, a Tel Aviv-based startup bringing automated evaluation and monitoring to generative AI development, closed a $6.1 million seed round led by Sorenson Capital and Ibex Investors.

• Salesforce strikes $8 billion deal for Informatica
   
• TSMC to set up chip design hub in Germany
   
• EU investigates major porn sites over child safety
   
• Rural internet is still so bad, some states are turning to outer space
   
• Temu owner PDD’s profit slides as woes in the U.S. and China sink in

• Elon Musk’s Neuralink raises fresh cash at $9B valuation (Semafor)
   
• The math tutor and the missing $533 million (Rest of World) 

This newsletter was compiled by Yuliya Chernova, 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, Angus Loten and Marc Vartabedian.

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