Good day. As artificial intelligence sweeps across the biotechnology industry, top regulators in the U.S. and Europe have laid down principles for its responsible use in drug development—guidance venture capitalists can use to evaluate startups.

The Food and Drug Administration and European Medicines Agency last month issued the “Guiding Principles of Good AI Practice in Drug Development,” designed to lay a foundation for developing good practices for applying the technology.

The document highlights AI's potential, such as reducing reliance on animal testing by improving predictions about medicines’ efficacy and toxicities.

But it also calls out the importance of adhering to ethical, legal and other standards; reevaluating AI tools to ensure their effectiveness; and using plain language to explain to intended audiences about how the technology is used and its performance and limitations.

Companies that adhere to these guidelines will likely have more success securing regulatory approval for drugs developed with AI. Venture investors, for their part, can use them when deciding where to put their money.

“The FDA has handed VCs a filter for separating real AI drug discovery and development from PowerPoint science,” said Dr. Rahul Gupta, president of GATC Health, which uses AI to predict how drugs will perform in the human body, and the White House’s former director of national drug control policy.

And now on to the news...

IPO outlook. Investors have been thirsting for initial public offerings, and big names including SpaceX, OpenAI and Anthropic are readying debuts for later this year. The momentum created an opening for dozens of smaller, mainly private-equity backed software firms that had been waiting in the wings. Then fears that AI will upend the software industry sent stocks tumbling earlier this month. Bankers and investors now expect the few mega-offerings to dominate the year. Most private tech companies—many that have spent years biding their time—will be forced to keep waiting it out.

Early-stage cybersecurity startups dabbling with artificial intelligence are drawing investors at the highest rate since a postpandemic boom, as demand grows for smart tools to combat smart attacks. Cyber startups worldwide landed more than 1,000 seed-funding deals between October and December, a 41% increase from the same period a year earlier, and the highest number since late 2023, startup-development firm DataTribe said.

AI use is no longer optional if you work in tech. While many sectors are still experimenting with artificial intelligence, the tech industry has moved to the next phase: tracking their workers’ use of AI tools—and enforcing it if they have to. From small startups to giants including Amazon.com, Alphabet’s Google and Meta Platforms, tech companies are measuring it with an eye on productivity gains and in certain cases factoring it into performance reviews. For some jobs, candidates aren’t even considered unless they can demonstrate AI fluency.

Funds

Consumer-focused growth equity firm Cutting Horse closed its inaugural fund with $75 million in commitments, exceeding the original $50 million target.

People

Norwest promoted Jordan Leites to principal and John McNeil to senior associate. Prior to joining the firm, Leites was an investment banking associate at Stone Key Partners. McNeil previously spent three years at ClearView Healthcare Partners.

Agentic AI platform Writer appointed Brian O'Reilly as its first chief operating officer.

Basis, a New York-based AI agent platform for accountants, landed $100 million in Series B funding at a $1.15 billion valuation. Accel led the round, which saw contributions from GV, Khosla Ventures and others. Accel’s Miles Clements will join Khosla Ventures’ Keith Rabois on the board.

Profound, a New York-based marketing infrastructure platform, scored a $96 million Series C round at a $1 billion valuation. Lightspeed Venture Partners led the investment, which included participation from Sequoia Capital, Kleiner Perkins and others.

Letter AI, a Chicago-based revenue enablement platform for go-to-market teams, raised $40 million in Series B funding. Battery Ventures led the round, with Principal Brandon Gleklen joining the company’s board.

Astelia, a New York-based cybersecurity startup, secured $35 million in combined seed and Series A financing led by Index Ventures and Team8.

Frankenburg Technologies, an Estonia-based missile defense startup, grabbed €30 million in Series A funding led by Plural.

Subject, a Beverly Hills, Calif.-based K-12 curriculum and online learning platform, nabbed a $28 million investment led by Vistara Growth.

Koah, a San Francisco-headquartered startup enabling contextual advertising natively inside generative AI, snagged $20.5 million in Series A funding. Theory Ventures led the round, with General Partner Tomasz Tunguz joining the board.

Xflow, an India-based B2B cross-border payments platform, collected $16.6 million in Series A funding. General Catalyst led the investment, which saw participation from PayPal Ventures and others.

Wootzwork, a Houston-based startup streamlining complex industrial processes for offshore manufacturing across India and Southeast Asia, raised a $6.6 million Series A round led by Z47.

Quill, a San Francisco-based startup that coordinates teams’ AI tools with context from conversations, was seeded with a $6.5 million investment led by Basis Set Ventures.

Mogul, a royalty-management platform, obtained a $5 million investment led by the Yamaha Innovations Fund.

• Inside Apple’s Push to Build an All-American Chip

• Meta and AMD Agree to AI Chips Deal Worth More Than $100 Billion

• Pentagon Gives Anthropic Ultimatum and Deadline in AI Use Standoff

• Anthropic Pushes Claude Deeper Into Knowledge Work

• Anthropic Dials Back AI Safety Commitments
   
• Breaking Down the Doomsday AI Memo That Spooked Markets
   
• The Do’s and Don’ts of Using AI to Write Performance Reviews

• Workday CEO says Anthropic and OpenAI use his company’s software (Bloomberg)
   
• More startups are hitting $10M ARR in three months than ever before (TechCrunch)

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, and Brian Gormley.

Join us on LinkedIn.