Good day. With artificial-intelligence startups flooding the market, how can investors identify those with lasting value? For Sameer Dholakia, a partner at Bessemer Venture Partners, it’s a matter of matching a real-world problem with a skilled team building a problem-solving tool. Mr. Dholakia joined Bessemer as a partner three years ago after leading email startup SendGrid as chief executive during its $3 billion acquisition by Twilio Inc., a cloud-communications company. WSJ Pro spoke with him about leading Bessemer’s recent investment in DeepL, a Cologne, Germany-based AI-powered translation startup.

Why did you invest in DeepL?

We believe the market need for multilingual communication will only grow, driven by increasing globalization and remote work. DeepL is leveraging its research in AI and machine learning to break down communication barriers, and has built a leading team of mathematicians and researchers who are driven by this mission.

AI is everywhere. How do you find the right startup to invest in?

We’ve seen this category hit a peak, with earth-shaking companies and products launching every few weeks. We diligence the category or type of problem they’re solving, the company’s technology or data, the nature of customer usage and retention, and whether the team has the right background and expertise to build a category-leading company in the space. It’s really exciting to see AI-powered tools finding traction with millions of people.

What will happen to all these AI startups down the road?

It’s hard to make macro forecasts, like timing the reopening of the tech IPO window, or M&A by FAANG-sized tech companies. However, we believe there is potential for several $1 billion-plus revenue outcomes in this generation of AI startups—across the application, data and infrastructure layer. Because of the size of the market and value-creation opportunity, we believe that this wave of startups will focus on building and scaling for years to come, with exit possibilities being a distant concern for the foreseeable future.

And now on to the news...

Eyeing business software makers. March Capital is doubling down on enterprise software, betting that a boom in artificial intelligence will carry through an economic downturn, as companies turn to AI-enabled automation tools to cut costs and streamline operations. 

• March, a nine-year-old venture-investing firm, on Friday said it closed a $650 million fund, its fourth and largest to date, targeting startups building cloud-based business software, including AI, cybersecurity and data-infrastructure systems.
   
• Based in Santa Monica, Calif., March’s past investments include CrowdStrike Holdings Inc., a cybersecurity firm based in Austin, Texas, and Uniphore Technologies Inc., a Palo Alto, Calif., conversational automation software maker.

Private markets deal makers and the investors who back them say pressure is mounting on the valuations of companies managers own. But that pressure is likely to affect some areas more quickly and dramatically than others, Maria Armental writes for WSJ Pro. Investors and managers say that valuations are likely to come down faster in the U.S., particularly in venture capital-backed technology startups, with potential write-downs in private equity likely to stretch over a longer period.

Morgan Stanley Investment Management Inc. has raised one of the largest funds dedicated to deals that allow private-equity managers to hold on to their best assets for longer, WSJ Pro reports. The asset management subsidiary of global investment bank Morgan Stanley has raised $2.5 billion for Ashbridge Transformational Secondaries Fund II, which invests exclusively in sponsor-led secondary deals focused on a single company, according to a statement seen by The Wall Street Journal. Such single-asset deals typically allow a private-equity manager to recapitalize a company backed through an older fund with capital raised for a new vehicle managed by the same firm and often backed by new investors, including dedicated secondary buyers such as the Morgan Stanley unit. Investors in the original funds are given the option to roll their interests into the new vehicle or sell their holdings outright to the new fund’s investors.

Tether Holdings Ltd. operates a $68 billion stablecoin at the heart of crypto’s alternative financial universe. Far more tether trades each day than bitcoin, The Wall Street Journal reports. Yet the company’s founders and owners are an unusual bunch with scant experience at that scale of finance. One founder was a child actor turned early crypto investor. Another founder and top shareholder practiced plastic surgery before turning to electronics importing and then crypto. One newer owner has gone deep into British politics. A group of four men has controlled 86% of Tether Holdings, according to a cache of documents reviewed by the Journal. The documents date back several years, but provide the clearest picture yet of the people behind what is by far the biggest stablecoin.

Funds

Early-stage investor defy closed its third fund with $300 million in commitments. The Woodside, Calif.-based firm invested in companies including Aalto, Arena Club, Bazaar and Novi through its first two funds.

Buoyant Ventures, an investor in digital technologies addressing climate change, closed its inaugural fund with $76 million in commitments, along with an additional $5.7 million raised in co-investments. Limited partners in the fund include Microsoft Climate Innovation Fund, Xcel Energy, Bank of America, NiSource, WovenEarth Ventures and the Office of the Illinois State Treasurer.

People

Fintech-focused QED Investors hired Melissa Ho as principal, where she will focus on early-stage investments across Southeast Asia. She previously led the investment team at Wavemaker Partners.

Atlanta-based Panoramic Ventures added Christy Johnson as general partner and chief performance officer. She originally joined the firm in 2008, and was most recently chief executive of AchieveIt Online, a Panoramic Ventures portfolio company.

Growth-stage business-to-business software investor Elsewhere Partners appointed Rod Favaron and Michele Perry as the firm’s first operating partners. Mr. Favaron was previously president of Upland Software. Before joining Elsewhere Partners, Ms. Perry was chief executive of Relatient.

Exits

Collaborative web development platform Netlify acquired competitor Gatsby Inc. for an undisclosed amount. San Francisco-based Netlify is backed by investors including Andreessen Horowitz, Bessemer Venture Partners, BOND, Kleiner Perkins and Menlo Ventures. Gatsby previously raised funding from Index Ventures, CRV and Trinity Ventures.

Deals

Digital customer experience platform Birdeye will expand into Australia, New Zealand and the U.K. with the purchase of Cube Online. Terms weren’t disclosed. Palo Alto, Calif.-based Birdeye is backed by investors including Accel-KKR, Trinity Ventures and World Innovation Lab.

Members-only home swapping network Kindred acquired Mango and appointed the dating app’s founder Bryan Li as chief technology officer. Kindred counts Andreessen Horowitz, Bessemer Venture Partners and Caffeinated Capital as backers.

Our Next Energy Inc., a Novi, Mich.-based energy storage technology startup, closed a $300 million Series B round at a post-money valuation of $1.2 billion. Fifth Wall and Franklin Templeton led the investment, which included participation from Temasek, Riverstone Holdings, Coatue Management, AI Capital Partners, Sente Ventures, BMW i Ventures, Assembly Ventures, Breakthrough Energy Ventures and Volta Energy Technologies. Richard Piliero, a managing director at Franklin Templeton, will join Our Next Energy’s board. The company develops batteries for electric vehicles and commercial fleets.

LeafLink Inc., a New York-based wholesale cannabis platform, scored $100 million in Series D financing. CPMG, L2 Ventures and Nosara Capital led the round, which included support from Founders Fund, Interplay, Lerer Hippeau and Thrive Capital.

Portside Inc., a San Francisco-based software-as-a-service platform for the business aviation industry, raised $50 million in Series B funding. Insight Partners led the round, which included participation from I2BF Global Ventures.

Moov, a payments startup, secured $45 million in Series B financing. Led by Commerce Ventures, the round saw additional participation from Andreessen Horowitz, Bain Capital Ventures, Visa and Sorenson Ventures.

Treasury Prime, a San Francisco-based embedded banking software platform, nabbed $40 million in Series C funding. Lead investor BAM Elevate was joined by The Banc Funds, Invicta, Deciens, QED Investors and SaaStr in the round.

Phantom AI, an autonomous driving platform, snagged a $36.5 million Series C round. New investors InterVest, Shinhan GIB and Samsung Venture Investment were joined by existing backers KT Investment and Renaissance Asset Management in the round. Founded in 2017, the company’s platform includes computer vision, sensor fusion and control capabilities.

Lulalend, a South Africa-based digital lender focusing on underserved small and medium-sized enterprises, picked up $35 million in Series B growth capital. Lead investor Lightrock was joined by DEG, Quona Capital and others in the round.

Craft, a San Francisco-based supply chain intelligence provider, closed a $32 million Series B round. BAM Elevate led the investment, which saw participation from Greycroft, Uncork Capital, High Alpha, ServiceNow Ventures, Point Field Partners and others.

Risilience, a U.K.-based climate analytics startup, grabbed $26 million in Series B funding. Quantum Energy Partners affiliate Quantum Innovation Fund led the round, which included support from IQ Capital and National Grid Partners. The company, which helps businesses transition to a low-carbon economy, will use the new funds for international expansion, with a focus on the U.S.

Onehouse, a Menlo Park, Calif.-based data infrastructure startup, landed $25 million in Series A funding led by Addition and Greylock Partners. Addition’s Aaron Schildkrout and Greylock’s Jerry Chen will join the board.

NT-Tao, an Israel-based nuclear fusion clean energy startup, raised $22 million in Series A funding led by Delek US and NextGear Ventures. The company says its proprietary plasma heating method is expected to reach 1,000 times higher density than other fusion reactors.

Recurrency Inc., a San Francisco-based supply chain software developer, picked up a $22 million investment. Bessemer Venture Partners led the round, with Kent Bennett joining the board. Lachy Groom, Elad Gil, Y Combinator’s Continuity fund, Contrary Capital, Sequoia Capital, Operator Partners, TQ Ventures and others also contributed to the funding.

• Apple sales shrink as pandemic rally ends for iPhone maker, other tech giants
   
• Google parent Alphabet posts drop in ad revenue amid slowdown
   
• Amazon warns of period of slower growth
   
• TikTok’s transparency campaign echoes effort by Huawei to ease security concerns
   
• Losses from Adani stock rout top $100 billion

• A new bubble is forming for AI startups, but don’t expect a crypto-like pop (The Information)
   
• How Fictiv is making hardware manufacturing more like building software (TechCrunch)

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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