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Sapphire Ventures’ Cathy Gao Talks AI Investing and Deciding What Risks to Take
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By Marc Vartabedian, WSJ Pro
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Good day. Artificial-intelligence inventions that have the potential to upend startups’ business models seem to emerge daily. And competition to get into the most promising deals is fierce.
How venture investors are performing in this pressurized environment was a central topic at the Web Summit tech gathering last week in Vancouver. On panels and in one-on-one meetings, venture capitalists said they were forced to make rapid investment decisions on AI, even as the ground continues to shift under their feet.
Cathy Gao, a partner at Sapphire Ventures specializing in business software and AI apps, is at the center of that investing frenzy. She spoke on a Web Summit panel focused on how AI has raised the temperature in the investing world.
WSJ Pro sat down with Gao after to discuss the investment crucibles and opportunities in the sector. The interview has been edited for length and clarity.
WSJ Pro: With AI innovations happening so quickly, how do you look around corners to determine what companies will be relevant in the not-too-distant future and what could be obsolete?
Gao: On one hand, because we’re later-stage investors, we have signals like [annual recurring revenue] about whether a company is breaking out. On the flip side, you have to pair that with thematic work on where you think the future is going in the next year or two.
Read the full interview here.
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And now on to the news...
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Hot water is pumped in from a geothermal power facility at Climeworks’ Mammoth carbon removal plant in Reykjavik, Iceland. PHOTO: JOHN MOORE/GETTY IMAGES
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Climate slump. Climate startups are feeling the impact of President Trump’s attacks on the energy-transition sector, as job cuts, bankruptcies and operational halts rack up, WSJ Pro reports.
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From carbon capture to solar power, companies across the clean-tech spectrum are reeling from funding withdrawals, policy changes and import restrictions brought in by the Trump administration as it has set about dismantling the climate goals of its predecessor.
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“There are going to be some companies that do fall away because they do not have strong fundamentals,” said Amy Duffuor, general partner at Azolla Ventures, a climate-focused venture-capital investor. “But a lot of high-quality companies that do not receive the funding will not scale.”
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The number of M&A transactions made by private-equity firm Apollo Global Management since the "Liberation Day" announcements in early April.
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PE Confronts Swollen Investment Backlogs With Dealmaking Stuck
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Midway through what was expected to be a recovery year, private equity’s dealmaking and fundraising remain in the dumps, according to consulting firm Bain & Co. The industry’s backlog of unsold investments stands at some 30,000 companies. More than half of those, worth a combined $1.8 trillion, have been held by firms for at least four years, said Hugh MacArthur, Bain’s global private-equity practice chairman. The amount of capital sent back to buyout fund investors as a percentage of net asset value, an industry measure, has for the past three years trailed historical levels that ranged around 20% to 30% from 2010 to 2020, according to Bain data. The ratio fell to 11% last year from 15% in 2022. Read the full WSJ Pro article here.
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AI Is Here for Plumbers and Electricians. Will It Boost Home Services?
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Netic, a startup based in San Francisco, is selling an AI-based platform that helps home-services firms automatically reach out to clients in need of maintenance or upgrades, and takes calls and messages on their behalf, The Wall Street Journal reports. Founded in 2024, Netic is part of a growing crop of startups looking beyond the saturated white-collar market and toward home-services operators like electricians, plumbers, roofers and HVAC specialists. The startup Monday said it has raised $20 million with funding from venture-capital firms including Greylock and Founders Fund.
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People
Payments platform Payouts Network appointed Judson Preuss as chief product officer. He previously served as head of product at ConnexPay.
Adaptive digital experience platform Contentstack named Josette Leslie as the company’s new chief financial officer. She was most recently CFO at alternative investment platform CAIS.
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Grammarly, a San Francisco-based AI assistant for communication and productivity, closed a $1 billion growth financing from General Catalyst’s Customer Value Fund.
Snorkel AI, a Redwood City, Calif.-based AI data development platform, scored $100 million in Series D funding led by Addition at a $1.3 billion valuation.
David, a New York-based protein bar maker, landed $75 million in Series A funding led by Greenoaks at a postmoney valuation of $725 million.
Vima Therapeutics, a Cambridge, Mass.-based startup developing oral therapies for movement disorders, launched with $60 million in Series A funding led by Atlas Venture.
Chalk, a San Francisco-based provider of a data platform for AI inference, raised $50 million in Series A funding at a $500 million valuation. Felicis led the round, with Managing Partner Aydin Senkut joining Chalk’s board.
LuminX, a San Francisco-based AI-driven inventory automation and visibility technology provider, completed a $5.5 million seed round from investors including 1Sharpe Ventures, GTMFund and 9Yards Capital.
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The EssilorLuxottica laboratory in Wissous, south of Paris. The company is buying Optegra from MidEuropa. PHOTO: CHRISTOPHE PETIT TESSON/AGENCE FRANCE-PRESSE/GETTY IMAGES
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VC funds are for sale—at a discount (The Information)
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Why venture-backed startups are looking to revenue-based financing (Inc.)
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