Good day. A month ago some wondered if software stocks that have dropped since January would recover. Not so much.

The BVP Nasdaq Emerging Cloud Index, which tracks the performance of cloud-software companies, was down about 24% for the year as of Monday. That’s more than double the drop of the Nasdaq Composite.

“In enterprise software today, the core question is: What is your moat in a world where frontier model providers or large enterprises themselves can replicate 80% of your product?” said Jonathan Lehr, co-founder and general partner at Work-Bench, a seed venture firm focused on enterprise software startups.

The median forward revenue multiple, or the ratio of enterprise value to projected revenue, for public cloud-software companies in the BVP Nasdaq index is less than 3, compared with 5.5 a year ago.

“The multiples are fair and maybe generous,” said Max Gazor, founder and partner at Striker Venture Partners. Once faster-growing AI companies go public, cloud-software stocks will likely see even less demand. “A lot of people will pull out of software,” Gazor said, to invest in alternatives.

All of that spells trouble for the older private software companies, as well as the returns of venture funds that backed them years ago. The prospects of exits for some of these businesses are declining, Gazor said.

“No one wants to buy nongrowing assets,” he said.

That will have to be reflected in how venture funds mark their portfolios. 

As the first quarter of the year comes to an end, venture-fund managers will have to take a hard look at that segment of their existing portfolios and take stock-market comparables into account as they make estimates on the fair value of their funds. Expect markdowns.

And now on to the news...

OpenAI sets record. OpenAI completed the largest funding round in Silicon Valley history, raising $122 billion ahead of a blockbuster IPO expected by the end of the year. The deal came with an additional perk: greater access to individual investors. As part of the financing, OpenAI raised more than $3 billion from wealthy investors through banks and said it would be included in several exchange-traded funds managed by ARK Invest, the investment firm led by technology bull Cathie Wood.

Allbirds was once valued at $4 billion. It just struck a deal to sell most of itself for $39 million. It is a remarkable fall for the once-highflying company, which captured the hearts and feet of Silicon Valley tech bros, soccer moms and Barack Obama with its eco-friendly wool sneakers.

A team of researchers led by California Institute of Technology computer scientist and mathematician Babak Hassibi says it has created a large language model that radically compresses its size without compromising performance.

• The company, PrismML, came out of stealth Tuesday and open-sourced its 1-bit technology model, enabling others to use it.

People

AtScale, a universal semantic layer platform, appointed Bryan Abou-Rjaily as chief revenue officer. He was previously at Snowflake.

Elysian, a third-party administrator for complex commercial claims, appointed Zack Moy as chief technology officer.

Tenex.AI, a Sarasota, Fla.-based AI cybersecurity startup, raised $250 million in Series B funding led by Crosspoint Capital Partners with plans to make more than 250 new hires.

Also, a Palo Alto, Calif.-based electric-vehicle startup, grabbed a $200 million Series C round led by Greenoaks. DoorDash also invested in the round as a strategic partner, alongside a multiyear commercial agreement with Also to develop and accelerate the deployment of autonomous delivery at scale

9fin, a London-headquartered AI-native platform for global debt markets, scored $170 million in Series C funding at a $1.3 billion valuation. HarbourVest Partners led the round, which included participation from CPP Investments, Redalpine, Highland Europe, Spark Capital and Seedcamp.

Depthfirst, a San Francisco-based applied AI lab focused on software security, landed $80 million in Series B funding. Meritech Capital led the round, which included contributions from Forerunner Ventures and others.

Monarch Quantum, a San Diego-based developer of integrated photonics hardware for quantum technologies, picked up a $55 million investment led by Serendipity Capital.

Midas, a Berlin-based platform for composable onchain investment products, snagged $50 million in Series A funding led by RRE and Creandum.

Sona, a London-headquartered agentic-workforce-management startup, nabbed $45 million in Series B funding. N47 led the investment, which saw participation from Felicis and others.

Censys, an Ann Arbor, Mich.-based internet intelligence and insights provider, collected $40 million in Series D funding, alongside $30 million in debt. Morgan Stanley Expansion Capital led the Series D portion, which included contributions from Decibel Partners, Greylock Partners, GV and Intel Capital.

ThinkLabs, a New York-based startup developing AI digital twins and agents for utilities and grid operators, closed a $28 million Series A round led by Energy Impact Partners.

Emerald AI, a Washington, D.C.-headquartered startup whose mission is to transform AI data centers into flexible grid assets, obtained a $25 million strategic expansion round also led by Energy Impact Partners.

Treeline, a San Francisco-based IT operating system provider, secured $25 million in Series A financing led by Andreessen Horowitz.

Variance, a San Francisco-headquartered startup building AI investigative agents for risk and compliance, fetched $21.5 million in Series A funding. Ten Eleven Ventures led the round, which included additional support from 645 Ventures, Y Combinator, Urban Innovation Fund and Okta Ventures.

MemQ, a Chicago-based quantum networking startup, completed a $10 million Series A round co-led by Quantonation and Ocean Azul Partners.

Huskeys, an edge security-management startup, emerged from stealth with $8 million in seed funding from investors including 10D, SV Angel, toDay Ventures and Alumni Ventures.

• Meet the Startup That Used AI and OpenClaw to Automate Its Own Developers

• Oracle Lays Off Workers Amid Heavy AI Investment

• Voltify Raises $30 Million to Change Way Railroads Are Powered

• Buying the Dip? This AI Agent Will Do It for You
   
• What Happens When AI Agents Go Rogue?
   
• Nvidia Invests $2 Billion in Marvell as Part of Chip Partnership

• Yupp shuts down after raising $33 million from a16z crypto’s Chris Dixon (TechCrunch)
   
• Device startup Nothing Technology plans to release AI glasses next year (Bloomberg)

This newsletter was compiled by Matthew Strozier, Yuliya Chernova and Zachary Cole.

Share your tips, comments and questions: vcnews@wsj.com

The team: Matthew Strozier, Yuliya Chernova, and Brian Gormley.

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