Good day. New York continues to make strides in pulling in tech talent. And venture investors are following, some of them young and moving to the city with an eye to building their careers there.

We spoke with Will McKelvey, 29, who relocated from the San Francisco Bay Area last year for a job as an associate at Lerer Hippeau. He got his M.B.A. from UC Berkeley’s Haas School of Business, where he founded a student-run venture fund. Prior to jumping into venture as a career, McKelvey spent about four years in Washington as a senior policy adviser to Congressman Ro Khanna (D., Calif.). This interview has been edited and condensed.

WSJ Pro: How did you think about any trade-offs of building your venture capital career in San Francisco versus New York?

McKelvey: I thought to start my venture career I needed to go to the heart of it all. I went out to business school and spent two years in Berkeley. But after a year I realized the Bay Area is not for me. It’s not a secret that San Francisco has struggled. I’m energized by cities. For someone who wants to feel the sheer exhilaration of city life, New York is obviously unparalleled in the United States. 

I was focused on New York and just New York-centric funds [when looking for a job]. I had people tell me that going to New York would potentially sacrifice some opportunities in my venture-capital career, and I think that’s wrong. The New York City ecosystem has become so well-rounded.

WSJ Pro: What about the edge that San Francisco has in the concentration of generative artificial-intelligence startups and funding. Can New York really catch up there?

McKelvey: If you are a very technical founder building generative AI and you want to be around the maximum number of technical people, then Hayes Valley in San Francisco has a ton of those. My perspective on GenAI is that technical moats will largely dissipate as the primary foundational model companies continue to build and improve in the coming year. As tech differentiation approaches zero, the winning companies will leverage distribution advantages paired with magical experiences to capture market share at the outset and then lean into non-technical moats like network effects and marketplaces to maintain dominance. The talent pool in NYC is perfectly suited to build these types of companies, and more and more technical talent moves to the city every week. 

We just backed a company called TollBit, which is based in NYC and building critical AI infrastructure for publishers to monetize their content when AI trains on it. Luis Voloch is one of the premier AI researchers and founders, and he’s building his next company [and is based] in Brooklyn. [Editor’s note: Voloch’s company, Jimini Health, is based in Manhattan, and isn’t in Lerer Hippeau's portfolio]. These are just two examples. The “singular dominance of SF for AI” is merely a narrative.

WSJ Pro: How are your first 10 months in New York shaping up?

McKelvey: Despite it being pretty mature, there are vestiges of New York being the scrappy little brother of the Bay Area. People still feel we are all in this together. Folks are more than happy to make intros, baptize me into the New York tech ecosystem. New York funds are much easier to collaborate with. The past 10 months here have been the happiest I’ve ever been across every vector of life.

And now on to the news ...

Cybersecurity bets. Evolution Equity Partners has wrapped up fundraising with $1.1 billion collected for a fund to back cybersecurity companies through growth investments, WSJ Pro reports. Evolution Technology Fund III eclipses the firm’s second main pool, which held $400 million in committed capital for investing in cybersecurity and software companies when it closed in 2021.

• The firm plans to write checks ranging from $20 million to $150 million from the new pool to back roughly 30 growth-stage cybersecurity companies.
   
• So far, Evolution has backed 20 businesses out of the new pool, including Protect AI, whose systems help manage security risks, and Arctic Wolf, a provider of cloud-security services.

Mental health startup Two Chairs, which focuses on finding the right match between patients and therapists, secured a $72 million growth investment to ramp up hiring and build a national network, WSJ Pro reports. Boston-based Fifth Down Capital backed the company alongside existing investors, including venture-capital firm Amplo, which led the debt and equity round. Bridge Bank, a division of Western Alliance Bank that offers financing for emerging technology businesses, provided the debt financing.

• A person familiar with the transaction said equity represented $52 million of the $72 million. The company said in a statement that the latest funding brings the total amount it has raised so far to $103 million.

Global buyout firm CVC Capital Partners said it plans to list its shares in Amsterdam, making a second attempt to go public in less than six months, The Wall Street Journal reports. CVC said Monday that it expects to raise at least 1.25 billion euros, equivalent to around $1.33 billion, by selling new shares as well as stock from some existing shareholders. The listing is expected to take place in the coming weeks, it said.

Funds

Underscore VC closed a $58 million third fund to continue making pre-seed and seed investments in business-to-business software startups. The Boston-based firm also promoted Brian Devaney to partner. He joined Underscore from First Round Capital in 2020.

People

2048 Ventures promoted Zann Ali to general partner and Julie Wolf to partner. Before joining the firm, Ali was at Putnam Investments, and Wolf at SOSV.

Bcomp, a Swiss startup producing flax fiber-based materials for consumer automotive interiors and bodywork, completed a $40 million Series C round led by EGS Beteiligungen.

Ecotrak, an Irvine, Calif.-based facility management platform, closed a $30 million investment led by Respida Capital.

Kode Labs, a Detroit-based autonomous smart building startup, scored $30 million in Series B funding led by Maverix Private Equity.

CleanFiber, a Buffalo, N.Y.-based startup making building insulation from recycled cardboard, closed a $28 million Series B round led by Spring Lane Capital, alongside a $31.5 million project financing facility.

Dot Compliance, a quality-management system provider with offices in Phoenix and London, raised a $17.5 million Series B extension round from investors including IGP Capital.

HumanX, a startup providing artificial intelligence solutions to enterprises and governments, launched with more than $6 million in funding led by Primary Venture Partners.

Writ, a San Francisco-based startup helping companies use data to make decisions, was seeded with a $3.8 million investment led by Gradient Ventures.

• AI comes to bankruptcy, as courts deal with its ethical and privacy risks
   
• Tesla plans to lay off more than 10% of workforce
   
• Microsoft ups ante in AI race with China via stake in Abu Dhabi firm
   
• Baidu says Ernie AI chatbot now has 200 million users
   
• Alleged rent-fixing of apartments nationwide draws more legal scrutiny
   
• Big Tech Is downsizing workspace in another blow to office real estate
   
• The lawsuits that could shape the future of AI and copyright law [WSJ Video]

• Airchat is Silicon Valley’s latest obsession (Wired)
   
• Novel material startups to watch, according to investors (Sifted)
   
• Google who? Gen Z is searching on TikTok, YouTube instead (Axios)

This newsletter was compiled by 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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