Good day. AI research lab Skyfall emerged from stealth on Monday, divulging a mission to build AI that could give rise to autonomous enterprises—that is, companies capable of running themselves.

The approximately year-old startup is building what it says is the first enterprise world model, a type of AI that could reason through the complex decisions involved in running a business.

Now all it needs is a company for its AI to run.

The startup is willing to pay up to $1 million to acquire a small SaaS business that would serve as a kind of proving ground for its AI. The goal is to double that company’s revenue in the first six months post-acquisition with minimal oversight: Human participation would be limited to things like setting up the initial AI systems, opening bank accounts, and filing tax and regulatory documents. Skyfall’s AI would effectively take over as the company’s CEO.

Skyfall co-founder and Chief Executive Sam Pasupalak said today’s large language models aren’t capable of modeling how a CEO has to make decisions within a business. He thinks world models—a type of AI that is gaining momentum—are up to the task.

The company also said Monday it has raised funding, though it declined to say how much or at what valuation.

Pasupalak started the company alongside his brother, Sumit, who serves as chief product officer, and Kaheer Suleman, the company’s chief technology officer. Sam Pasupalak and Suleman previously founded Maluuba, an AI research lab that Microsoft bought in 2017 for $160 million.

For its first acquisition, Skyfall wants a company founded in the last 24 months with monthly recurring revenue under $20,000 and a platform that lets customers sign up and pay without a sales call, among other requirements. Skyfall wants to make its first acquisition by the end of August.

“Next year, perhaps, if this is successful, we can go for a business in the $10 million to $100 million range," said Pasupalak.

And now on to the news...

Regulating the frontier. Silicon Valley and Washington are debating a multibillion-dollar question: Should American companies be able to use Chinese artificial-intelligence models? OpenAI and Anthropic executives are sounding the alarm about the rise of cheap AI, particularly powerful new models produced in China, suggesting they will lead to a “dystopian” AI future and present unacceptable security risks without regulation. Some analysts who study the AI industry say the two companies, which are preparing for public listings in the next year, just want to eliminate the competition.

More than a year into his tenure, Defense Secretary Pete Hegseth is keeping his promise to shower money on high-tech defense startups. VCs and startup founders have been salivating at what they hope is a true defense reformation that hands power—and billions of dollars—to defense-tech startups that have been excluded from the inner circle of weapons procurement.

• Investor exuberance in the sector has sent valuations soaring. But many are anxious that Congress is preparing to slow the fire hose to a relative trickle amid growing scrutiny of Hegseth’s spending and disapproval of the Iran war.

Related: Defense-Focused Capitol Meridian Closes $1.9 Billion Fund

Individual investors’ yearslong love affair with the market’s biggest tech stocks is starting to cool off. Retail traders are buying fewer shares of Microsoft, Apple, Amazon.com, Meta, Nvidia, Alphabet and Tesla. Instead, they are flocking to newer AI trades: chip stocks like SK Hynix, for example, or the Roundhill Memory exchange-traded fund, according to data from flow-tracking firm Vanda Research. That reflects a broader shift in the market in which the group of seven market-leading tech giants have at least temporarily ceded the spotlight to chip makers, memory suppliers and some small and midsize shares linked to the AI build-out.

People

Growth equity investor Summit Partners said Matt Lunkes joined the firm as an advisory partner. He most recently served as senior vice president and chief of staff at Accelya.

J.P. Morgan said Marc Brown and Shawn Hoyer will join the firm’s global banking venture-capital coverage team as managing directors. Brown was previously at EQT. Hoyer was most recently at Bank of America.

Type One Ventures, which invests in space, AI and deep technology companies, appointed Omar Pimentel as director of frontier strategy.

CuspAI, a startup harnessing AI for materials breakthroughs, scored $450 million in Series B funding at a $2.6 billion valuation. Kleiner Perkins and New Enterprise Associates led the round, which included participation from Bezos Expeditions, Lux Capital, AMD Ventures, Basis Set Ventures and others.

Raghu Vamsi Aerospace Group, an India-based aerospace and defense manufacturing company, picked up a $40 million investment led by Norwest and Skegen Asset Management.

Natural, a San Francisco-based startup building payments infrastructure for AI agents, raised $30 million in Series A funding led by Forerunner Ventures.

Empirical Security, a Chicago-based cybersecurity startup building foundational and predictive models for exposure management, landed $25 million in Series A funding led by Brightmind Partners.

Infinity.inc, a San Francisco-headquartered startup building a software layer that makes any AI chip inference-ready, was seeded with a $15 million investment at a $100 million post-money valuation. Investors included Touring Capital and Principal Venture Partners.

deltaVision, a Munich-based manufacturer of fluidic systems for launchers, satellites, lunar landers and orbital servicing vehicles, snagged a €10.2 million (about $11.6 million) investment led by KT Ventures and Valemount Capital.

Sofab Inks, a Louisville, Ky.-based startup enabling the transition to mass-market production of perovskite solar applications, was seeded with a $6 million investment led by Cloudberry Ventures.

Apaluma, an Albuquerque, N.M.-based startup that transforms fragmented regulatory records into a unified ecosystem, raised nearly $5.6 million in seed funding from investors including Crosslink Capital, Kickstart, Haven Ventures and Overwater Ventures.

Cascade, a startup building an AI platform for architecture, engineering and construction firms, grabbed a $3.5 million seed investment from investors including a16z Speedrun, Ada Ventures and Blitzscaling Ventures.

Zeom, a London-headquartered platform offering streamlined access to global investments, secured a $2.7 million pre-seed round led by Fabric Ventures.

• These AI-Native Companies Have Tiny Staffs and Fewer Bosses

• The Massive Supply Deals Feeding the AI Frenzy Are No Sure Thing

• BlackRock Leads $12 Billion Financing for New Meta Data Centers in Texas

• Judge Temporarily Blocks Paramount-Warner Deal
   
• Chinese-Owned EV Maker Polestar Won’t Appeal U.S. Ban, Leaving Dealers in the Lurch

• OpenAI has seen a 'resurgence' of interest in secondary markets. (Business Insider)
   
• Armed robots are on the horizon, as Silicon Valley pitches new military tech (Washington Post)
   
• U.K. businesses are not deepening their use of AI, suggests ONS data (FT)

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, Brian Gormley and Sarah Klearman.

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