Good day. The hype around artificial intelligence is creating challenges for businesses selling AI products, says Jack Altman, managing partner of Alt Capital, which just launched an accelerator for business software startups. 

On the one hand, demand is strong. “You are seeing companies ramp revenue very quickly,” he said.

Budgets are opening up for AI from even more conservative industries, such as education, government and healthcare. “They are really ready to buy this stuff,” Altman said.

However, customer commitment may be weak and it is an open question whether initial contracts will be renewed. “You are dealing with a very strong uptake in experimental budgets and you have to be careful on the other side,” Altman said.

The adoption of AI technologies in workplaces is having mixed results.

About a third of generative AI-using employees said they have seen no change in productivity or have seen a decline in productivity, according to a report by think tank Oliver Wyman Forum. Workers in the transportation industry, for example, reported a 19% decline in productivity after using generative AI tech.

Renewal rates will depend on business customers seeing true value from the technology.

And now on to the news...

American drones failed to turn the tide in Ukraine. Most small drones from U.S. startups have failed to perform in combat, dashing companies’ hopes that a badge of being battle-tested would bring the startups sales and attention. It is also bad news for the Pentagon, which needs a reliable supply of the aircraft, The Wall Street Journal reports.

• In the first war to feature small drones prominently, American companies still have no meaningful presence. Made-in-America drones tend to be expensive, glitchy and hard to repair, said drone company executives, Ukrainians on the front lines, Ukrainian government officials and former U.S. defense officials.
   
• Silicon Valley company Skydio sent hundreds of its best drones to Ukraine to help fight the Russians. Things didn’t go well. Skydio’s drones flew off course and were lost, victims of Russia’s electronic warfare. It has since gone back to the drawing board to build a new fleet.
   
• Absent solutions from the West, Ukraine has turned to cheaper Chinese products to fill its drone arsenal. The military is using off-the-shelf Chinese drones, primarily from SZ DJI Technology.

Some companies are moving away from the idea that stand-alone, startup-style labs are the best way to drive innovation, WSJ's CIO Journal reports.

• The re-evaluation comes as big businesses feel the pressure to harness cutting-edge generative artificial intelligence for new discoveries. The best ideas come from within the business, these companies say, rather than from colleagues in detached groups who then have to get buy-in from the company.
   
• Walmart in January announced plans to close Store No. 8, an idea-incubation arm that had some associates based in California’s Silicon Valley. The stand-alone lab was no longer needed, the Arkansas-based retailer said, because it had developed a new method that embedded innovation deeper across the company, giving more employees the opportunity to contribute.

Funds

New York-based early-stage investor AlleyCorp closed on just over $250 million for its latest fund.

Vienna-based Elevator Ventures launched a new €70 million fund to continue making Series A and B investments in fintech startups.

Interactive Venture Partners raised a capital commitment of €50 million for its inaugural fund to make early-stage investments primarily in Central Eastern Europe.

People

Pomelo Group, a Singapore-based payment infrastructure platform, appointed Steve Vickers as chief executive officer. He was previously at Paysend and Thunes.

Stoke Space, a Kent, Wash.-based startup developing reusable rockets and space vehicles, named Paul Croci to the post of chief financial officer.

Cyera, a data security startup with offices in New York and Tel Aviv, scored $300 million in Series C funding at a $1.4 billion valuation. Coatue led the round, which included additional support from Sequoia Capital, Accel and others.

Monad Labs, a New York-based blockchain startup, closed a $225 million Series A round. Paradigm led the investment, which included participation from Greenoaks and others.

Guesty, a property management software platform for the short-term rental and hospitality industry, secured $130 million in Series F financing. KKR & Co. led the round, which saw additional participation from investors including Inovia Capital. Stephen Shanley and Lauriane Requena of KKR, along with Dennis Kavelman of Inovia Capital, will join the Guesty board.

Platform Science, a San Diego-based fleet technology platform, landed $125 million in growth capital from investors including Activant Capital and 8VC.

Onum, a Madrid-based data observability and orchestration startup, raised $28 million in Series A funding led by Dawn Capital.

Alethea, a Washington, D.C.-based disinformation detection and mitigation startup, completed a $20 million Series B round. GV led the investment, which included participation from Ballistic Ventures.

Andesite AI, a McLean, Va.-based cybersecurity startup, launched with just over $15 million in funding from investors including Red Cell Partners and General Catalyst.

Pactio, a London-based developer of digital infrastructure for the private capital industry, collected $14 million in Series A funding led by EQT Ventures.

GTM Buddy, an Durham, N.C.-based AI sales enablement platform, snagged $8 million in Series A financing led by Archerman Capital and Leo Capital.

Spines, a Boynton Beach, Fla.-based AI self-publishing platform, was seeded with a $6.5 million investment led by Aleph.

Lirvana Labs, a San Francisco-based provider of an AI-powered personalized learning companion for preschool to elementary grade children, launched from stealth with $5.3 million in funding from investors including Kapor Capital and Chingona Ventures.

• Utah’s tech hub powers America’s hottest job market, WSJ ranking finds
   
• GM’s Cruise attempts comeback for its driverless fleet—with human drivers first
   
• Chinese EV maker XPeng makes inroads in Hong Kong, Macau
   
• Blizzard videogames to return to China in new deal with NetEase
   
• Elon Musk and Jamie Dimon’s AI predictions and what they mean for the future of humanity
   
• Meet the robots slicing your barbecue ribs
   
• Treasury asks Senate for new powers to curb crypto crime financing

   

• NYSE executive says ‘handful’ of AI startups are exploring IPOs (Bloomberg)
   
• U.S. to award Samsung up to $6.6 billion chip subsidy for Texas expansion, sources say (Reuters)
   
• San Francisco-to-L.A. overnight train inches closer to reality (KTLA 5)
   

This newsletter was compiled by Yuliya Chernova 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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