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What Has Your Career Taught You About Venture Capital?
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By Brian Gormley, WSJ Pro
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Good day. Atlas Venture Partner Bruce Booth in October published a reflection on his blog about lessons he has learned over his two-decade career in biotech venture capital. For this week's question, we want to know: What is the biggest lesson you have learned about venture capital in your career? Please email responses to vcnews@wsj.com.
Last week, we asked what metrics investors are focusing on given the variety of pricing models that artificial-intelligence startups are experimenting with. Here are some responses, edited for length and clarity.
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Dale Chang, operating partner at Scale Venture Partners: “What counts as ‘good’ is changing with AI. We’re seeing higher churn and higher revenues as the norm. A good sanity check metric is GAAP [generally accepted accounting principles] revenue for clarity on what’s truly growing (or not), as well as daily and monthly active users as a signal into stickiness.”
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Pradeep Tagare, head of investments at National Grid Partners: “One particular metric we watch out for is services revenues versus repeatable product revenues as that is a good indicator of scalability of revenues and gross margins.”
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Priya Saiprasad, general partner at Touring Capital: “VCs need to focus on three metrics that reveal true company health: continuity-adjusted revenue, which weights revenue by usage behavior to predict retention; average revenue per agent, which tracks monetization of agentic workflows; and operating margin, [which is] now more telling than gross margin in AI-native companies. They represent usage depth, value capture and profitable scalability.”
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Jai Das, co-founder, president and partner at Sapphire Ventures: “We focus first on revenue quality, preferring durable production spend over short-lived experimental pilots. NRR [net revenue retention] measures how much revenue a company retains from existing customers—where more than 120% signals real product stickiness rather than the ‘tourist effect’ churn. We also look at the subscription versus usage mix, favoring hybrid models with healthy (20%–30%) overage revenue. Finally, we scrutinize compute-adjusted gross margins and expect a clear path toward 70%+, with token costs decreasing and meaningful value added beyond the underlying LLM.”
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And now on to the news...
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PHOTO: BLOOMBERG NEWS
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OpenAI updates ChatGPT. OpenAI on Thursday announced the release of GPT-5.2, calling the artificial-intelligence model its most advanced for professional knowledge work. The release comes about a week after Chief Executive Sam Altman declared a “code red” effort to improve the quality of ChatGPT and to delay development of some other initiatives, including advertising. The company has been on high alert from the rising threat of Google’s latest Gemini AI model, which outperformed ChatGPT on certain benchmarks including expert-level knowledge, logic puzzles, math problems and image recognition.
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Texas Sues Epic Systems Over Parent Access to Child Records
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Texas Attorney General Ken Paxton filed an antitrust lawsuit against healthcare technology giant Epic Systems, alleging the company’s setup can block parents from accessing their children’s health information. The suit, filed Wednesday in a Texas state court, said the default configuration for Epic’s patient healthcare portal, MyChart, could limit parents’ access to the health records of their teenage children. The lawsuit also said that Epic uses its power over patient data and its medical-records system to block competition. An Epic spokesperson called the suit “flawed and misguided.”
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Trump Signs Executive Order to Curtail State AI Laws
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President Trump signed an executive order Thursday that aims to override state laws on artificial intelligence. The order would allow the Justice Department to punish states with rules deemed restrictive for AI, in a move to bring the U.S. under one federal standard. Silicon Valley executives had been lobbying the president to ban state AI laws that they said could cause the U.S. to lose the AI race to China.
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Measure Aims to Ease Regulations on Venture
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Legislation that passed the House on Thursday has several provisions reducing regulatory burdens on venture funds and expanding the criteria for who can qualify as an accredited investor.
The Incentivizing New Ventures and Economic Strength Through Capital Formation Act, or INVEST Act, updates rules around secondary and fund-of-funds investments. It allows venture funds to have up to 49% of their assets in such investments before the fund managers have to register as investment advisers with the Securities and Exchange Commission. There are other provisions expanding the maximum fund size and limited-partner pool before some regulations kick in.
Holli Heiles Pandol, senior counsel and head of U.S. policy at financial software firm Carta, said that emerging fund managers will benefit, including in geographies that tend to raise less capital.
The bill also directs the SEC to develop an accredited-investor exam, she said, which would allow more investors to participate in the private asset class.
INVEST Act, which combines several other capital-formation acts, is now heading to the Senate. “The Senate has expressed interest in a bipartisan capital formation package and a strong bipartisan vote in the House (302 in support) is a good indicator of what’s next,” Pandol said.
Stacey Song, partner at the law firm Cooley, said: “I’ve heard it may take some work to pass the Senate, but not impossible.”
—Yuliya Chernova
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Funds
Factorial Capital closed its second fund with $25 million in commitments to back technical founders at the angel, pre-seed and seed stages.
People
Core Innovation Capital added Michael J. Hsu as a venture partner. Hsu most recently served as Acting Comptroller of the Currency.
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Port, an Israeli AI agent startup, raised $100 million in Series C funding led by General Atlantic at an $800 million valuation.
CapRelease, a London-based finance platform for e-commerce retailers, has secured $36 million in combined debt and equity.
Skydo, an Indian payments startup, raised a Series A funding round of over $10 million led by Susquehanna Asia Venture Capital.
On Me, a San Francisco-based digital gifting platform, raised a $6 million seed round led by NFX.
BoodleBox, a Colorado-based AI for higher education startup, raised a $5 million seed round co-led by Dogwood Ventures and Osage Venture Partners.
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Cody Finke, Brimstone CEO, at a storage shed for calcium-bearing silicate rock in Oakland, Calif. PHOTO: POPPY LYNCH FOR WSJ
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