Good day. Earlier this week, we led this newsletter with word that San Francisco-based Emergent has joined the ranks of unicorn vibe-coding startups after raising a $130 million Series C raise that valued the company at $1.5 billion.

Emergent and its investors say the company has carved out an important niche as a vibe-coding platform for small-business owners with minimal coding experience or technical expertise. One VC I spoke with said that when multiple companies perform well in the same space, it can indicate the market for their product is bigger than you might think.

So, how big do you think the total addressable market for vibe-coding startups is? Is there space for all of these companies—and more—to succeed? Please email responses to vcnews@wsj.com.

Last week, we asked how investors are rethinking their investment strategy in light of the rise of open-source (or more specifically, open-weight) AI models. How do you see it changing startup business models? Here are edited and condensed highlights of the responses:

• Zach Aarons, co-founder and general partner at MetaProp: “Our investment strategy doesn’t really change since we are mostly investing in AI at the application layer. We are seeing more of our startups embrace open-source models because they are far more cost effective than the leading closed-source models. For example, we are seeing closed-source models aggressively discount their tokens for startups in Y Combinator to combat this trend."
   
• Zach Bratun-Glennon, general partner at Gradient: “We’re backing founders who treat open-source as leverage, not liability. They bring open-weight models into the enterprise and hand back the controls (managed fine-tuning, orchestration, models that stay home) so the customer’s proprietary edge compounds with every interaction instead of leaking upstream.”
   
• Anthony Georgiades, founder and general partner at Innovating Capital: “Honestly, the rise of open weights makes us more optimistic, not less. It just changes where we go looking for value. Once base models get cheap and easy to swap, the model itself stops being the interesting part. What matters is who can turn AI into a system of record or a system of action inside a company, something an enterprise actually runs on and can’t easily rip out. So these days the first thing we ask a founder is simple: What breaks if you swap out the underlying model? If the answer is ‘not much,’ we’re probably looking at a feature, not a company yet.”

And now on to the news...

A letter rarely reached. Coatue Management is leading a $3 billion investment in Databricks, a data-analytics software provider, that values the company at $188 billion, according to people familiar with the matter. The new financing represents a 40% increase from its valuation in December, when Databricks raised money at a $134 billion valuation. 

• Databricks is one of Silicon Valley’s most-valuable startups, and is among a crop of companies long considered candidates for public listings.
   
• The new financing round is the company’s Series M, a letter rarely reached by private companies.

The federal government is cracking down on companies that provide ketamine for consumers to take at home, as concerns grow about misuse, adverse effects and deaths. The Drug Enforcement Administration has ongoing multiple investigations into “bad actors” prescribing the powerful mind-altering drug online, according to a person familiar with the probes.

• In late June, the Food and Drug Administration sent warning letters to 14 online marketers citing “significant violations” and ordering them to stop selling their ketamine products.
   
• The moves follow a Wall Street Journal article in March reporting that ketamine use has skyrocketed under loosened pandemic-era regulations, with hundreds of businesses selling the powerful anesthetic for at-home use, often without medical supervision. In some instances, patients have died or harmed others while using the drug.

China’s artificial-intelligence heavyweight DeepSeek is preparing for an initial public offering as early as the second quarter of next year to bankroll its costly research and fuel growth, according to people familiar with the matter. DeepSeek is discussing a listing in Shanghai, the people said, aiming to file the IPO paperwork by the end of this year. Last month, the Hangzhou-based company raised $7.4 billion in its maiden external funding round, where investors valued it at more than $50 billion. Founder Liang Wenfeng also began talking to prospective inventors about raising more money in a new funding round this month, the people said. 

Correction: InsideDesk raised a $12.6 million funding round. Thursday’s newsletter incorrectly said it was a 12.6 million Canadian dollar investment.

Funds

Lockheed Martin Ventures will open a London office with plans to invest at least $100 million in U.K. and European startups.

People

Flare Capital Partners promoted Jon George to vice president. Prior to joining the firm, he worked at OCA Ventures and Wittington Ventures.

Cellular Intelligence, a startup building a universal foundation model for cell signaling, appointed Jonathan Alspaugh as chief strategy officer and Adam Weinroth as chief marketing officer. Alspaugh most recently served as president and chief strategy officer of RyCarma Therapeutics. Weinroth was previously CMO at Form Bio.

Founders Fund appointed Ryan Beiermeister as a partner on the investment team.

Exits

NetApp acquired AI data infrastructure startup DataPelago for an undisclosed sum.

Instacart purchased Arpalus, a developer of shelf intelligence technology for grocery retail. Terms weren’t disclosed.

Fireworks, a San Mateo, Calif.-headquartered open model inference and training platform, landed $1.5 billion in Series D funding at a $17.5 billion valuation. Atreides Management, Index Ventures and TCV led the round, which included participation from Evantic Capital, Lightspeed Venture Partners and Nvidia.

Wonder, a food technology platform, scored $650 million in Series D funding at a pre-money valuation of $9 billion from investors including Accel, GV and New Enterprise Associates.

Alpaca, a New York-based agent-first brokerage infrastructure provider, picked up a $135 million investment led by Peak XV.

Spectro Cloud, a San Jose, Calif.-based AI infrastructure management software provider, raised more than $100 million in Series D funding led by the growth equity business within Goldman Sachs Alternatives. AMD Ventures and others also invested in the round.

Senra Systems, a Redondo Beach, Calif.-based manufacturer of wire harness systems for aerospace and defense, raised $65 million in Series B funding co-led by Lowercarbon Capital and Interlagos.

Fora, a New York-headquartered travel agency startup, closed a $60 million Series D round led by Forerunner and Tactile Ventures at a $1 billion post-money valuation.

Oak, an identity operating system provider, emerged from stealth with $60 million in seed funding co-led by Accel, Greylock Partners and CRV.

microagi, a Germany-headquartered robotics deployment startup, was seeded with a $55 million investment led by Hummingbird.

Lumin Digital, a San Ramon, Calif.-based platform for banks and credit unions, fetched more than $115 million in new funding, including $45 million in growth equity led by Light Street Capital. The new funds give the company a $1.6 billion valuation.

Sable, an AI employee startup, snagged a $45 million investment led by Sequoia Capital and 8VC. Shaun Maguire of Sequoia and Joe Lonsdale of 8VC will join the company’s board.

Velocity, a London-headquartered stablecoin treasury and settlement platform, secured $38 million in Series A financing led by Dragonfly and FirstMark.

Monumental, an Amsterdam-based startup developing autonomous bricklaying robots, nabbed $32 million in Series B funding. Khosla Ventures led the investment, which included participation from Hummingbird, Plural and others.

Risk Ledger, a London-based supply chain security startup, grabbed £24 million in Series B funding (about $32 million) from investors including Axiom Equity and Mercia Ventures.

TytoCare, a remote physical examination technology developer with offices in New York and Israel, closed on more than $25 million in growth funding from investors including Insight Partners, OrbiMed and others. The company also named Adam Pellegrini as its new chief executive officer.

• Trump Media to Sell Faster Access to President’s Social Posts
   
• The Inside Story of IBM’s Shocking Profit Warning 
   
• I Gave an AI Agent Access to My Passwords. Here’s What Happened.
   
• Why Microsoft’s $80 Billion Xbox Bet Backfired

• For Software Engineers, the AI Reckoning Is Already Here (Bloomberg)
   
• Paralysed man regains hand function through novel brain technology (Financial Times)

This newsletter was compiled by Sarah Klearman, Zachary Cole and Matthew Strozier.

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

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

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