Good day. President Trump wants to “close the carried-interest tax-deduction loophole,” White House spokeswoman Karoline Leavitt said Thursday. Carried interest, the portion of a fund’s profits that venture capital and other investors receive, is taxed at a preferential federal rate. Trump was unsuccessful in his attempt to end the carried-interest perk during his first term.

For this week’s question, we want to know what impact a change in tax on carried interest would have on venture capital and entrepreneurship. Please email responses to vcnews@wsj.com.

Last week, we asked what DeepSeek’s arrival means for venture investors. Here are some of the responses, edited for length and clarity:

• Hussein Kanji, founder and partner at Hoxton Ventures: “Those of us funding companies free-riding on the aggregate industry R&D spent on foundational models (that rapidly go open-source) look like winners; for everyone else, reality got a lot more complicated and stressful. Some of this reminds me of the early days of the internet where people thought the big winner was going to be the leading browser company (remember Netscape’s super successful IPO) only to discover that browsers had no economic value because competition (perhaps illegal competition) eroded margins to zero. It was the products and services that took advantage of free, widely distributed browsers that generated the wealth.”
   
• Ravi Jain, investment director at TDK Ventures: “DeepSeek’s story isn’t about training—it’s about inference. The real breakthrough is extracting more from smaller models, making AI faster, cheaper and deployable everywhere. This is a game-changer for edge AI. AI is no longer confined to the cloud; it’s now on your phone, your wearables and soon, your AR glasses. Imagine real-time translation, instant object recognition and seamless contextual overlays—all running directly on your device, with zero noticeable lag and no reliance on the cloud.”
   
• Simon Wu, partner at Cathay Innovation: “DeepSeek’s announcement showed us that AI model costs can be commoditized faster than expected and that AI talent is truly global—unlocking new entrants and use cases in the U.S. and beyond. We are now refocusing on traditional fundamentals—operational efficiency, distribution and retention—since revenue in this space often mirrors rapidly growing consumer transactional flows rather than traditional recurring revenue.”
   
• Lu Zhang, founder and managing partner at Fusion Fund: “DeepSeek is a big win for the open-source community. Startups can no longer rely on the assumption that closed models provide a competitive edge. Our due diligence will continue to focus more on differentiation beyond the model, such as proprietary data, distribution channels and vertical integration. Startups relying on fine-tuning or proprietary-model development must justify the ROI and have the right AI infra layer to reduce the cost of both training and reasoning.”
   
• Igor Taber, founder and general partner at Cortical Ventures: “DeepSeek’s model doesn’t flip conventional wisdom—it reinforces the trajectory we’ve anticipated in AI. Models becoming cheaper and more efficient is technological gravity at work, driven by advances in compute, algorithms and methodologies. This trend will not just continue, but accelerate. In due diligence, DeepSeek’s release doesn’t fundamentally shift our approach. We’ve always factored in the inevitable commoditization of models. The focus remains on startups that build differentiated products, infrastructure or services on top of these models.”

And now on to the news...

Carried interest. President Trump wants to “close the carried-interest tax-deduction loophole,” said White House spokeswoman Karoline Leavitt Thursday. She listed the Trump administration’s tax priorities that she said the president laid out to congressional leaders. 

• Venture capital and other investors collect carried interest, or a portion of profits made by their funds. They pay a preferential federal tax rate on this income, which some politicians call a “loophole.” 
   
• The National Venture Capital Association, a venture industry group, issued a statement Thursday opposing President Trump’s call. “Carried interest encourages smart, high-risk investments in innovative high-growth startups. The 2017 Trump tax legislation kept venture investment flowing to emerging technologies like AI, crypto, life sciences, and national defense. A change now will disrupt that progress and disproportionately harm small investors, especially in middle America,” the NVCA and its CEO Bobby Franklin said in a statement. 
  
  —Yuliya Chernova

Donald Trump’s company is gearing up to sell financial products to the public, WSJ reports.

• Trump Media & Technology Group announced on Wednesday that it plans to launch a finance company called “Truth.Fi.” The company didn’t specify if it plans to start selling investments or savings products to the public, but it opened the door to offering Trump-endorsed investments for everyday Americans.
   
• The idea would be to capitalize on concerns from conservatives who feel they have been cut out by big banks and other financial firms. Trump himself last week criticized the CEOs of Bank of America and JPMorgan Chase, accusing them of not allowing people with right-wing beliefs to do business with the bank.

Private-equity managers pitching first-funds still face a tough sell in 2025, but plenty of firms will be taking the plunge anyway—including ones that have operated as independent sponsors, WSJ Pro reports.

• Last year in the U.S., firms closed 46 first-time private-equity, growth and turnaround funds, raising $9.2 billion—but that was down from 121 such funds that closed on $21.5 billion in 2023, according to research-provider PitchBook Data. In the 12 months to late January, firms have hit the marketing trail seeking commitments to 95 first-time funds, PitchBook data show.

Funds

Private markets investment firm Hamilton Lane closed its Venture Access Fund at just over $615 million, which exceeded the original target of $500 million.

Cherry Ventures raised $500 million spread across its fifth early-stage fund and an opportunity fund. The firm has offices in Berlin, London and Stockholm.

Overlap Holdings closed its inaugural fund with $33 million in commitments to make early-stage investments in sectors including energy, life science, materials science, space, robotics and semiconductors.

People

Direct-to-consumer bridal brand Birdy Grey appointed Jill Layfield as chief executive officer. She was previously co-founder and CEO of Tamara Mellon.

Engine, a travel platform for booking and managing work trips, appointed Jenny Decker as chief financial officer. She was previously CFO of Front.

7AI, a Boston-based agentic AI startup, launched with $36 million in seed funding from investors including Greylock Partners, Spark Capital and CRV.

Avelios Medical, a Munich-based hospital information system provider, scored €30 million in Series A funding led by Sequoia Capital.

Urban Sky, a Denver-based developer of autonomous stratospheric balloons, closed a $30 million Series B round led by Altos Ventures.

Lynx, a Boston-based healthcare payments and administration platform, completed a $27 million Series A round. Flare Capital Partners led the investment, with Partner Victor Lanio joining the company’s board.

TrueFoundry, a San Francisco-based AI deployment and scaling platform, landed $19 million in Series A funding. Intel Capital led the round, with Investment Director Avi Bharadwaj joining the board.

Cognida.ai, a startup specializing in delivering practical AI solutions to enterprises, closed a $15 million Series A round led by Nexus Venture Partners. The company has offices in Lincolnshire, Ill. and India.

Presto, an Oakland, Calif.-based electric vehicle charging platform, was seeded with a $15 million investment from Union Square Ventures, Congruent Ventures, Powerhouse Ventures and Jetstream.

Tyba, a San Francisco-based energy storage optimization platform, secured $13.9 million in Series A financing. Energize Capital led the round and Partner Tyler Lancaster will join the board.

Seasats, a San Diego-based maker of autonomous surface vehicles for the maritime sector, picked up a $10 million investment led by Shield Capital. 

Brands are courting a new type of celebrity athlete: high-school kids.

Customs brokers, the invisible link between U.S. Customs and Border Protection and importers, are being inundated by calls from panicked clients about how to deal with shifting tariff policy.

With businesses unwilling to drop top dollar on unproven AI tools, AI software vendors are getting creative on new strategies to convince them to buy.

A series of lawsuits against companies that transferred pension liabilities to Apollo-owned insurer Athene are challenging private equity’s role in retirement.

• DOGE staffer resigns over racist posts

• Lawmakers push to ban DeepSeek app from U.S. government devices

• Hydrogen-truck maker Nikola explores bankruptcy filing

• Amazon earnings: shares fall after weaker-than-expected outlook is issued

• Power stocks had been on an AI tear. Then came DeepSeek.

• Arm stock falls after chip designer gives muted outlook

This newsletter was compiled by Brian Gormley, Zachary Cole and Yuliya Chernova.

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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