Good day. Earlier this week, we wrote about the scenarios that arise when founders quit to join a big AI shop, or sell their startup too early in an ‘acquihire’ designed to seize the company’s staff. Either can leave venture investors feeling blindsided.

If you are a founder with venture backers, what do you think they need to understand about this impulse? If you are a VC, what have you changed about your own investing practice in response to this trend? Please email responses to vcnews@wsj.com.

Last week, we asked about the discrepancy between historic exit sizes that would still be far too small for the many startups gunning for decacorn and above status. Here are edited and condensed highlights of the responses:

Darian Shirazi, general partner, Gradient: Technology companies now address a vastly larger market and mediate a much greater share of economic activity. I believe it is safe to assume that exit values will continue to increase over the coming years and founders should strive to optimize for larger outcomes if their business is performing well.

The implication for venture investors is not that ownership no longer matters. It is that ownership should be optimized for expected dollar returns rather than anchored to a fixed 20% target. If the credible outcome for an exceptional company is materially larger, owning a smaller share may generate the same or better fund-level return. It also means that missing out on a great company is even more costly than ever before.

Caleb Appleton, partner, Bison Ventures: Company scale alone does not guarantee strong returns. A startup can ultimately become a decacorn or centicorn and still produce a less compelling venture outcome if investors entered at a price that already assumed much of the upside, which is what we're seeing with many mega-rounds today. VCs need to continue prioritizing backing differentiated companies early to leave room for value to compound. 

Neil Sequeira, founder and partner, defy vc:
AI will likely create a new generation of outsized companies, but the fundamentals of venture investing remain the same. The right fund size, ownership strategy and disciplined approach allow firms to generate exceptional returns across a range of exit outcomes.

And now on to the news...

New VC with a consumer bent. Bryan Kim, a former partner at Andreessen Horowitz, is setting up a new venture firm, Mido Capital, and plans to raise about $100 million for its debut fund, according to people familiar with the situation. 

• He filed formation documents for Mido in Delaware last month, according to a regulatory filing. The first fund will invest in early-stage consumer AI and other companies, the people said.
• Kim didn’t respond to a request for comment.
• At Andreessen, Kim focused on consumer tech and artificial-intelligence deals. One of his standout investments was AI voice-generation company ElevenLabs.

Ram Rupireddy could hardly believe his luck in 2020 when his friend told him about a New Jersey firm pitching investment opportunities in SpaceX and other buzzy privately held companies.The investment firm, Late Stage Management, wasn’t selling actual shares, but stakes in vehicles that it said held them. Rupireddy wired over money before the end of the year. When SpaceX went public this June at a $1.77 trillion valuation, Rupireddy’s dream of a windfall seemed within reach. It’s turned into more of a nightmare. Shortly after the IPO, Rupireddy and three other investors who spoke to the Journal said they couldn’t log in to Late Stage’s web portal for investors. 

Vast, a Chinese artificial-intelligence unicorn backed by technology titans Alibaba and Baidu, is in talks with investors to get fresh capital, people familiar with the matter say. The company, which develops tools to generate 3-D models, is looking to raise funds in a round that could bring its valuation to nearly $2 billion, one of the people said.

Funds

Sequoia Capital has raised about $10 billion in new funds this year, all of it dedicated to growth and late-stage investing. The firm has distributed more than $5 billion to investors so far this year, according to a person familiar with the firm. 

G Squared, a venture-capital firm specializing in the private secondary market, closed its seventh flagship fund with $2.3 billion in commitments.

White Star Capital held the final close of its Fund IV at $250 million to continue backing startups at the Series A and B stage.

224 Ventures launched with $100 million in assets under management to invest in AI-native teams.

People

Structural intelligence technology provider StructureFlow appointed Neal Chatrath as president. He was previously chief revenue officer at Concertiv.

VEIR, a manufacturer of superconducting data-center power delivery systems, appointed Greg Mongeau as chief operating officer. He most recently served as vice president of product development at SharkNinja.

Ionic Mineral Technologies, a producer of advanced materials and critical mineral solutions, appointed Kelton Smith as chief technology officer. He joins the company from Tetra Tech.

Versana, an enterprise data and digital infrastructure provider for the syndicated loan and private credit markets, said Paul Gallant joined the company as chief product officer. He most recently held the same position at Hazeltree.

Battery Ventures promoted Brandon Gleklen to partner. He joined the firm in 2015.

Deals

Arcade.dev, an action layer for production AI agents, acquired Smithery, a public registry and hosting platform for model context protocol.

Hadrian, a Torrance, Calif.-based startup building highly automated factories for space and defense manufacturers, scored $1.37 billion in new equity financing valuing the company at $7.87 billion. Participating investors included WCM Investment Management, JPMorganChase's Strategic Investment Group, Washington Harbour Partners, Valor Equity Partners, 137 Ventures, Andreessen Horowitz, Founders Fund and others.

LifeMine Therapeutics, a Watertown, Mass.-headquartered biopharmaceutical company whose lead program focuses on organ transplant rejection, landed $263 million in funding, including a $188 million Series E round led by Milky Way Investments. Bezos Expeditions, RA Capital Management, GV and ARCH Venture Partners were also Series E participants.   

WindBorne Systems, a weather intelligence startup building an atmospheric sensing network, landed $37 million in Series B funding co-led by Khosla Ventures and Galvanize.

Sapiom, a San Francisco-based platform that helps builders ship, run and scale AI agents, snagged $35 million in Series A funding. Dragonfly led the round, which saw contributions from Accel, Gradient, Coinbase Ventures, Operator Collective and others. Haseeb Qureshi, managing partner at Dragonfly, will join the company’s board.

Naïve, a Palo Alto, Calif.-based AI lab building foundational infrastructure for autonomous companies, raised $28.5 million in Series A funding. Nexus Venture Partners led the investment, which included participation from Y Combinator, Liquid 2 Ventures and others.

Ordway, a Washington, D.C.-based billing and revenue management platform, secured $20 million in additional equity and debt funding led by Harbert Growth Partners.

Wordsmith AI, an Edinburgh-based platform for in-house legal teams, added $14 million to the company’s Series B round from investors including Intact Private Capital and FT Ventures. 

Malachyte, a New York-headquartered startup providing behavior intelligence to consumer e-commerce brands, closed a $10 million seed round co-led by Bessemer Venture Partners and Gradient.

Mitti Labs, a startup whose technology helps reduce methane emissions from rice farming, nabbed $9.5 million in Series A funding from investors including Aramco Ventures and Lightspeed India Partners. The company has offices in India and New York.

Pinegap, a New York-headquartered platform that automates the workflows of institutional buy-side analysts, collected $8 million in Series A funding led by Stellaris Venture Partners.

• A User’s Guide to the Universe of Rogue AI Bots
   
• Doctors Don’t Want Patients to Read Test Results With AI. They’re Doing It Anyway.
   
• LinkedIn Wants Users to Lean Less on AI. Maybe a Lot Less.
   
• Nielsen to Buy DoubleVerify
   
• Crypto Trader Wintermute Steps Onto Regulated Wall Street With Broker License
   
• Meta AI Model Hacked Outside Company, Adding to Concerns Over Rogue Bots
   
• SoftBank Uses OpenAI Stake to Borrow $10 Billion
   
• SpaceX, Tesla to Build Chip Plant in Texas to Meet Compute Demand 

This newsletter was compiled by Yuliya Chernova and Zachary Cole.

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

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

Join us on LinkedIn.