Silicon Valley is pushing senators to follow the House's lead in reviving a favorable tax benefit that disappeared several years ago, Axios' Ashley Gold and I report.

Why it matters: This could change the math for a slew of startups, and even Big Tech companies.

The big picture: U.S. companies currently are unable to fully deduct many software development and other R&D costs, including certain employee salaries, from their taxable income.

• That's because of a change made to Section 174 of the tax code during the 2017 tax bill negotiations, in order to make the budgetary impact of tax cuts more politically palatable. It became effective in 2022.
• It requires that such costs be amortized over five years, rather than taken in the year the costs are incurred — much like a one-time capital outlay that depreciates, even though compensation expenses tend to be repeated annually.

Zoom in: Startups tend to be unprofitable, which should mean that they don't pay federal tax.

• But that got flipped on its head with the Section 174 change, since many of a startup's costs now get applied to future taxes. In short, it can make unprofitable companies look profitable for tax purposes.
• According to a recent survey by fintech upstart Mercury, which was shared exclusively with Axios, 73% of respondents say that their companies have had a negative financial impact from the 2022 change. Some 44% of respondents said it forced operational changes, including canceled projects and layoffs.

How it works: The House bill would allow for full expensing in the same year that the costs were incurred, but would not apply that change retroactively to 2022.

• A proposal from the Senate Finance Committee would make the change to Section 174 retroactive to 2022 for small companies and allow acceleration of remaining deductions for larger companies.

Driving the news: More than 2,300 individuals recently signed a letter that was circulated on the Hacker News site run by startup incubator Y Combinator, asking the Senate to prioritize the retroactivity carveout.

• They included employees of OpenAI, Airbnb, Spotify, and Redfin.

By the numbers: According to the Congressional Budget Office, the House provision — without retroactivity — would add $118 billion to the deficit over the next decade.

The bottom line: This is hardly the most pressing issue facing senators, as they work through possible Medicaid and SALT changes, but it could have a significant impact on America's innovation economy.

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Meta (Nasdaq: META) is in advanced talks to hire Daniel Gross and Nat Friedman as part of its new AI lab, per multiple reports. It also would take a stake in the pair's venture capital firm, NFDG.

Why it's the BFD: This would be the second time this month that Meta has poached the top exec of an AI decacorn, as Gross currently serves as CEO of Safe Superintelligence.

• Unlike the recent deal with Scale AI and Alexandr Wang, this one seems contentious. CNBC reports that Meta recently tried to acquire Safe Superintelligence but was rebuffed by founder Ilya Sutskever.
• Safe Superintelligence recently was valued at $32 billion in a Greenoaks-led round that also included Nvidia, Lightspeed, a16z, Alphabet, and DST Global.
• As we discussed in March 2024, this generation of AI founders seems unusually willing to leave their startups for incumbents.

Zoom in: Meta, which has never had a corporate venture fund, would buy out limited partners in NFDG, per The Information.

• A Meta spokesperson declined to confirm any news on Gross and Friedman (formerly CEO of Github) to Axios, saying only: "We will share more about our superintelligence effort and the great people joining this team in the coming weeks."

The bottom line: Mark Zuckerberg is trying to acqui-hire his way to the head of the AI class.

🚑 Tennr, an New York-based provider of patient referral automation tools, raised $101m at a $605m valuation led by IVP, with participation from new backers ICONIQ and GV, plus insiders Lightspeed, a16z, Foundation Capital, and YC. axios.link/4kNvMxg

🚑 PolyActiva, an Australian ocular biotech, raised A$40m in Series C funding led by an undisclosed Australian sovereign wealth fund, with insider Brandon Capital also participating. axios.link/43PCmxu

• Senra Systems, a Renondo Beach, Calif.-based developer of wire harnesses for aerospace and defense applications, raised $25m in Series A funding. Dylan Field and CIV led, joined by General Catalyst, Sequoia Capital, Founders Fund, 16z, 8VC, and Pax. axios.link/3Tzz8YI

🌎 Elemental Advanced Materials, a Houston-based developer of low-carbon nanomaterials, raised $20m led by Taranis. elementaladm.com

• Mercanis, a German procurement tech startup, raised $20m in Series A funding. Partech led, joined by AVP and insiders SignalsVC, Capmont Technology, and Speedinvest. axios.link/3ZGECVg

⚡ Ostrom, a German green energy solutions provider, raised €20m in Series B funding. Eneco Ventures led, joined by insiders SE Ventures, Union Square Ventures, Adjacent, Übermorgen, and J12. axios.link/3SXAf4v

• Tadaweb, an OS that collects and analyzes public data, raised $20m led by Arsenal Growth and Forgepoint Capital, with Wendel participating, per Axios Pro.

• Tensec, a cross-border financial services startup, raised $12m in seed funding. Costanoa Ventures led, joined by Quiet Capital, WillowTree Investments, Cambrian VC, Ignia Partners, Montage Ventures, Renegade Partners, and Endeavor Scale Up Ventures. axios.link/3HPK6Hd

• Grifin, a retail investing app, raised $11m in Series A funding led by Nava Ventures, with Alloy Labs, Draper Associates, Gaingels, Nevcaut Ventures, and TTV Capital participating. axios.link/4e6Gf4o

• Gradient Network, a developer of decentralized AI on Solana, raised $10m in seed funding. Pantera Capital and Multicoin Capital co-led, joined by HongShan. axios.link/4l669s1

🚑 Infinity Bio, a Baltimore-based immune response mapping company, raised $8m in Series A funding led by Illumina Ventures, with participation from PTX Capital, Blackbird BioVentures, and Propel Baltimore Fund. axios.link/44oQ0Yr

🚑 GeneCentric Therapeutics, a Durham, N.C.-based gene expression startup, raised $8m in Series C funding. Hatteras Venture Partners led, joined by IAG Capital Partners, Alexandria Venture Investments, and Labcorp. axios.link/3HOp2AU

• Project Eleven, a developer of quantum-resistant bitcoin security solutions, raised $6m. Variant Fund and Quantonation led, joined by Castle Island Ventures, Nebular, and Formation. axios.link/4l8qyvU

• NaroIQ, a German fintech for launching ETFs, raised €5.8m in a seed round led by Magnetic, with participation from Redstone. axios.link/43RgdyN

🚑 DESKi, a French maker of cardiac imaging software, raised €5.2m in seed funding. Racine2 led, joined by BNP Paribas Développement, Épopée Gestion, Good Only Ventures, Better Angle, and NACO. axios.link/4ef4bmn

• TAC, a DeFi startup focused on the Telegram ecosystem, raised $5m led by Hack VC. axios.link/4jSg16Z

• SaturnX, a Dubai-based stablecoin infrastructure startup, raised $3m in seed funding led by White Star Capital. axios.link/4k4yttp

• Nook, a crypto-focused savings app, raised $2.5m led by Coinbase Ventures. axios.link/4ndWkK2

• Accel-KKR received a minority investment from Pact Capital Partners, a GP stakes firm focused on the midmarkets. axios.link/4e9pXYv

• Ares Management acquired three funds previously controlled by Indonesia's Northstar Group, per Bloomberg. axios.link/4n5a3T7

• Bayview Asset Management agreed to acquire San Diego-based mortgage lender Guild Holdings (NYSE: GHLD) for $1.3b. axios.link/45xPwk2

• Bitdefender, a Romanian cybersecurity company backed by Vitruvian Partners, agreed to acquire Mesh Security, an Irish email security startup backed by Elkstone and Enterprise Ireland. axios.link/3ZZHsVF

• Duration Capital Partners invested more than $600m for a minority stake in Watco, a Kansas-based transportation service company whose assets include short line railroads and ports. axios.link/4e9H5O0

• Garnett Station Partners formed a commercial roofing services platform called Skybound Service Partners, including an acquisition of Atlanta-based Roof Technology Partners. skyboundservicepartners.com

• Haveli Investments agreed to buy NoSQL database provider Couchbase (Nasdaq: BASE), for $1.5b. or $24.50 per share. axios.link/3HQ7wfs

• Heartland Paving Partners, a Soundcore Capital Partners portfolio company, acquired Macadam Co., a Mid-Atlantic pavement solutions provider. heartlandpavingpartners.com

• Macquarie Group acquired stakes in three U.K. airports from Ontario Teachers' Pension Plan. axios.link/3ZBo2WT

• Main Capital Partners acquired majority stakes in Dutch auto leasing and rental software providers CarWise and AutoDisk at a combined enterprise value north of €200m. axios.link/4022Sl1

• Axiom Intelligence Acquisition 1, a SPAC targeting European infrastructure, raised $175m in an upsized IPO. axios.link/43uaRsW

• CSLM Digital Asset Acquisition III, a financial infrastructure digitization SPAC, filed for a $200m IPO. axios.link/445cbBG

• Dot Ai, an asset intelligence tech company, completed its reverse merger with ShoulderUp Technology Acquisition Corp., and will trade on the Nasdaq (DAIC). axios.link/45PrTUf

• Pioneer Acquisition I, a health care SPAC, raised $220m in its IPO. axios.link/4mzBMLH

🚑 Amulet Capital is exploring a sale of SSI Strategy, a Parsippany, N.J.-based biotech consultancy, per Axios Pro.

• Home Depot (NYSE: HD) offered to buy Georgia-based building products distributor GMS (NYSE: GMS), following an unsolicited $5b takeover bid from Brad Jacobs' QXO (NYSE: QXO), per the WSJ. axios.link/3HIOU15

• The EU will launch a full antitrust investigation into Mars' proposed $35.9b takeover of snackmaker Kellanova (NYSE: K), per Reuters. axios.link/3G5qGNT

• The French government will become the largest shareholder in satellite company Eutelsat (Paris: ETL), following a €1.35b capital infusion. axios.link/4kJAFYg

• NerdWallet (Nasdaq: NRDS) acquired Future You Wealth, a New York-based RIA with $178m in AUM. axios.link/4k2cPWF

• Unilever (NYSE: UL) is weighing a sale of healthy snack brand Graze, per the FT. axios.link/4kPgvMx

• Wix (Nasdaq: WIX) acquired SF-based vibe coding startup Base44 for an initial $80m. axios.link/44koyuW

• Cinven is raising between €1.5b and €2b for a new midmarket fund, per Bloomberg. axios.link/3HNzgkY

• Aquiline promoted Daniel Flueckiger, Stewart Koenigsberg, Dante La Ruffa, and Matthew Woeste to partners. aquiline.com

• Jason Lublin joined WTSL, the new media and entertainment investment firm led by Patrick Whitesell, as president and partner. He previously was CFO at Endeavor.

• Neil Moge is joining Prudential PLC as chief investment officer, succeeding Don Guo, per PE International. Moge previously spent 11 years with Goldman Sachs. axios.link/447rmu2

🚑 Carole Nuechterlein announced plans to retire as the head of Roche's corporate VC arm. axios.link/4k2pjgJ

The Buss family has agreed to sell most of its control stake in the Los Angeles Lakers at a $10 billion franchise value to Mark Walter, as first reported by ESPN.

• It's the highest price ever attached to a pro sports team sale, topping the recent Boston Celtics deal ($6.1 billion initially, rising to $7.3 billion). Like with the Celtics, the Lakers don't own their building.
• And it probably would have been even higher had there been an auction.
• But Jeanie Buss is said to have negotiated exclusively with Walter — who had a right of first refusal, based on his purchase of a 27% stake four years ago with Todd Boehly.