Venture capital firm Greycroft this week told investors that it will refocus its core strategy around AI startups, according to a letter obtained by Axios.

Why it matters: The move is emblematic of the broader VC market, but it also caused internal friction at Greycroft that will result in two longtime partner departures.

Behind the scenes: Greycroft in April announced that it had raised around $1 billion for a pair of new funds — its seventh early-stage flagship fund and its fourth growth fund — after about a year in market.

• At around the same time, the 17-year-old firm began discussing the AI-centric strategy shift, multiple sources tell me and Axios' Lucinda Shen. It will continue to back health care and financial tech startups, but through the lens of what its letter calls "vertical software that is powered by artificial intelligence."
• The change away from sector-based core investing is said to have gone too far for Ellie Wheeler, an 11-year Greycroft vet who focuses on health care, and Will Szczerbiak, who joined Greycroft in 2015 with a heavy focus on enterprise fintech.
• Moreover, both Wheeler and Szczerbiak are New York-based partners, at a time when Greycroft is opening its first Bay Area office to capitalize on local AI talent — including the hiring of a new partner and the expected addition of four other investment professionals.
• Wheeler and Szczerbiak are expected to leave Greycroft at year-end, along with three more junior investment professionals. In its letter to investors, the firm writes: "They are both excellent investors, have been valuable members of our team, and have our full support in what they want to do next."

The intrigue: The pending departures were first reported by The Information, which suggested they were layoffs related to a disappointing fundraising haul.

• It's true that Greycroft didn't hit its ambitious "hard caps," but it did meet targets and raised more than during prior fundraises. It also currently employs more investment professionals than it did at the beginning of the year.

What's next: Greycroft sent the investor letter in response to The Information piece, saying it had planned to unveil its new strategy in November. It writes:

"The AI market today appears to have many similarities to the days of the early Internet. We have opportunities to invest across the entire stack, ranging from technical building blocks to the first commercial applications ... This looks a lot like other software supercycles we have seen over the last 17 years."

• It's also worth noting that Alan Patricof, Greycroft's 88-year-old co-founder and chairman emeritus, recently told me that AI is a "bigger and more profound revolution" than gene splicing, PCs, the internet or cloud computing."

Editor's note: Greycroft was an early investor in Axios, although it no longer holds any ownership position. It also invested in Axios HQ, a software spinout in which some Axios employees have equity.

The U.S. House of Representatives soon may move to make Rep. Patrick McHenry (R-N.C.) temporary speaker, following a series of failed GOP nominations. A vote could even come later today, if and when Rep. Jim Jordan (R-Ohio) loses for a third time.

Why it's the BFD, beyond stemming the D.C. dysfunction: Crypto and crypto investors don't have a lot of heroes right now, but one of them seems poised to become one of America's most powerful politicians.

• McHenry has a lengthy history of interest in crypto and other financial technologies, including his sponsorship of legislation that would create a statutory framework for digital asset regulation (nicknamed the "McHenry Bill").
• Some crypto sources even believe he could serve as a House check on Sen. Elizabeth Warren (D-Mass.), a crypto skeptic who yesterday tied the asset class to money laundering by Hamas.
• McHenry's most likely successor as chair of the House Financial Services Committee would be Rep. French Hill (R-Ark.), who's also largely supportive of crypto.

The bottom line: There's not much difference between an empowered temporary speaker and a permanent one, except that there are some questions as to whether McHenry would be third in line for the presidency or entitled to participate in certain intelligence briefings. Go deeper.

A few legal developments to keep an eye on:

Three major music publishers, including Universal, have sued Amazon-backed AI company Anthropic for copyright violations. This isn't the first such litigation against foundational AI unicorns, and poses a very costly risk to their business models. Go deeper.

Three firms caught up in the FTX contagion allegedly lied to customers about risk, according to a lawsuit today by New York attorney general Letitia James. The defendants are Gemini Trust, Genesis Global and Digital Currency Group. Go deeper.

A U.S. congressional committee is asking venture firm Sequoia Capital for information on its investments in Chinese AI, quantum computing and semiconductor companies. You might recall that Sequoia recently spun off its China group into an independent firm called HongShan. Read the letter.

• Employment Hero, an Australian employment management platform, raised A$263m in Series F funding. TCV led, and was joined by insiders Insight Partners, AirTree, Seek and OneVentures. www.employmenthero.com

🚑 Waymark, an SF-based Medicaid provider enablement startup, raised $42m. Lux Capital led, and was joined by CVS Health Ventures, Andreessen Horowitz and NEA. https://axios.link/3FmH20z

🚑 Petfolk, a Charlotte-based vet care company, raised $40m in Series B funding, as first reported by Axios Pro. Movendo Capital led, and was joined by White Star Capital and Idea Farm Ventures. https://axios.link/492gkrC

• Hivebrite, a Paris-based community engagement platform, raised $37m in Series B funding. Quadrille Capital led, and was joined by insider Insight Partners. https://axios.link/3FoOmsH

• SynFutures, a decentralized crypto derivatives exchange, raised $22m in Series B funding. Pantera Capital led, and was joined by Susquehanna International Group and HashKey Capital. https://axios.link/46wgeHc

• Darwinium, an SF-based fraud detection startup, raised $18m in Series A funding. USVP led, and was joined by Blackbird, Airtree Ventures and Accomplice. https://axios.link/3Q4u1xN

🚑 Pair Team, a provider of community-based health care to Medicaid populations, raised $9m in Series A funding, as first reported by Axios Pro. Next Ventures led, and was joined by YC, PTX Capital, Kapor Capital and Kleiner Perkins. https://axios.link/3MvijeL

• Anyplace, an SF-based hospitality startup, raised $8.3m in Series B funding from Launch Fund, CapitalX, Gaingels, Riverside Ventures, Potluck Ventures, MSIVC, FreakOut Shinsei Fund and Delight Ventures. https://axios.link/3tEEgRV

• Mediatool, a Swedish media management platform for advertisers, raised €7m from Fairpoint Capital and eEquity. www.mediatool.com

• Snappy, a Toronto-based provider of restaurant management SaaS, raised C$7m in Series A funding led by Golden Section Ventures. www.gosnappy.io

• Mon Petit Placement, a French digital savings startup, raised €6.5m from backers like La France Mutualiste. https://axios.link/3Qlbxdw

• Showroom B2B, a trading platform for small garment retailers in India, raised $6.5m in seed funding, as first reported by Axios Pro. Jungle Ventures led, and was joined by Accion Venture Lab, Saison Capital and ICMG Partners. https://axios.link/3FmvMkL

⚡ Skoon Energy, a Dutch clean energy rental equipment platform, raised $5.6m in Series A funding, as first reported by Axios Pro. Blue Bear Capital led, and was joined by Graduate Entrepreneur Fund. https://axios.link/45ydfg1

• Vopero, an online clothing resale marketplace for Latin America, raised $4m. Cencosud Ventures led, and was joined by insider Grupo Axo. https://axios.link/3M38kN9

• Natrx, a Raleigh, N.C.-based developer of coastal resilience infrastructure, raised $3.5m in seed funding. Ponderosa Ventures and Oval Park Capital co-led, and were joined by Fulcrum Financial Partners, Silverstrand Capital and Titan Cement. https://axios.link/3tzTkjz

• Lanes & Planes, a German corporate travel booking and billing company, raised $3m in Series B funding. Smash Capital led, and was joined by Battery Ventures, Coparion, DN Capital and Allron. https://axios.link/3S4sPgl

⚡ Elyos Energy, an energy optimization startup focused on commercial buildings, raised $3m in seed funding from Rebel Fund, Zeno Partners and Endgame Capital. https://axios.link/45ByLk3

• Grandstand, a startup that helps athletes monetize their fan bases, raised $2.75m in seed funding from Will Ventures. www.grandstand.io

• Convoy, a Seattle-based logistics startup once valued by VCs at $3.8b, is winding down its core trucking marketplace and today will lay off a majority of its remaining workers, Axios' Kia Kokalitcheva reports.

• Antin Infrastructure Partners and Brookfield Infrastructure Partners each are considering takeover kids for Techem, a German marketing firm majority owned by Partners Group, per Reuters. A deal could be valued at between €7b and €9b. https://axios.link/46y95q3

🚑 Ardian increased its stake to 92% in Dedalus, an Italian provider of health care and diagnostic software. www.dedalus.com

🚑 Atlantic Street Capital acquired Brown's Medical Imaging, an Omaha, Neb.-based medical imaging company. www.brownsmedicalimaging.com

• CenterGate Capital acquired Cartridge Technologies, a Rockville, Md.-based provider of managed printing services to the federal government, from Broadtree Partners. www.ctimd.com

• I Squared Capital agreed buy Arriva, operator of London's red double-decker buses, from Deutsche Bahn. No financial terms were disclosed, but prior reports put the price tag at around €1.6b. https://axios.link/3FlI3Gr

🚑 Reynolda Equity Partners acquired a majority stake in Conquest Research, a Winter Park, Fla.-based clinical trial site services provider. www.conquestresearch.com

🚑 Abivax, a French developer of therapies for chronic inflammatory diseases, reset its Nasdaq float terms to 20.3m shares being offered at $11.60-$13. It previously planned to sell 18.7m shares at $13.39, which was the as-converted price that Abivax shares traded at on the Euronext Paris (ABVX). https://axios.link/3QmpU1f

• Grand Centrex, a Singapore-based video game publisher and distributor, agreed to go public at an implied $1.2b valuation via RF Acquisition Corp. (Nasdaq: RFAC), a SPAC led by Tse Ng (Ruifeng Wealth Management). https://axios.link/3tKCsqj

• BitGo, a Palo Alto, California-based digital asset platform valued by VCs at $1.75b, acquired HeightZero, a Jackson, Wyo.-based wealth management platform. https://axios.link/3S473t2

• CPSI (NASDAQ: CPSI) acquired Viewgol, a Frisco, Texas-based ambulatory revenue cycle management company, for $36m in cash and up to $31.5m in earnouts. www.cpsi.com

• Graham Nash is selling his music catalog to Irving Azoff's Iconic Artists Group. https://axios.link/45AEdDJ

🚑 Henry Schein (Nasdaq: HSIC) acquired Shield Healthcare, a Valencia, Calif.-based provider of homecare medical products. www.shieldhealthcare.com

• J.M. Smucker (NYSE: SJM) agreed to sell its Canadian fermented condiment brands to TreeHouse Foods (NYSE: THS) for $20m. https://axios.link/3Fn2Klb

• Qantas Airways (ASX: QAN) abandoned its A$611m takeover offer for charter flight operator Alliance Aviation Services (ASX: AQZ), after opposition from Australian antitrust regulators. https://axios.link/3Snw6I3

⚡ Wallbox (NYSE: WBX) acquired the assets of German EV charging company ABL for around €15m. https://axios.link/3rPsYtA

• Breakpoint Capital, a VC firm led by James Payne (former CEO of MoPub), is raising $10m for its debut fund, per an SEC filing.

• Founders Future, a French VC firm, acquired equity crowdfunding marketplace Sowefund. https://axios.link/3FpSFnq

• KKR raised around $3b for its third growth equity fund focused on tech companies in North America, Europe and Israel. www.kkr.com

• Charlie Teeple joined HarbourVest Partners as a managing director responsible for credit-specific operations. He previously was with Liberty Mutual Investments. www.harbourvest.com