Axios Pro Rata

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September 27, 2023

Top of the Morning

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Illustration: Shoshana Gordon/Axios

A group of venture capital firms is working with the U.S. Commerce Department to develop "responsible AI" guidelines for themselves and their portfolio companies, Axios has learned.

Why it matters: This effort is designed to cover thousands of current and future startups, whereas most other AI self-regulation talks have been limited to Big Tech companies and major AI model vendors.

  • It's also an attempt to correct for the "move fast and break things" philosophy that drove the rise of social media technologies, without considering second or third-order effects.

What to know: The current framework, which is being designed by a diverse set of stakeholders, asks VC firms to consider certain commitments when conducting due diligence, and also that they encourage portfolio companies to do the same.

  • The top tentpole is a commitment to "responsible AI," which includes "establishing internal AI governance processes, mitigating risk, protecting privacy, and prioritizing security."
  • Firms and portfolio companies also are asked to foster transparency about decision-making, audit and test for product safety and make regular and ongoing improvements.

Behind the scenes: Dozens of firms are said to have signed so far, including Bain Capital Ventures, General Catalyst, Lux Capital, Mayfield and IVP.

  • The organizer is Responsible Innovation Labs (RIL), a coalition of investors and tech execs that first became known for its work around the collapse of Silicon Valley Bank.

What they're saying: "Every company will eventually be an AI company, like every company was a mobile company, and they're all going to be using these models that are effectively black boxes," says Hemant Taneja, a co-founder of RIL and managing partner of General Catalyst. "So the question is how to use AI responsibly to deliver core services, in everything from education to financial wellness to education."

  • A senior Commerce Department official adds: "Commerce provided feedback to Responsible Innovation Labs regarding our Department's priorities because we believe voluntary commitments from industry represent a necessary and impactful step in the development of responsible AI standards. These commitments are critical first steps that can serve as a bridge to regulation. We're encouraged to see venture capitalists, startups, and business leaders rallying around this and similar efforts."

The bottom line: Venture capitalists don't typically have equity control of their portfolio companies, although they can collectively hold majority stakes.

  • So this is less about forcing mechanisms and more about how to create foundational company cultures around AI, and to encourage a VC ecosystem that's swimming in the same direction on tech's biggest platform shift in a generation.
  • It's also about heading off top-down government regulation that some VCs worry could impede tech innovation and, consequently, investment returns.

The BFD

Illustration of a gavel handle made from the Amazon logo

Illustration: Annelise Capossela/Axios

The Federal Trade Commission yesterday sued Amazon, accusing the company of engaging in anticompetitive practices within its core retail business.

Why it's the BFD: This could be the first step in breaking up one of the world's largest and most powerful conglomerates.

Details: The complaint, which was joined by 17 state attorneys general, alleges that Amazon illegally uses "anti-discounting tactics" that prevent other online retailers from offering lower prices, and also that it "effectively requires" Amazon sellers to use the company's "costly" fulfillment services.

What the FTC says: "Amazon's actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon."

What Amazon says: "The lawsuit filed by the FTC today is wrong on the facts and the law .... The practices the FTC is challenging have helped to spur competition and innovation across the retail industry."

The bottom line: The FTC is asking for structural relief but doesn't identify any desired divestitures. Instead, it first wants a finding of liability, and then would work on solutions.

Venture Capital Deals

• OpenAI is in talks to raise new funding at a valuation of between $80b and $90b, structured as an employee tender, per the WSJ. https://axios.link/46w3Kix

🚀 Sierra Space, a Louisville, Colo.-based commercial space transportation and infrastructure company, raised $290m in Series B funding at a $5.3b valuation. MUFG, Kanematsu Corp. and Tokio Marine & Nichido co-led, and were joined by insiders Coatue, General Atlantic, Moore Strategic Ventures, BlackRock and AE Industrial Partners. https://axios.link/3PWSTJ6

• H55, a Swiss developer of electric and hybrid propulsion and battery systems for aviation, raised a $49.3 in Series C funding from ND Capital, Tippet Venture Partnersand RTX Ventures. www.h55.ch

• Lumu, a Doral, Fla.-based enterprise cybersecurity startup focused on real-time compromises, raised $24m in Series B equity funding (plus $6m in debt) led by Forgepoint Capital. https://axios.link/46tDN2S

• Eloelo, an Indian gaming and livestreaming platform, raised $22m co-led by Courtside Ventures and Griffin Gaming Partners. https://axios.link/3LBABKA

• Traydstream, a London-based trade document automation startup, raised $21m in Series B funding co-led by Pivot Investment Partners and e& capital. https://axios.link/3RAsHVR

🚑 Cartwheel, a Cambridge, Mass.-based telemental health startup focused on schools, raised $20m in Series A funding, per Axios Pro. Menlo Ventures led, and was joined by Reach Capital and insiders General Catalyst, BoxGroup and Able Partners. https://axios.link/48mKTYO

• Kolena, an SF-based provider of AI model testing tools, raised $15m. Lobby Capital led, and was joined by SignalFire and Bloomberg Beta. https://axios.link/3RwOain

🚑 Evvy, a New York-based vaginal health startup, raised $14m in Series A funding. Left Lane Capital led, and was joined by General Catalyst, Labcorp Venture Fund, RH Capital, Ingeborg Investments, G9 Ventures, Virtue, and Amboy Street Ventures. https://axios.link/3EUpxEE

ğŸŒŽ Resourcify, a German waste management and recycling startup, raised €14m in Series A funding. Vorwerk Ventures led, and was joined by Revent, Ananda Impact Ventures, Speedinvest, BonVenture, WEPA Ventures. https://axios.link/3PsFV4a

• EchoMark, a Bellevue, Wash.-based provider of enterprise data protection software, raised $10m in seed funding led by Craft Ventures. www.echomark.com

• GeologicAI, a Canadian rock analysis startup, raised US$10m in Series A extension funding from Export Development Canada. www.geologic.ai

⚡ Neara, an Australian energy infrastructure modeling platform, raised US$10m in Series B extension funding from Prosus Ventures and insiders Skip Capital and Square Peg Capital. www.neara.com

• Timeline, a British financial planning platform, raised £10m in Series B funding. Blackfin Capital Partners led and was joined by MTech Capital. https://axios.link/3ZyYFUr

• Senser, an Israeli zero-instrumentation production intelligence startup, raised $9.5m in seed funding. Eclipse led, and was joined by Amdocs. www.senser.tech

• Vega, a British investment platform for high-net-worth individuals, raised over $8m from Motive Ventures, Picus Capital, Citi Ventures and No Label Ventures. www.vega.investments

• XL8, a San Jose, Calif.-based developer of machine translation tech, raised $7.5m in Series A funding. KB Investment led, and was joined by Atinum Investment. www.xl8.ai

🚑 NorthStar Care, a Seattle-based provider of virtual substance use disorder treatments, raised $6m in seed funding co-led by Tony Robbins and Starting Line. https://axios.link/461I3aj

• Meeno, an SF-based relationship mentoring startup, raised $5m in seed funding. Sequoia Capital led, and was joined by AI Fund and NEA. https://axios.link/3Pzq4kd

• Tune Insight, a Swiss collaboration platform for sensitive data, raised $3.4m. 14Peaks Capital led, and was joined by Inflection.xyz, Debiopharm, Zurich Cantonal Bank and insider Wingman Ventures. www.tuneinsight.com

• Verisoul, an Austin, Texas-based SaaS for detecting fake users, raised $3.25m in seed funding. Bitkraft Venturesled, and was joined by King River, Third Prime and Hashkey. www.verisoul.ai

• Cygnetise, a London-based blockchain-authorized signatory management startup, raised £2.5m in seed funding. Adjuvo led, and was joined by Massive. https://axios.link/3PROIOl

• Whipnotic, a New York-based whipped cream brand, raised $2.5m in seed funding, per Axios Pro. Backers include GTM Investments, East Dune Holdings and Crenshaw Ventures. https://axios.link/3RDj60u

☕ abCoffee, an Indian coffee chain, raised $2m in seed funding led by Tanglin Venture Partners. https://axios.link/456dBKS

🚑 StretchDollar, an SF-based small-business health benefits startup, raised $1.6 million in pre-seed funding, from Precursor Ventures, Elefund, v1vc, Kindergarten Ventures and Westerly Ventures. https://axios.link/465NVzi

Shopify (TSX: SHOP) invested an undisclosed amount in Faire, an SF-based curated wholesale marketplace previously valued at over $12b by VC firms like Sequoia Capital and Dragoneer. https://axios.link/3PSDxF8

Private Equity Deals

• Arlington Capital Partners acquired Exostar, a Herndon, Va.-based provider of secure collaboration and risk management solutions from, Thoma Bravo. www.exostar.com

• Cinven agreed to buy €160m of bonds sold by portfolio company Eurovita, in order to help the Italian life insurer stave off liquidation, per Reuters. https://axios.link/3t55QqZ

• GIC is among the bidders for a 20% stake in Vietnamese grocer Bach Hoa Xanh from Mobile World Investment, per Reuters. https://axios.link/3PUB3Gz

🚑 Icon Infrastructure of London is in talks to acquire some U.K. assets from listed South African hospital operator Life Healthcare Group for around $1b, per Bloomberg. https://axios.link/3EUGvCY

• Range Media Partners, a management and production firm backed by Point72, acquired Stoked Management Group, an athlete-focused talent agency with clients like surfer John Florence, Peloton instructor Kendall Toole and Olympian Gabrielle Thomas. https://axios.link/3ESsWUs

⚡ Rosen Group, a Swiss maker of oil and gas pipeline testing equipment that could be valued at around $4b, could receive final takeover bids from Brookfield, Goldman Sachs, Partners Group and Thomas H. Lee Partners, per Bloomberg. https://axios.link/48wkic4

🚑 Technical Safety Services, a Berkeley, Calif.-based portfolio company of LLCP, acquired Controlled Environment Management, a Gilbert, Ariz.-based provider of controlled environment testing and related services to the life sciences market. www.techsafety.com

⚡ Titan Cloud, a Nashville-based portfolio company of Charlesbank Capital Partners, acquired Australian fuel management software firm Leighton O'Brien. www.titancloud.com

• Wren House Infrastructure is in talks to buy a 49% stake in SeaCube, a Woodcliff Lake, N.J.-based shipping container lessor, from Ontario Teachers' for upwards of $1b (including debt), per Bloomberg. https://axios.link/45beMIR

Liquidity Events

• Apax Partners and GTCR are exploring an IPO or sale process for AssuredPartners, an Orlando, Fla.-based insurance broker that could be valued at up to $16b, per Bloomberg. https://axios.link/3t7pFhw

• Onex is considering a full or partial sale of U.S. trade show organizer Emerald, per Reuters. https://axios.link/3RAtaHm

• PAI Partners is seeking a buyer for Apleona Group, a German facilities manager that could fetch €4b, per Bloomberg. https://axios.link/45bFKzY

🐮 Wind Point Partners hired William Blair and BMO to find a buyer for Gehl Foods, a Germantown, Wis.-based dairy products maker that could fetch over $600m, per Reuters. https://axios.link/3RJcAVI

More M&A

🚑 Alfasigma agreed to buy Intercept Pharmaceuticals (Nasdaq: ICPT), a Morristown, N.J.-based drugmaker focused on liver diseases,for $794m in cash, or $19 per share (82% premium over Monday's closing price). https://axios.link/3RDYPYu

• AutoNation (NYSE: AN) made a £447m takeover offer for Pendragon (LSE: PDG), a British auto dealer that previously received a sweetened £447m bid from its largest shareholder, Hedin Mobility Group, and PAG International. https://axios.link/466lOQe

⚡ Chesapeake Utilities (NYSE: CPK) agreed to buy Florida City Gas for $923m in cash from NextEra Energy (NYSE: NEE). https://axios.link/3RCUdSv

🚑 Zeus Co., a family-owned maker of medical equipment components based in South Carolina, is exploring a sale that could fetch at least $4b, per Reuters. https://axios.link/3PRXyfg

It's Personnel

• Guy Metcalfe is retiring as chairman of Morgan Stanley's real estate banking business. https://axios.link/3ZzFFF7

• Greg Ogard joined Scottsdale, Ariz.-based PE firm Montage Partners as a vice president. He previously was with Platte River Equity. www.montagepartners.com

• Liz Wessel, founder of WayUp who most recently was a visiting partner at YC, joined First Round Capital as a partner. www.firstround.com

Final Numbers

Data: FactSet, Axios calculations; Chart: Axios Visuals
Data: FactSet, Axios calculations; Chart: Axios Visuals

All three of the big post-Labor Day IPO issuers are now trading below their opening prices, although both Arm and Klaviyo continue to trade above their actual IPO prices.

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