Y Combinator Faces Backlash Over Funding Clone Startup & SoftBank to Invest $500 M in OpenAI

☕Hey there, Welcome to today's quick rundown in the Venture Daily Digest Newsletter. We've got the scoop on startup fundraising, VC funds, and some cool tech – all in just 5 minutes!

Top News

Y Combinator is being criticized after it backed an AI startup that admits it basically cloned another AI startup. PearAI, founded by Duke Pan, launched an AI coding editor that was initially a direct copy of Continue, an open-source project. The startup faced backlash for using a made-up closed license instead of the original Apache license, which Pan later corrected. The incident has sparked debates about Y Combinator's due diligence and the ethics of funding startups that closely replicate existing projects.

SoftBank's Vision Fund will invest $500 million in OpenAI's latest $6.5 billion funding round, which values the company at $150 billion. This marks SoftBank's first investment in OpenAI, as the AI startup plans to restructure its business to remove a profit cap. Apple reportedly dropped out of participating in the funding round.

Other Major News

• Morgan Stanley Raises $750 Million for 1GT Climate Fund. (Scroll To VC Updates)

• Meta's AI-powered Ray-Ban smart glasses can take photos automatically, raising privacy concerns. (Scroll To Tech Updates)

• Microsoft to face higher competition scrutiny in Germany, including over its use of AI. (Scroll To Tech Updates)

• Russia fines Google, Discord over banned content (Scroll To Tech Updates)

• How to Split Equity between Cofounders & When You Should (and Shouldn't) Split Equity Evenly? (Scroll To Featured Article)

• VC & Startups Job Opportunities (Scroll To Today’s Opportunities)

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🗞️ Startup Funding Updates

Airship, a Washington, DC-based company that provides software tools and financial products to help home services owner-operators grow their businesses, raised $4M in Pre-Seed funding. The round was led by QED Investors, with participation from Silence, Lorimer Ventures, Four Acres Capital and Twine Ventures.

Loti AI, a Seattle, VA-based company which specializes in likeness protection technology, received an additional undisclosed amount in Seed funding from Khosla Ventures. This new investment brought the total amount of capital raised to $6.65M. The seed round was led by FUSE and Bling Capital, with participation from K5 Tokyo Black, Ensemble, and AlphaEdison.

Series Entertainment, also known as Series AI, is a U.S.-based game studio startup developing AI-powered game creation tools. The company has raised a total of $35.9 million, including a recent $28 million Series A round. Investors include Netflix, Dell Technologies Capital, Andreessen Horowitz, BITKRAFT, and F4 Fund, with the latest round reportedly valuing the company at around $190 million post-money.

HPC-AI Tech, a San Francisco, CA-based AI startup specializing in AI Software Infrastructure and Video Generation, raised USD50m in Series A funding. Backers included Singtel Innov8, Sinovation Ventures, Capstone Capital, Greater Bay Area Homeland, Lingfeng Capital, and Stony Creek Capital.

Enlaye, a one year old Boston based company building AI native risk lifecycle management for the Built World has raised $1.7M in pre-seed financing. The round was co-led by Glasswing VC and Hannah Grey VC, with participation from Link Ventures.

Lucky Energy, an Austin, TX-based energy drink company, raised $11.75M in Series A funding. The round was led by Brand Foundry Ventures with additional investment from Imaginary Ventures, Sapphire Sport, and Sugar Capital, among others.

Briink, a Berlin, Germay-based AI startup dedicated to empowering ESG and sustainability teams, raised €3.85M in Seed funding. The round was led by EquityPitcher Ventures and 13books Capital, with participation from existing investors Merantix, seed + speed Ventures, and angel investors.

C2N Diagnostic, a St Louis, MO-based company which specializes in developing Alzheimer’s disease-specific fluid biomarker tests, received a $15M program-related investment from GHR Foundation (GHR).

Atlas Metrics, a Berlin, Germany-based provider of a platform for ESG compliance and sustainability performance management, received €12.2M in Series A funding. The round was led by MMC Ventures with participation from existing investors Cherry Ventures, b2venture and Redstone.

Neeve, a San Francisco, CA-based provider of a cloud platform-as-a-service for smart buildings and spaces, raised $15M in funding. The round was led by Cantor Fitzgerald and RXR.

Apono, a NYC-based leader in privileged access for the cloud, raised $15.5M in Series A funding. The round, which brought the total amount to $20.5M, was led by New Era Capital Partners, with participation from Mindset Ventures, Redseed Ventures, Silvertech Ventures, initial seed investors, and more.

Qodo (fka CodiumAI), a Tel Aviv, Israel-based provider of a generative AI code integrity platform, raised $40M in Series A funding. The round was led by Susa Ventures and Square Peg, with participation from Firestreak Ventures, ICON Continuity Fund, and Seed investors TLV Partners and Vine Ventures.

Wispr, a San Francisco, CA-based company building a natural way to interact with technology, raised $12M in funding. The round, which brought the total amount to $26M, was led by Matt Kraning, CTO, Cortex at Palo Alto Networks with participation from existing investors NEA and 8VC, along with Tim Junio (CEO, Expanse), and Alumni Ventures.

Aktis Oncology, a Boston, MA-based clinical-stage biotechnology company pioneering the discovery and development of novel targeted alpha radiopharmaceuticals to treat a broad range of solid tumors, closed a $175m Series B financing. The round was led by RA Capital Management, and co-led by RTW Investments and Janus Henderson Investors.

HungryPanda, a NYC-based overseas Asian food delivery platform, closed a $55m refinancing and fundraise. The round was led by Mars Growth Capital, a JV between Liquidity Group and MUFG, with continued support from existing investors, including Perwyn, Kinnevik, 83North, and Felix.

Podeo, a Dubai, UAE-based provider of a platform for podcasters, raised $5.4M in Series A funding. The round was led by Oraseya Capital (the VC arm of Dubai Integrated Economic Zones Authority) with participation from Ibtikar Fund, Cedar Mundi Ventures, Samarium, iSME, and returning investor Razor Capital.

Ensemble, a San Francisco, CA-based enterprise machine learning startup, raised $3.3m in seed funding. The round was led by Salesforce Ventures with participation from M13, Motivate, and Amplo.

Celestia Foundation, a modular data availability network that makes it easy for anyone to securely launch their own blockchain., raised $100M in funding. The round, which brought the total amount to $155M, was led by Bain Capital Crypto, with participation from Syncracy Capital, 1kx, Robot Ventures, Placeholder, and more.

Sequentia Biotech, a Barcelona, Spain-based bioinformatics company focused on the analysis and application of omics data, raised €10M in Equity funding. The round was led by Seventure Partners and EIC Fund.

Mindpeak, a Hamburg, Germany-based company which specializes in AI-powered pathological solutions, raised $15.3M in Series A funding. The round was led by ZEISS Ventures and InnoVentureFund with participation from AI.FUND, the European Innovation Council Fund, and others.

RD Technologies, a Hong Kong-based company providing a financial platform for Web2 and Web3 services, raised US$7.8M in Series A1. Backers included from HongShan, Hivemind Capital, Aptos Labs, Hash Global, SNZ Capital, Solana Foundation, Anagram, Upward Capital, ZhongAn Digital Asset, HashKey Group, Dragonfly, Bright Venture, and Eminent Vision.

11x.ai, based in the United States, develops AI-powered sales development bots for lead generation and customer outreach. The company has raised approximately $74 million in total funding, including a recent $50 million Series B round led by Andreessen Horowitz. Other investors include Benchmark, 20VC, Project A, Lux Capital, and SV Angel, with the latest round valuing the company at around $350 million.

📰 Venture Capital Updates

Index Ventures is expanding its New York-based investing team, planning to add 3-4 new members within a year. The firm sees New York's ecosystem as advantageous due to its high density of customers, especially in health and finance sectors, and its role as a gateway for European companies entering the U.S. market. Despite online discourse favoring San Francisco, Index believes New York's startup scene is thriving, citing successful investments like Datadog and Cockroach Labs.

Morgan Stanley Investment Management held the final close of the 1GT climate private equity fund (1GT), at $750M. The investor group was led by a number of institutions in Europe, Japan and North America.

📌 Featured Article

How to Split Equity between Cofounders & When You Should (and Shouldn't) Split Equity Evenly?

Founders often ask how they should split equity with their co-founders...
If you search the web on this topic, you will see horrible advice, typically advocating for significant inequality among different founding team members.

A lot of founders follow this trend because of the following reasons:

• I came up with the idea for the company

• I started working months before my co-founder

• This is what we agreed to

• My co-founder took a salary for n months and I didn't

• I started working full-time & months before my co-founder

• I am older/more experienced than my co-founder

• I brought on my co-founder after raising n thousands of dollars

• I brought on my co-founder after launching my MVP

• We need someone to a tie-break in the case of founder arguments

Founders tend to make the mistake of splitting equity based on early work.

All of these lines of reasoning screw up in four fundamental ways:

• It takes 7 to 10 years to build a company of great value. Small variations in year one do not justify massively different founder equity splits in years 2-10.

• Startups often fail, so the more motivated the founders, the higher the chance of success. Giving founders a larger equity stake can increase their motivation and drive.

• Investors view founder equity splits as a signal of how the CEO values their co-founders. Unequal splits can imply that certain founders are not highly valued, which can deter investment.

• Dramatic equity disparities can overemphasize the initial idea rather than the team's ability to execute and generate traction. Startup success relies more on execution than the original concept.

Equity should be split equally (or near equally) because all the work is ahead of you. My advice: Split equal (or close to equal) equity splits among co-founders.

• These are the people you are going to war with.

• You will spend more time with these people than you will with most family members.

• These are the people who will help you decide the most important questions in your company.

Finally, these are the people you will celebrate with when you succeed. I believe equal or close to equal equity splits among founding teams should become standard. If you aren't willing to give your partner an equal share, then perhaps you are choosing the wrong partner.

[Check out our Venture Curator newsletter - to get insights on startups, AI and venture capital from leading founders & investors]

📑 Startup’s Latest Buzz

Acquisition & Going Public

Davenforth, an Austin, TX-based company that launched a new managed IT, voice, and networking platform, acquired TeleCloud, a Dallas, TX-based cloud communication and connectivity provider, and Third Generation, a Pittsburgh, PA-based provider of cloud communication services.

Equativ, a Paris and New York based independent ad tech company, announced the strategic acquisition of Kamino Retail, a Paris, France-based flexible and agnostic on-site retail media platform designed for retailers.

Layoffs & Bankruptcy

Drata, a security compliance automation platform, has laid off 9% of its workforce (40 people) despite reporting strong growth metrics earlier.

Startups & People

Russia fined Google and Discord 3.5 million roubles each for failing to remove or restrict access to content deemed illegal. The fines are part of Russia's ongoing efforts to penalize foreign tech platforms for non-compliance. Both companies have faced increasing pressure in Russia, especially after Google's blocking of YouTube channels related to Russian media following the Ukraine invasion.

🤖 Latest In Tech

Meta's AI-powered Ray-Ban smart glasses can take photos automatically, raising privacy concerns. When asked if these images would be used to train AI models, Meta refused to provide a clear answer. This lack of transparency is particularly concerning given the glasses' new real-time video feature, which could capture and process numerous images without the user's explicit awareness.

Germany's Federal Cartel Office has designated Microsoft as a company with "paramount significance for competition across markets." This designation, lasting five years, allows the regulator to closely monitor Microsoft's activities, particularly in generative AI and cloud computing. The decision applies to Microsoft as a whole, giving the German authority broader powers than the EU's Digital Markets Act to intervene if it deems Microsoft's actions are hampering competition.

ByteDance plans to develop a large-language AI model using Huawei's Ascend 910B chips, as U.S. restrictions push the company to domestic suppliers. The constrained supply of chips has delayed the model's development, though ByteDance continues to use Ascend chips for less computationally intensive tasks. Despite challenges, ByteDance remains one of the largest buyers of both Huawei and Nvidia AI chips in China.

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