Top News

xAI, the Elon Musk AI company that now includes X, is launching a $300 million secondary share sale that values the combined group at a whopping $113 billion. The Financial Times has the scoop here. 

Speaking of xAI, Bloomberg is reporting that the company is selling $5 billion in debt at double-digit interest rates to fund massive infrastructure spend as it races to keep up with OpenAI and Google. SiliconANGLE has more here. 

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Early AI Investor Elad Gil Finds His Next Big Bet: AI-Powered Roll-Ups

By Connie Loizos

Elad Gil started betting on AI before most of the world took notice. By the time investors began grasping the implications of ChatGPT, Gil had already written seed checks to startups like Perplexity, Character.AI, and Harvey. Now, as the early winners of the AI wave become clearer, the renowned “solo” VC is increasingly focused on a fresh opportunity: using AI to reinvent traditional businesses and scale them through roll-ups.

The idea is to identify opportunities to buy mature, people-intensive outfits like law firms and other professional services firms, help them scale through AI, then use the improved margins to acquire other such enterprises and repeat the process. He has been at it for three years.

“It just seems so obvious,” said Gil over a Zoom call earlier this week.“This type of generative AI is very good at understanding language, manipulating language, manipulating text, producing text. And that’s audio, that’s video, that includes coding, sales outreach, and different back-office processes.”

If you can “effectively transform some of those repetitive tasks into software,” he said, “you can increase the margins dramatically and create very different types of businesses.” The math is particularly compelling if one owns the business outright, he added.

“If you own the asset, you can [transform it] much more rapidly than if you’re just selling software as a vendor,” Gil said. “And because you take the gross margin of a company from, say, 10% to 40%, that’s a huge lift. Suddenly you can buy other companies at a higher price than anyone else because you have that increased cash flow per business; you have enormous leverage on the business on a relative basis, so you can do roll-ups in ways that others can’t.”

So far, Gil has backed two companies pursuing this strategy. According to The Information, one is a one-year-old company called Enam Co., focused on worker productivity, which has been valued at more than $300 million by its backers, including Andreessen Horowitz and OpenAI’s Startup Fund.

Though Gil says he can’t discuss specifics of the private deals, he suggests the approach represents something new. “There used to be these technology-enabled roll-ups 10 years ago, and most of them kind of ended up being not really that much of a user of technology,” he says. “It was kind of like a thin veneer painted on to increase the valuation of the company. I think in the case of AI, you can actually radically change the cost structure of these things.”

More here.

Massive Fundings

Atticus, a one-year-old Los Angeles startup that is developing stealth-mode stablecoin banking infrastructure, is reportedly raising a round at a $1.5 billion to $2 billion valuation. The rumored lead is Anduril co-founder Palmer Luckey. The Block has more here.

Mubi, an 18-year-old New York and London company that runs a global streaming service for independent and classic films, raised a $100 million round at a $1 billion post-money valuation. The deal was led by Sequoia Capital. Tech Funding News has more here.

TAE Technologies, a 27-year-old company based in Foothill Ranch, CA, that is developing fusion energy systems designed to deliver clean, on-demand power without radioactive waste or meltdown risk, raised a $150 million extension. The company has raised a total of $1.3+ billion. Previous investors Google, Chevron, and NEA took part in the financing. More here.

Big-But-Not-Crazy-Big Fundings

Netic, a two-year-old San Francisco startup that uses AI to help home-services companies like plumbers and HVAC firms book appointments, follow up with customers, and manage technician schedules more efficiently, raised a $20 million round. Investors included Greylock, Founders Fund, and Day One Ventures. The Wall Street Journal has more here.

Smaller Fundings

Console, a one-year-old San Francisco startup that helps IT teams automate routine tasks like password resets and app access requests via an AI assistant in Slack, raised a $6.2 million seed round from Thrive Capital. TechCrunch has more here.

Dedge Security, a two-year-old Madrid startup that aims to help developers and businesses keep their Web3 apps and blockchain systems secure from the earliest stages of development, raised a $4.6 million seed round. Tritemius was the deal lead. FinTech Global has more here.

Literal Labs, a two-year-old startup based in Newcastle, UK, that develops custom logic-based AI models designed to be faster, more energy-efficient, and easier to explain than traditional neural networks, raised a $6.2 million pre-seed round. Northern Gritstone and Mercuri were the co-leads. EU-Startups has more here.

LuminX, a one-year-old San Francisco startup that is developing AI vision models to improve warehouse operations and logistics efficiency, raised a $5.5 million seed round. Investors included 1Sharpe, GTMFund, 9Yards, Chingona Ventures, and Bond Fund. SiliconANGLE has more here.

NavLive, a three-year-old London startup that makes an AI-powered scanner to create real-time building site surveys for the architecture and construction industries, raised a $4.4 million seed round led by Oxford Science Enterprises, with SOSV, Oxford Capital Partners, Clearance Venture Partners, AE Works, Britbots, and Oxford Innovation Finance also participating. BBN Times has more here.

REplace, a two-year-old Tel Aviv startup that uses AI to help renewable energy developers and data center operators quickly identify optimal sites for new projects, raised a $1.6 million seed round led by Gravity Climate Fund, with Adam/a and Malbec Ventures as well as previous investor Techstars also stepping up. CTech has more here.

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New Funds

AI may be making startups cheaper and faster to build, but some VCs worry it could accelerate the rise of "zombie" funds. Fortune has more here. 

Exits

Snowflake, which helps businesses manage and analyze data in the cloud, is buying Crunchy Data, a Postgres-focused database startup used by big enterprises and government agencies, for around $250 million as it races Databricks and others to power the next wave of AI agents built on customer data. Crunchy Data's investors include Alsop Louie Partners, Gray Ventures, Harbert Growth Partners, and Heavybit. TechCrunch has more here. 

Salesforce is bringing on most of the team from Moonhub, a startup that builds AI tools for hiring, as it continues to bulk up its AI stack. TechCrunch has more here. 

Going Public

Circle disclosed in a regulatory filing that it’s targeting a $7.2 billion valuation in an upsized IPO, wagering that rising interest instablecoins and pending legislation will outweigh investor concerns over mounting distribution costs. Reuters has more here. 

People

In a series of tweets yesterday, Elon Musk announced that X is rolling out a revamped direct messaging system called XChat with vanishing messages, file sharing, and app-based calling. But his confusing claim that XChat would feature "Bitcoin-style" encryption drew snickers from crypto and security pros. TechCrunch has more here. 

Essential Reads

Meta plans to let AI handle every part of ad creation by next year, from writing copy to targeting users, cutting out agencies and production crews while giving small businesses a leg up and making big brands uneasy about handing even more power to Meta. The Wall Street Journal has more here. 

Samsung is finalizing a deal to preload Perplexity’s AI tools across its devices and invest in the company’s $500 million round, a move that not only challenges Google’s dominance but could complicate Apple’s own flirtation with the startup. Bloomberg has more here. 

The director of New York University's Digital Theory Lab wonders if ChatGPT isn't just as much of a threat to numeracy as it is to literacy. The New York Times has more here. 

Startups, for the love of God, please stop calling your AI a co-worker.

Detours

Silicon Valley’s psychedelic scene has spawned a cottage industry of integration therapists, as tech workers come back from ayahuasca retreats rethinking their jobs, relationships, and sense of purpose. 

Retail Therapy

Edward Scissorhands director Tim Burton is selling his storybook English estate, an 18th-century riverfront retreat once owned by a British prime minister, for $6 million, complete with rose gardens, rope bridges, and enough bedrooms to house a film crew.