For the past two days, I’ve been watching over 200 founders pitch their young startups at Y Combinator’s virtual Demo Day. Of course, as I even joked on Twitter (or, I suppose, X), artificial intelligence was undoubtedly the biggest theme of this summer’s batch. But after reflecting on my notes and chatting with a couple venture investors, I rounded up a few takeaways.
San Francisco is back
San Francisco was predictably a big theme this year, as Jessica teased in yesterday’s newsletter. Y Combinator was fully back in person this summer, and CEO and president Garry Tan didn’t hold back on singing the tech hub’s praises in his opening remarks: He compared YC in San Francisco to “Rome or Athens in antiquity.” But Tan’s enthusiasm for the city wasn’t just words: Scrolling through the list of companies, a lot of those selected for this batch are based out of SF.
That’s attractive to investors like Niko Bonatsos, a managing director at General Catalyst, which he says invests in pretty much every YC batch. “We do love that a ton more of the companies are focused on the U.S., and the majority of them are in California working out of San Francisco,” Bonatsos, who splits his time between SF and New York, told me. “This is what made YC great before,” he argued, adding that he feels like it’s “back to the roots.”
A.I. + law
As I and others have pointed out, this summer batch was all about A.I.—with A.I. startups making up a huge portion of those pitching investors this week. But within that broad category, I noticed several companies that are applying A.I. in some way, shape, or form to the legal field: atla is building A.I. assistants to help in-house lawyers answer legal questions; Hidden Hand is working on being an A.I. paralegal for contingency law; and Pincites is applying A.I. to help companies save time on contract negotiation.
These fledgling startups are tapping into a bigger theme: A.I.-for-law companies have become popular with investors recently. Take EvenUp, which is focusing on A.I. for personal injury law, and raised a round led by Bessemer Venture Partners earlier this year at a $350 million valuation (reportedly raising even more this summer); and Sequoia Capital-backed Harvey, more broadly working on providing elite law firms with a generative A.I. copilot to assist them, which also raised funding earlier this year.
I do wonder if some of these companies are focusing on markets that are too niche to get enough revenue to turn into big unicorns. But some VCs clearly believe that even though startups like EvenUp are focusing on a pretty specific market (personal injury law), there’s enough opportunity to return their investments. It’ll be interesting to see if these YC companies are able to ride that broader A.I.-for-legal trend and win checks.
Stripe, Rippling, Datadog were popular cameos for pitches
Plenty of startups like to compare themselves to successful companies, even if they’re competitors. For example, Stripe, the $50 billion startup that also went through YC many years back, has long attracted comparisons, as I wrote about a while back. And a couple startups in this week’s YC batch were eager to invoke Stripe’s name, with “Stripe for” taglines on their pitch decks, à la YC startup Flex’s “Stripe for accepting HSA/FSA payments.”
Other companies inserted as the “fill-in-the-blank for” that I noticed include Rippling, Plaid, Datadog, Mint, Shopify, and Snowflake. This clearly isn’t a new trend, but it’s always interesting to see which companies have reached that level of fame or respect among VCs that founders aspire to be the next them or the them for something.
Flexport’s C-suite shakeup: The supply chain management company had some big C-suite changes this week. On Wednesday, Dave Clark said he was resigning as CEO of Flexport—about a year after he joined the company from Amazon. In a swift reversal, Ryan Petersen, Flexport’s founder, declared he was returning to lead the company after stepping down from the CEO role in March, and after joining famed VC firm Founders Fund just two months ago. And per reports, there’s been some drama behind the scenes.
Have a great weekend,
Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.
VENTURE DEALS
- Imbue, a San Francisco-based A.I. research lab, raised $200 million in Series B funding from Astera Institute, Nvidia, Kyle Vogt, Simon Last, and others.
- Inceptive, a Palo Alto, Calif.-based software company that’s using A.I. to develop drugs and vaccines, raised $100 million in funding from Nvidia, Andreessen Horowitz, Obvious Ventures, Section 32, and others.
- Ibex Medical Analytics, a Tel Aviv, Israel-based technology developer using A.I. to develop cancer diagnostics, raised $55 million in Series C funding. 83North led the round and was joined by Sienna Venture Capital and existing investors Octopus Ventures, aMoon, Planven Entrepreneur Ventures, and Dell Technologies Capital.
- Certa, a Saratoga, Calif.-based platform that manages third party risk and compliance, raised $35 million in Series B funding. Fin Capital and Vertex Ventures led the round and were joined by Tru Arrow Partners and existing investors.
- Ello, a San Francisco-based developer of an A.I. reading coach for children, raised $15 million in Series A funding. Goodwater Capital led the round and was joined by Homebrew, Reed Hastings, Common Sense Growth, and Ravensburger.
- Tradeteq, a London, U.K.-based Securitisation-as-a-Service platform allowing users to turn assets into securities, raised $12.5 million in extended Series A funding. MS&AD Ventures led the round and was joined by Interlock Partners and angel investors.
- Ostrom, a Berlin, Germany-based green energy retailer and electricity management platform, raised an additional $8 million in Series A funding. SE Ventures led the round and was joined by Union Square Ventures, Adjacent, J12, and Übermorgen.
- Trident Digital Group, a Stamford, Conn.-based digital asset lender, raised $8 million in seed funding. New Form and White Star Capital led the round and were joined by CMT Digital, Joint Effects, and Permit Ventures.
- Blooming Health, a New York City-based communication and referral platform that enables care providers to connect with older adults remotely, raised $4.2 million in funding. Afore Capital and Crossbeam Venture Partners led the round and were joined by Metrodora and Evan Moore.
- Skyqraft, a Stockholm, Sweden-based energy infrastructure inspector, raised $3.8 million in funding. Subvenio Invest, Neptunia Invest, and Antler led the round.
- Takes, a San Francisco-based social app for sports fans, raised $1.6 million in pre-seed funding. Riccardo Silva, Carlo Pozzali, Astralis Capital, and Joe Inzerillo participated in the round.
PRIVATE EQUITY
- Tenable agreed to acquire Ermetic, a Tel Aviv, Israel.-based security platform for companies’ cloud infrastructures, for approximately $240 million in cash and $25 million in restricted stock and RSUs.
- Man Group agreed to acquire a controlling interest in Varagon Capital Partners, a New York City-based middle market private credit manager, for $183 million.
- Agrinam intends to merge with Freight Farms, a Boston, Mass.-based agricultural technology company creating sustainable farming machines and software. Financial terms were not disclosed.
- Bain Capital agreed to acquire Harrington Process Solutions, a Chino, Calif.-based piping and fluid process products distributor. Financial terms were not disclosed.
- Consortium Brand Partners acquired a majority stake in Draper James, a New York City-based fashion and lifestyle brand. Financial terms were not disclosed.
- Coretelligent, backed by Norwest Equity Partners, acquired Advanced Network Products, a Philadelphia, Penn.-based cloud service provider. Financial terms were not disclosed.
- GTCR invested in R&T Deposit Solutions, a New York City-based money management firm. Financial terms were not disclosed.
- Igneo Infrastructure Partners agreed to acquire a majority stake in Soltage, a Jersey City, N.J.-based renewable energy provider. Financial terms were not disclosed.
- SAP has agreed to acquire LeanIX, a Bonn, Germany-based enterprise architecture management provider supporting companies simplifying their IT infrastructure. Financial terms were not disclosed.
EXITS
- Repsol agreed to acquire ConnectGen, a Houston, Tex.-based renewable energy provider, from Quantum Capital Group for $768 million.
- Artémis agreed to acquire a majority stake in Creative Artists Agency, a Los Angeles, Calif.-based entertainment and sports agency, from TPG. Financial terms were not disclosed.
- KKR and Infracapital acquired a stake in Zenobē, a London, U.K.-based EV fleet and grid-scale battery storage specialist, from Tiger Infrastructure Partners. Financial terms were not disclosed.
- Meazure Learning acquired Examity, a Newton, Mass.-based online proctoring platform for educators, certifying bodies, employers, and other assessment providers, from Great Hill Partners. Financial terms were not disclosed.
- ZMC Management acquired InProduction, a Chicago, Ill.-based seating, staging, and structure provider for the events industry, from Dubin Clark. Financial terms were not disclosed.
IPOS
- Smith Douglas Homes, a Woodstock, Ga.-based private homebuilder, filed to go public. Founder Fund and GSB Holdings back the company.
PEOPLE
- Greycroft, a New York City-based venture capital firm, hired Marcie Vu as a partner. Formerly, she was with Qatalyst.
- Greylock, a Menlo Park, Calif.-based venture capital firm, promoted Seth Rosenberg to general partner. Formerly, he was with Facebook.
- Menlo Ventures, a San Francisco-based venture capital firm, hired Joff Redfern as a partner. Formerly, he was with Atlassian.
- North Branch Capital, an Oak Brook, Ill.-based private equity firm, hired Brian Gleason as an operating partner. Formerly, he was with Summit Hydraulics.
- Riverwood Capital, a Menlo Park, Calif.-based private equity firm, hired Keith Janosky as chief financial officer and managing director, investor relations. Formerly, he was with Khosla Ventures.
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