TheChek News Flow

Although financial regulators haven’t released specific AI-related rules, existing regulations could apply, senior officials warn

Financial institutions’ use of artificial intelligence should have risk controls in place to address possible drawbacks, senior bank regulators said, warning that old rules could be applied to the novel technology.

Even without AI-specific guidance from federal bank regulators, institutions could run afoul of existing rules, officials at the Federal Reserve Board of Governors and Office of the Comptroller of the Currency said Friday.

“There’s a lot of existing guidance,” Kevin Greenfield, the deputy comptroller for operational risk policy at the OCC, said at a panel discussion hosted by the New York City Bar Association. “It doesn’t need to be AI-labeled to be applicable.”

U.S. financial regulators have grappled with how to handle banks’ and other institutions’ growing use of AI, a technology that has been deployed in applications as diverse as fraud monitoring and product pricing. Five regulators, including the OCC and the Federal Reserve, in 2021 asked institutions for information on their use of AI, but so far they haven’t issued any sweeping guidance.

Despite the lack of new guidance, banks should already have risk management practices in place, David Palmer, a senior supervisory financial analyst at the Federal Reserve, said in the same panel discussion.

“If they don’t have the appropriate governance, risk management and controls for AI, they shouldn’t use AI,” he said.

Mr. Palmer said, in his personal view, a comprehensive set of AI-related rules might never come from banking regulators, and instead the agencies might issue more granular updates on their thinking.

“There could be a series of things issued…as we all learn more,” he said. “Things are moving so quickly and we’re all learning a lot.”

Regulators already have told financial institutions to comb through existing guidance for its possible applications to AI, Mr. Palmer said.

Federal Reserve regulators also have begun to examine how institutions are using AI, though at this point those probes have been conducted mostly as a way of educating the regulators, rather than to produce the types of findings that would emerge from a more formal examination, Mr. Palmer said.

Institutions should maintain a “healthy degree of skepticism” about the technology, and ensure they have enough oversight staff, he said.

“We want to confirm that our institutions [are] using it the right way, they have the proper governance, risk management controls over it,” Mr. Palmer said.

* Cover Story:

The wedding boom, which began at the end of last year, has fueled hopes that the U.S. could reverse a long trend of falling fertility rates. But fresh data and interviews with demographers show that, once the backlog of ceremonies clears, the surge in trips to the altar is unlikely to lead to more trips to the maternity ward. Indeed, despite a slight uptick in 2021, the birthrate is still hovering close to historic lows, far below what is needed to keep the population from shrinking.

* Interview:

Barron’s interviews Rich Greenfield, proprietor of LightShed Partners, a research and investment boutique focused on technology, media, and telecommunications. Greenfield discusses social media, games and streaming services and the quest for users. There’s fresh turmoil in the media industry. Advertising spending is softening, pressured by a toxic brew of high inflation, rising interest rates, and worries about an economic slowdown. While consumers are starting to head back to movie theaters, the streaming-video business is showing signs of maturing, with slowing growth and increasing competition. Netflix is going to sell ads. Elon Musk is (maybe) buying Twitter. Apple is airing baseball games.

* Tech Trader:

-A recent law barring large social media companies from moderating content could be bad in ways that investors likely aren’t expecting. In fact, the biggest risk facing Meta Platforms FB –4.06%, Twitter, and Alphabet isn’t the rise of TikTok—or Apple’s tough stance on privacy—it’s the possibility that a new Texas law could effectively upend social media’s business model. The tech companies got some relief this past week when the Supreme Court stepped in to put the law on hold, but there’s no guarantee it stays that way pending a full review of the case in US District Court.

* The Trader:

The end of cheap money has caught up with the market’s scorekeepers: The S&P Global SPGI and MSCI. Their shares are down more than 28% this year, trailing far behind the S&P 500SPX index. Both run indexes and sell reams of data and analytics services. And both are highly insulated from competition, making their stocks good long-term bets. MSCI, though, is looking stronger in the near term.-Consider the stock market this past holiday-shortened week. Through the first three days of trading, the S&P 500SPX index looked like it was going to be able to start a winning streak after breaking a seven-day losing streak the week before. Instead, it finished down 1.2%. The Nasdaq Composite, which closed off 1%, and the Dow Jones Industrial Average, which fell 0.9%, followed similar trajectories. It’s not just the stock indexes that failed to follow the trend—bond yields did, too.

Washington (CNN)Staring down the prospect of an extended stalemate in Ukraine, the US and its allies are placing a renewed emphasis on the need for a negotiated settlement to end the war as the conflict grinds into its 100th day with no clear victory in sight for either side.

US officials have in recent weeks been meeting regularly with their British and European counterparts to discuss potential frameworks for a ceasefire and for ending the war through a negotiated settlement, multiple sources familiar with the talks told CNN. Among the topics has been a four-point framework proposed by Italy late last month. That framework involves Ukraine committing to neutrality with regard to NATO in exchange for some security guarantees, and negotiations between Ukraine and Russia on the future of Crimea and the Donbas region.

Ukraine is not directly involved in those discussions, despite the US commitment to "nothing about Ukraine without Ukraine." US and Ukrainian officials said the US has not been pressuring Ukraine to commit to a certain plan or directly pushing them to sit down with the Russians.

Still, there is some confusion about what kind of framework the US would consider appropriate to bring to the Ukrainians for further discussion.

US Ambassador to the UN Linda Thomas Greenfield told reporters earlier this week that the Italian framework is "one of those initiatives that we certainly would love to see bring a conclusion to this horrific war and the horrific attacks on the Ukrainian people." But two US officials told CNN that the US actually does not support the Italian proposal.

In any case, US and western officials tell CNN that there is a growing concern that if the Russians and Ukrainians don't get back to the table and work out a deal, the war will drag on -- potentially for years.

It's not clear whether these discussions will translate into eventual settlement talks. The Biden administration still sees no real prospect for any diplomatic breakthroughs or ceasefires anytime soon and two NATO officials said that the western alliance sees little appetite to negotiate on the Ukrainian side -- in part because Russia's brutal bombing campaign and myriad human rights violations have destroyed public support for any concession to Russia.

Moscow has also showed little interest in serious talks, officials say. Right now, Ukraine remains focused on ensuring a decisive military victory in the east and the south in order to put themselves in a superior negotiating position, these sources said.

"We can propose all the plans we want, but unlikely Kyiv will go for anything that cedes territory at the moment," according to one official.

The concern that the conflict

could grind on indefinitely -- with mounting costs -- has been reflected in the subtle shift in language and messaging by US officials over the past several weeks.

In April, the US' stated goal was for Russia to "fail," a National Security Council spokesperson said at the time, and for the Russian military to be significantly "weakened" in the long term, as Defense Secretary Lloyd Austin proclaimed -- comments that reflected optimism that Ukraine might be able to defeat Russia decisively on the battlefield after successfully defending Kyiv.

But as an effective stalemate has taken hold on the battlefield, with Russia making incremental gains in the east and Ukraine saying it is increasingly outgunned and outmanned, senior Western officials -- including US President Joe Biden -- are emphasizing anew that even with advanced western weaponry, Ukraine's prospects for peace will ultimately rest on diplomacy.

"As President Volodymyr Zelensky of Ukraine has said, ultimately this war 'will only definitively end through diplomacy,'" Biden wrote in a New York Times op-ed on Tuesday. "Every negotiation reflects the facts on the ground. We have moved quickly to send Ukraine a significant amount of weaponry and ammunition so it can fight on the battlefield and be in the strongest possible position at the negotiating table."

The hope, officials said, is that the US can support Ukraine long enough to see it through to a peaceful settlement rather than a full capitulation.

"Wars are unpredictable," NATO Secretary General Jens Stoltenberg told reporters on Thursday. "We were able to predict the invasion, but how this war will evolve, it's very hard to predict. What we do know is that almost all wars end at some stage at the negotiating table."

But there are no indications yet that either Ukraine is giving up, or that Russian President Vladimir Putin will reverse what he's doing inside Ukraine, one administration official told CNN. There are also no signs that Putin is willing to negotiate in good faith to end the war.

"We just don't know" yet what might change Putin's mind, the official added.

Officials have been careful to note that the US is not pushing for Ukraine to cede any territory to Russia, and have said from the beginning of the war that the US will avoid getting directly involved in any Russia-Ukraine negotiations. One source said that any pressure the US and the West places on Ukraine to negotiate will erode Kyiv's leverage in future talks.

"It's not for us to decide or to have strong opinions [on] what Ukraine should accept or not accept," Stoltenberg said Thursday.

But some Ukrainian officials are still wary that the west will try to impose a deal on them, one Ukrainian source told CNN. Zelensky and his senior advisers have publicly ruled out making any territorial concessions to Russia.

"Those who advise Ukraine to give something to Russia, these 'great geopolitical figures,' never see ordinary people, ordinary Ukrainians, millions living on the territory they are proposing to exchange for an illusory peace," he said in a video address late last month.

The war has settled into a grinding slog that intelligence and military officials believe will last many months, if not years. Although the two sides may trade small swathes of territory back and forth from day to day or week to week, multiple officials with access to the latest intelligence told CNN that they do not expect either Russia or Ukraine to break through the existing battle lines anytime soon.

For now, that effective stalemate presents an opportunity for the US to slowly bleed Russia of both blood and treasure, multiple military officials said. But the longer the conflict drags on, the higher the costs for the West -- and the greater the challenge the Biden administration will face in supplying Ukraine, finding sustainable replacements for Russian oil and gas, and keeping an already-fractious European alliance committed to its strategy.

The issue is particularly politically fraught heading into election season, with gas prices continuing to rise largely because of the measures the west has taken to cut off imports of Russian oil and gas.

That has led to some debate within the administration about how much further to go with sanctions. Some officials are concerned that new tough moves -- like imposing secondary sanctions on countries that don't comply with US restrictions on Russian energy exports -- could roil energy markets even further. And there is a growing acknowledgement that sanctions will not be a "knock-out punch" to Russia, but rather a "stranglehold" that could take years to produce meaningful consequences, one senior official said.

As the US looks to maintain its military and financial support for Ukraine and isolate Russia for as long as it takes to get to a peace agreement, a key strategy will be keeping the NATO alliance unified. But already, sources say, there are cracks appearing in NATO -- Turkey is refusing to allow Sweden and Finland to move forward with joining the bloc, and diplomats had to carve out an exception for Hungary as part of Europe's recent oil embargo against Russia.

There's also the challenge of maintaining domestic support for funding Ukraine's war. There's been growing opposition among Donald Trump-aligned Republicans with each assistance vote that Congress has taken, one Democratic lawmaker noted. He added that there are concerns over how willing Congress will be in the future to fund a protracted conflict.

"We have some runway between now and the end of the year," the lawmaker said, referring to the $40 billion Ukrainian assistance package Biden signed into law last month.

Another top priority will be to continue to procure enough sophisticated weaponry to feed a high-attrition, artillery-heavy war without depleting US stockpiles. One option under consideration is to restart production lines for Soviet-era systems that the Ukrainians already know how to use. But the US also wants to transition Ukraine to NATO-compliant weapons systems, which are easier to produce and procure than the older Soviet systems. But even that comes with its own long-term challenge: Ukraine's military will need more training to operate the western systems.

Still, US officials have pointed to the more advanced weapons already on the battlefield, like the howitzers, that have helped Ukraine significantly to stop Russia's advances.

"I think we're not seeing the Ukrainian defenses buckle," said Colin Kahl, the Pentagon's undersecretary for policy. "They're hanging on, but it is a grinding fight."

Stoltenberg put it succinctly on Thursday. "We just have to be prepared for the long haul," he said, "because what we see is that this war has now become a war of attrition."

Maybe it was the holiday week that slowed things down, or maybe it’s another sign of a weakening venture market, but big funding rounds were hard to come by this week. Only five startups in the U.S. had raises of $100 million or more. That would have been unheard of last year. Nevertheless, there were some big rounds in financial services, biotech and upskilling.

1. Acrisure, $725M, financial services: In a large round many folks likely missed, Grand Rapids, Michigan-based Acrisure closed a $725 million Series B-2 at a $23 billion valuation. The round was led by a wholly owned subsidiary of the Abu Dhabi Investment Authority. The company offers financial, cyber, and asset and wealth management services to customers in insurance and real estate services. It grew its revenue from $38 million to $3.5 billion in the past eight years. Commercial insurance premiums have jumped as the war in the Ukraine has put upward pressure on rates. That may not have hurt Acrisure’s fundraising pitch.

2. Upstream Bio, $200M, biotech: Waltham, Massachusetts-based Upstream Bio locked up a $200 million Series A to continue its development of therapeutics for allergic and inflammatory diseases. The round was led jointly by OrbiMed and Maruho. Upstream Bio is developing an antibody that targets thymic stromal lymphopoietin and its receptors that can inflame when things like smoke or allergens are introduced into the environment. The treatment could be useful to those with asthma.

3. Guild, $175M, edtech: Upskilling has become popular as workers look to expand their skill set, and Guild used that popularity to raise an upsized round. The Denver-based online education platform with a focus on upskilling frontline employees raised $175 million in a Series F funding round led by Wellington Management that values the company at $4.4 billion. Even Oprah Winfrey invested. The upskilling space is capitalizing on workers wanting to take advantage of employer-covered e-learning. In addition to being easily accessible, upskilling firms can offer cheaper alternatives. Guild typically costs between $3,000 and $6,000 a year for its slate of courses offered through partner learning providers. Founded in 2015, the company has raised more than $553 million, according to Crunchbase data.

4. Coralogix, $142M, analytics: Data observability was big with investors last week and that continued. San Francisco-based Coralogix closed a $142 million Series D co-led by new investors Advent International and Brighton Park Capital. Data observability has become big as data in general has exploded and companies need to know the health and state of their data. Coralogix’s platform allows for real-time insights and trend analysis of data. Founded in 2014, the company has now raised a total of nearly $240 million, according to Crunchbase data.

5. Devo, $100M, cybersecurity: Despite the slowdown in the venture market, some companies are still able to raise large up rounds just months apart. In October, Cambridge, Massachusetts-based cybersecurity firm Devo closed a $250 million Series E that valued the company at $1.5 billion. This week, the company locked up a smaller $100 million Series F led by Eurazeo at an increased valuation of $2 billion. Devo’s cloud-native logging and security analytics platform helps companies manage the hundreds of disparate security tools they may have across their networks. The platform can analyze issues and collect data to try to provide answers in real-time. Founded in 2011 in Spain, the company has now raised more than $480 million, according to Crunchbase.

6. Vizgen, $85.2M, biotech: Cambridge, Massachusetts-based life science company Vizgen closed an $85.2 million Series C led by Blue Water Life Science Advisors and Arch Venture Partners. Founded in 2019, the company has raised more than $135 million, according to Crunchbase.

7. WorkOS, $80M, information technology: San Francisco-based WorkOS, which develops APIs to make applications enterprise-ready, closed an $80 million Series B led by Greenoaks. Founded in 2018, the company has now raised $95 million, according to Crunchbase.

8. MoEngage, $77M, marketing: San Francisco-based MoEngage, a customer engagement platform developer, raised $77 million in a Series E funding led by Goldman Sachs Asset Management and B Capital. The company has raised three rounds in the last 12 months, and has now raised a total of $210 million, according to Crunchbase data.

9. JupiterOne, $70M, cybersecurity: Morrisville, North Carolina-based cyber asset security firm JupiterOne raised a $70 million Series C led by Tribe Capital that values the company at more than $1 billion. The company has raised more than $119 million to date.

10. InfStones, $66M, blockchain: Dallas-based blockchain infrastructure company InfStones closed a $66 million round led by SoftBank Vision Fund 2 and GGV Capital. The company has now raised more than $100 million to date.

This is a monthly feature that runs down the most active investors in U.S.-based companies, looks at some of their most interesting investments, and includes some odds and ends of who spent what. Check out last month’s feature here.

Andreessen Horowitz and Tiger Global led the way last month in investing in U.S.-based startups—both in total rounds participated in, as well as rounds led or co-led.

Just like April, May saw only a half dozen firms invest in 10 or more deals announced in the month—down from May 2021 when 10 firms took part in double-digit numbers of rounds, according to Crunchbase data.

Let’s take a closer look at the most active investors in U.S.-based startups in May and some interesting rounds they took part in.

For the first month this year, Andreessen Horowitz led the way in total rounds with 20—half in previous investments and half in new companies.

While a specific round usually catches our interest, sometimes it’s more of a theme that runs through the month for a certain investor that grabs our attention. In Andreessen Horowitz’s case, it was a sharp interest in all things Web3 and gaming.

It’s no secret the Menlo Park giant loves blockchain and crypto, but the firm did seem to double down on that interest last month. Its investments included:

That’s a lot of bets on Web3 and gaming on the next iteration of the internet. But a16z is not known to tread lightly in areas in which it believes.

The hedge fund giant may be known for leading huge nine-figure rounds and minting unicorns, but this month we are going to look at a much smaller round that went to a company tackling a big issue.

Tiger led a $20 million Series A for New York-based telehealth startup Parallel Learning. The company works with families and schools to diagnose, treat and empower students with learning and thinking differences. According to the company, approximately one in five people struggle with learning or thinking differences. Care and diagnosis can be expensive and confusing.

Parallel looks to streamline and simplify that process. It expects to use the new cash to expand nationally and add behavioral and speech therapies.

It’s not often we highlight a round of undisclosed value, but this is an exception. Last month Accel took part in a seed round for San Francisco-based Sotera Heritage, an insurtech company.

While the insurtech industry has seen a lot of investment in recent years, Sotera—which is still under the radar—is a little different. The company is not looking to insure your car or home. Rather it uses what it calls “deep tech” and data to create risk ratings for “unusual objects.” Think high-end art and antiques.

The company completed the accelerator program at Lloyd’s and plans to use its platform to also record at-risk collections to help stop looting and the illegal trafficking of antiquities and art.

New York-based Gaingels—which invests in companies with diverse and inclusive leadership teams—has been near the top of this list every month this year. However, its number of U.S.-based investments have declined every month to land it a little lower in the rankings.

However, that does not mean it doesn’t have rounds of note. In April, the firm was part of a $7 million fundraise for San Francisco-based “crispy” plant-based chicken nuggets maker Nowadays. Last month, the firm continued its inquisitive food ways as part of an oversubscribed $2 million investment in Chicago-based company Hyfé Foods.

The sustainable food company develops low-carb, protein-rich “fungi flour.” The company uses fermentation to upcycle wasted sugar water from food and beverage manufacturing. This creates its mycelium flour. The process reduces water waste and contributes a sustainable form of protein.

It’s no secret the venture capital market is experiencing a little dip right now as funding falls with valuations.

One option some startups may look into is venture debt—especially those that have raised some venture capital—and Y Combinator may have just the company to help.

Norwalk, Connecticut-based 8vdX, a digital venture debt provider for investors and startups, closed a $3 million seed round which included funding from the startup accelerator giant.

The company has created an online venture debt marketplace, with startups filling out applications for debt right on its platform. The startup can expedite the entire applying process to just a day or two.

In a down market, startups may look for just such a thing.

Logistics and supply chain tech has been popular with investors, and Insight Partners has not let the party pass it by. The firm co-led a $150 million Series E with Kleiner Perkins for San Francisco-based logistics startup Motive. The round values the automated operations platform developer at $2.85 million.

Motive, formerly KeepTruckin, offers an AI-powered platform that helps improve driver safety and track fleet spending. The platform also offers other logistics and management tools.

Venture-backed freight and logistics companies continue to see heavy investor interest after a record-setting 2021, according to Crunchbase data. Last year, investors poured more than $21.5 billion into freight and logistic startups—more than doubling the $9.8 billion 2020 realized.