Weekly Download #29

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This week in Silicon Valley, Startups & Tech:

• Trump's AI Power Grab: Signed EO to preempt state AI laws, created federal litigation task force under Pam Bondi, and threatened to withhold state funding

• OpenAI Ships GPT-5.2, Lands Disney: New model claims 11x speed at 1% cost vs. humans; Disney's $1B investment brings 200 characters to Sora

• Crypto's Regulatory Reset: SEC dismissed 60%+ of cases including Trump-linked investigations; prediction markets go mainstream

• $475M "Seed" Round Sets Absurd New Record: Unconventional AI raised history's largest seed at $4.5B valuation

• Lightspeed's $9B AI War Chest: VC raised six funds, including $3.3B, to double down on Anthropic, xAI, and Mistral

As we continue to build at Context Ventures, we've launched Startup Intros with a simple mission: to help early-stage founders find the right investors, faster and smarter.

🔥 Context VC & Startup Intros Events Coming Up

• Dec 16: Verza's Annual Holiday Mixer & Content Sprint: Join a great group of top-tier creators, founders, and industry leaders. Sign up on Partiful!

• Dec 17: Startup Grind x ThinkTank VC Holiday Party: Join us for an evening of relaxed networking, great convos, and holiday cheer. Sign up here!

• Jan 20: AI Startup Pitch Night: Apps to pitch are open! Join us in SF for an exciting pitch night featuring the hottest AI startups. Sign to pitch here!

• May 27: Early Stage Summit: Due to various logistical factors, we had to reschedule the event but plan to make it better than ever. Register on Luma!

🏛️ Trump's AI Policy Takeover: When Silicon Valley Gets Its Own Regulator

📜 The Executive Order: One Ring to Rule Them All

President Trump signed an EO aimed at preempting state AI laws, declaring "we want to have one central source of approval:"

• OMB Guidance: New rules require LLMs procured by federal agencies to comply with "truth-seeking" and "ideological neutrality" principles

• Enforcement Mechanism: The EO orders AG Pam Bondi to create an "AI Litigation Task Force" that meets regularly with David Sacks to challenge state laws

• The Threat: Directs federal agencies to consider withholding funding from states passing "the most onerous and excessive laws" around AI

🎭 Sacks Plays Defense While MAGA Plays Offense

AI czar David Sacks defended the order, telling Bloomberg it aims to "ease companies' compliance burden" and that the administration is working with Congress on a common oversight standard.

The Behind-the-Scenes Drama: Sacks and AI adviser Sriram Krishnan had to overcome significant MAGA opposition to get the EO signed, spending weeks talking to lawmakers and ultimately modifying the language to get it across the finish line.

🗳️ States to DC: We'll Do What We Want

The reception from state capitals ranged from eye-rolls to open defiance. Policymakers behind key state AI bills scoffed at the EO, with some GOP governors pushing ahead with their own legislation anyway. Steve Bannon publicly claimed Sacks "misled Trump" on the order's implications.

The Plot Twist: New York's governor is proposing to rewrite the RAISE Act using text copied verbatim from California's SB 53: the exact kind of cross-state regulatory coordination the EO was designed to prevent.

The Legal Time Bomb: As Techdirt points out, the EO's interstate commerce argument could backfire spectacularly by invalidating GOP state laws targeting "Big Tech censorship." If the feds can preempt California's AI safety rules, they can preempt Texas's content moderation mandates too.

The Bottom Line: The administration has created a federal AI czar with a taxpayer-funded legal team to sue states, while simultaneously demanding that AI models be "ideologically neutral." However, the president's own base is skeptical, and states are already copying each other's homework in defiance.

🤖 OpenAI's Big Week: New Models, Mouse Ears, and Adult Mode

🧠 GPT-5.2: The "Best Model Yet" (Again)

OpenAI debuted GPT-5.2 in three modes (Instant, Thinking, and Pro) with improvements across writing, coding, and reasoning benchmarks:

• API Pricing: $1.75/1M input and $14/1M output tokens; Pro tier at $21/1M input and $168/1M output

• Context Window: 400K tokens in, 128K max output, with an August 31, 2025 knowledge cutoff

• The Benchmark Flex: OpenAI says GPT-5.2 Thinking beats or ties industry professionals on 70.9% of GDPval knowledge work tasks at 11x the speed and less than 1% of the cost

• Hallucination Claims: Hallucinates less than GPT-5.1; prerelease testers include Notion, Box, Shopify, and Zoom

Translation: OpenAI claims it's their most capable model to date, a claim they've made about every release since GPT-3. Their pitch is that GPT-5.2 can do your job faster and cheaper than you can.

🏰 Disney Brings 200 Characters to Sora (And $1B to OpenAI)

Disney and OpenAI signed a three-year deal bringing 200+ Disney characters to Sora, with Disney making a $1B investment in OpenAI. It's the biggest validation yet for AI-generated video, and an admission that Sora desperately needs content people actually want to create.

The Engagement Problem: Sora has high costs and limited traction, with users averaging just 13 minutes per day versus 90 minutes on TikTok. OpenAI hopes that letting users generate Baby Yoda doing the macarena will fix the retention crisis.

The Control Structure: The deal gives Disney significant oversight, including a joint steering committee to monitor user creations. Bob Iger insists the partnership "does not in any way represent a threat to creators"—the kind of reassurance that historically precedes exactly that.

Meanwhile, Google Gets the Stick: Disney sent Google a cease-and-desist letter accusing it of "massive scale" copyright infringement for AI-generated Disney content on YouTube. Google promptly removed dozens of AI videos depicting Disney characters.

⚡ OpenAI in Review

🎂 Ten Years of OpenAI: Sam Altman published a reflective essay on OpenAI's decade-long journey and "path toward AGI." The nonprofit-to-capped-profit-to-$300B-valuation trajectory went unmentioned.

📱 ChatGPT Tops the App Store: ChatGPT was 2025's most downloaded free app in the US App Store, up from fourth place in 2024. Threads, Google, TikTok, and WhatsApp rounded out the top five.

🎰 Crypto's Regulatory Arbitrage: From Enforcement to Enablement

🏛️ Washington Rolls Out the Welcome Mat

The SEC's crypto enforcement machine has gone from attack dog to lap dog. A NYT investigation found the agency eased up on or dismissed 60%+ of ongoing crypto cases after Trump's return to office, including investigations into Trump-linked companies.

The CFTC Joins the Party: The Commodity Futures Trading Commission withdrew its 2020 guidance on "actual delivery" of digital assets, removing rules the agency now calls "overly complex" that had required physical settlement of crypto trades within 28 days.

Translation: The regulators who spent 2022-2024 treating crypto like organized crime are now treating it like a campaign donor. Which, to be fair, it was.

🔮 Prediction Markets Go Mainstream (With All the Problems That Implies)

The CFTC granted Gemini a Designated Contract Market license for its prediction markets platform Gemini Titan, allowing it to offer regulated crypto futures, options, and perpetuals alongside event contracts. The Winklevoss twins finally have their casino license.

The Volume War: Kalshi integrated into the Phantom crypto wallet and is winning the prediction markets arms race. November trading volume reached $5.8B, compared with Polymarket's $3.7B. When you can bet on OpenAI's next release date from the same wallet holding your Solana, the user acquisition funnel gets very short.

The Insider Trading Problem: Companies are scrambling to update insider trading policies to address prediction markets following suspicious betting patterns around OpenAI and Google announcements. Kalshi is pushing for federal oversight, a rare case of an industry seeking regulation because the alternative is losing institutional customers due to compliance concerns.

Reality Check: Prediction markets spent years arguing they shouldn't be regulated like gambling. Now that they're mainstream, they're discovering why gambling is regulated: people cheat.

🏜️ The Gulf State Gold Rush

Michael Saylor, Changpeng Zhao, and a parade of crypto executives descended on Abu Dhabi this week, hoping to secure deals with Emirati investors. The UAE has positioned itself as crypto's Switzerland: friendly jurisdiction, deep pockets, and a notable lack of extradition treaties with the US.

The Timing: CZ, freshly pardoned by Trump after his Bank Secrecy Act conviction, is back on the conference circuit, courting sovereign wealth. Saylor's pitching MicroStrategy's Bitcoin treasury strategy to funds managing hundreds of billions. The message is clear: if US regulation gets uncomfortable again, there's always the Gulf.

The Bottom Line: Crypto's regulatory strategy has evolved from "move fast and break things" to "move money to wherever the rules are friendliest."

⚡ Startup Quick Hits: When $475M is a "Seed Round"

🧠 Unconventional AI's $475M Seed Sets New Records for Absurdity: The SF startup raised the largest seed round in history at a $4.5B valuation, with a16z, Lightspeed, Sequoia, Databricks, and Jeff Bezos all piling in. They're "rethinking computer foundations to optimize energy efficiency for AI."

🔐 Saviynt's $700M Makes Identity Security Very Expensive: The El Segundo identity security platform raised Series B at a $3B valuation from KKR, Sixth Street, and Ten Eleven Ventures. Their AI-based platform secures "all types of identities across digital ecosystems."

🌋 Fervo Energy's $462M to Power AI's Insatiable Grid Appetite: The geothermal startup closed Series E from B Capital, Google, Breakthrough Energy, and a parade of strategic investors, including Devon Energy and Mitsubishi.

💳 Airwallex's $330M at $8B Proves Fintech Isn't Dead: The Singapore-based payments platform raised Series G from Addition, T. Rowe Price, and Robinhood Ventures. Global payments infrastructure for businesses isn't sexy, but it's profitable.

✈️ Boom Supersonic's $300M Proves Concorde Dreams Die Hard: The supersonic airplane manufacturer raised Series B at a $1.5B valuation from Darsana, ARK, Bessemer, and YC. They're building commercial airliners "designed for speed, safety, and sustainability."

🛰️ K2 Space's $250M for Satellites That Actually Do Something: Raised Series C at $3B valuation led by Redpoint, with Lightspeed, T. Rowe Price, and Altimeter joining. They build high-power satellite platforms for orbital missions.

💰 Investor Quick Hits: When AI Keeps Getting Funded

🚀 Lightspeed's $9B AI Armada: Lightspeed raised $9B+ across six AI-focused funds, including a $3.3B vehicle to double down on breakout hits like Anthropic, xAI, and Mistral. The firm has now backed 165 AI startups.

🐯 Tiger Global's $2.2B Comeback Tour: The crossover fund that got wrecked in 2022 is raising $2.2B for its latest venture fund. After writing down billions in markups that evaporated, Tiger's back with fresh LP capital.

🇰🇷 a16z Crypto Plants Flag in Seoul: Andreessen Horowitz's crypto arm opened a Seoul office and hired Monad's Sungmo Park to lead Asia efforts. The firm calls South Korea the world's second-largest crypto market.

🇮🇱 Viola Ventures' $250M Israel Bet: The Israeli VC raised $250M across two new funds, underscoring its continued backing of the startup nation amid regional instability. Israeli founders keep building; Israeli VCs keep funding.

⚡ Powerhouse Ventures' $100M Climate Fund III: The climate-focused VC is raising up to $100M for its third fund. When AI data centers need 165 terawatt-hours annually by 2030, every energy startup becomes an AI startup.

💸 IPO & M&A Quick Hits: Acqui-Hires, Rejections & More

🤖 ServiceNow's $7B IoT Security Splurge: ServiceNow is in advanced talks to acquire Armis, the IoT device security company, for up to $7B. Armis just raised $435M weeks ago.

💊 Mirum's $620M Bet on Liver Disease: Mirum Pharmaceuticals acquired Bluejay Therapeutics, which develops treatments for viral and liver diseases, for $620M.

⚽ Tether's Juventus Bid Gets Red-Carded: Exor rejected Tether's all-cash offer for its 65.4% controlling stake in Juventus, which valued the Italian soccer club at €1.1B.

🔐 Arteris Acquires Cycuity for Chip Security: Arteris acquired Cycuity, a semiconductor cybersecurity assurance company.

⚡ The AI Acqui-Hire Parade Continues: Stripe acquired Valora (crypto payments), Baseten acquired Parsed (reinforcement learning), and Duco Experts acquired Nurdle AI (deployment safety). The pattern: big companies buying small teams for their talent and tech.

🌟 Editor's Note

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💭 Parting Thoughts

This week, the federal government decided it should be the only regulator of AI, OpenAI convinced Disney that AI-generated Elsa videos are a feature, not a lawsuit, and the SEC remembered that crypto companies are campaign donors. Seed rounds now cost half a billion dollars. None of this is normal, but normal left Silicon Valley around 2021 and hasn't been seen since.

Forward to a friend or hit reply to let me know what you're seeing in your world.

Till next time!

P.S. Raised this week, and we missed you? Want to be featured? Have tips or funding questions? Reply or DM us as we’re here to help.

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