The hedge fund doubling down on VC

1. Key Themes

Theme 1: AI-focused capital is scaling up, with multi-strategy investors building dedicated growth vehicles

D.E. Shaw is more than doubling its VC/growth fund to chase the AI boom

• D.E. Shaw is raising a bigger Voltaic fund to deploy into the AI boom, with a late-stage, pre-IPO tilt.
• Quote: "Hedge fund D.E. Shaw is targeting $1 billion for its second Voltaic venture and growth equity fund, more than double the size of its predecessor."
• Quote: "The new fund would give D.E. Shaw significantly more firepower to deploy capital in the AI boom, following investments into Anthropic and OpenAI earlier this year."
• Quote: "More than half of Voltaic II is expected to go into later-stage private companies, the people said. The fund is pursuing a mid- to late-stage, pre-IPO strategy focused on technology, data and adjacent sectors."

Mega-rounds for frontier AI labs are becoming the anchor deal type for crossover investors

• Quote: "It co-led Anthropic's $30 billion Series G in February, which valued the AI developer at $380 billion."
• Quote: "A month later, it co-led OpenAI's $122 billion round at an $852 billion valuation."

Theme 2: PE exit markets are normalizing, shrinking the role of continuation funds

Continuation funds are falling from "overflow valve" to a selective tool

• Quote: "The number of continuation funds to close this year is tracking below the record level seen in 2025, raising the prospect that the recovery of traditional exit markets is making them a less important tool for generating liquidity."
• Quote: "PitchBook counted 95 continuation fund deals in the year to Sept. 30 with an aggregate value of $47.4 billion... This compares with 161 such deals in the record year of 2025, when aggregate transaction value topped $97.6 billion."
• Quote: "Kyle Walters, a PE research analyst at PitchBook, noted that this form of secondary transaction is likely to be used more selectively in the future, rather than as an 'overflow valve' as it was in 2025."

The M&A recovery is the underlying driver

• Quote: "Traditional exit markets have been ticking along nicely in 2026. The number of PE-backed M&A deals to close in the third quarter was up nearly 6% from the prior quarter and about 7.9% from the same period in 2025."
• Quote: "Continuation funds emerged as an important tool to help PE managers return capital to cash-strapped LPs without having to sell companies for valuations they are unwilling to accept."

Theme 3: AI infrastructure and developer tooling attract outsized early-stage and growth checks

Seed rounds are reaching unicorn scale in AI-adjacent categories

• Quote: "Signed-data platform developer SignSplit emerged from stealth with a $400 million seed round led by W Group at a $1 billion valuation."

Infrastructure and observability layers continue to raise

• Quote: "Supabase, the provider of an open-source Postgres development platform, raised a $150 million round led by GIC."
• Quote: "Clockwork.io, which develops a GPU cluster observability and fault-tolerance platform, secured a $31 million round led by Premji Invest, Wing Venture Capital, and Seligman Ventures."
• Quote: "Australia-based data center operator Firmus is planning to allocate half of the shares in its $5.5 billion IPO to existing backers including Nvidia and Blackstone."

Embodied AI and personal-AI hardware are drawing a16z-backed early checks

• Quote: "Safeworld, a startup developing simulations for safety testing humanoid robots, raised a $12 million seed round led by Shine Capital and Andreessen Horowitz."
• Quote: "Ghost, a startup developing a personal computer designed to centralize data and run personal AI agents, raised an $11 million seed round led by Andreessen Horowitz."

Theme 4: Biotech M&A and IPO activity remain active exit paths for venture and PE backers

Large strategic acquisitions of venture-backed biotechs

• Quote: "CSL agreed to a $1.6 billion deal with OrbiMed-backed Alentis Therapeutics to develop a drug for rare kidney and liver diseases."
• Quote: "Texas-based biotech IntraBio, which is backed by Oxford Science Enterprises, agreed to be acquired by Tokyo-listed Shionogi in a $2 billion deal."

IPO window open for corporate-backed biotech and data center operators

• Quote: "Autoimmune and inflammatory disease-focused biotech TRex Bio, which is backed by Eli Lilly, is seeking to raise about $133.3 million in its IPO."
• Quote: "Singapore-based data center operator DayOne Data Centers, which is backed by Coatue, filed publicly for its US IPO."

2. Contrarian Perspectives

Contrarian view 1: Continuation funds may be cyclical liquidity patches, not a permanent structural shift

• Much of the recent narrative treated continuation funds as a new, durable pillar of PE liquidity. PitchBook's data suggests they were a response to a stressed environment and recede as markets heal.
• Quote: "Their use soared as sharply higher borrowing costs and macroeconomic uncertainty triggered a multi-year slowdown in the M&A and IPO markets."
• Quote: "Kyle Walters... noted that this form of secondary transaction is likely to be used more selectively in the future, rather than as an 'overflow valve' as it was in 2025."
• Evidence: deal count fell from 161 in all of 2025 to 95 through Sept. 30, 2026, while PE-backed M&A grew about 7.9% year over year.

Contrarian view 2: A hedge fund, not a traditional VC, is doubling down on pre-IPO venture

• Multi-strategy hedge funds are typically seen as public-market players. D.E. Shaw is instead scaling a dedicated venture/growth vehicle and co-leading the largest private rounds in history, which suggests the most valuable AI exposure is now private and pre-IPO.
• Quote: "The fund is pursuing a mid- to late-stage, pre-IPO strategy focused on technology, data and adjacent sectors."
• Quote: "Voltaic Fund I closed in early 2023 with more than $450 million in commitments, just shy of a reported $500 million goal." The fund is now more than doubling despite a first fund that narrowly missed its target.

3. Companies Identified

D.E. Shaw (D.E. Shaw Ventures / Voltaic)

• Description: Hedge fund with a venture and growth equity arm.
• Why mentioned: Targeting $1B for Voltaic II and co-leading the largest AI rounds.
• Quote: "It co-led Anthropic's $30 billion Series G in February, which valued the AI developer at $380 billion."

Anthropic

• Description: AI developer.
• Why mentioned: Raised a $30B Series G at a $380B valuation.
• Quote: "It co-led Anthropic's $30 billion Series G in February, which valued the AI developer at $380 billion."

OpenAI

• Description: AI developer.
• Why mentioned: Raised $122B at an $852B valuation.
• Quote: "A month later, it co-led OpenAI's $122 billion round at an $852 billion valuation."

SignSplit

• Description: Signed-data platform developer.
• Why mentioned: $400M seed at a $1B valuation.
• Quote: "SignSplit emerged from stealth with a $400 million seed round led by W Group at a $1 billion valuation."

Valon

• Description: Mortgage servicing operating system developer.
• Why mentioned: $150M Series D at a $2.3B valuation.
• Quote: "Valon, the developer of a mortgage servicing operating system, secured a $150 million Series D at a $2.3 billion valuation from investors including Ribbit Capital and Andreessen Horowitz."

Supabase

• Description: Open-source Postgres development platform.
• Why mentioned: $150M round led by GIC.
• Quote: "Supabase, the provider of an open-source Postgres development platform, raised a $150 million round led by GIC."

Zenflow

• Description: Medical device startup focused on urologic care for men.
• Why mentioned: $52M Series D led by Cook Medical.
• Quote: "Zenflow, which focuses on urologic care for men, raised a $52 million Series D led by Cook Medical."

Clockwork.io

• Description: GPU cluster observability and fault-tolerance platform.
• Why mentioned: $31M round.
• Quote: "Clockwork.io, which develops a GPU cluster observability and fault-tolerance platform, secured a $31 million round."

Living Optics

• Description: Hyperspectral camera startup.
• Why mentioned: $20M round led by BRV Capital Management.
• Quote: "Hyperspectral camera startup Living Optics raised a $20 million round led by BRV Capital Management."

Consano Bio

• Description: Biotech developing a biologic for chronic sciatica.
• Why mentioned: $15M round.
• Quote: "Consano Bio, a biotech developing a biologic medication for chronic sciatica, raised a $15 million round."

Pandektes

• Description: Copenhagen-based legal research specialist.
• Why mentioned: €13.5M Series A led by Alstin Capital.
• Quote: "Copenhagen-based legal research specialist Pandektes raised a €13.5 million Series A led by Alstin Capital."

Safeworld

• Description: Simulation platform for safety testing humanoid robots.
• Why mentioned: $12M seed.
• Quote: "Safeworld, a startup developing simulations for safety testing humanoid robots, raised a $12 million seed round led by Shine Capital and Andreessen Horowitz."

Ghost

• Description: Personal computer built to run personal AI agents.
• Why mentioned: $11M seed led by a16z.
• Quote: "Ghost, a startup developing a personal computer designed to centralize data and run personal AI agents, raised an $11 million seed round led by Andreessen Horowitz."

Alentis Therapeutics

• Description: OrbiMed-backed biotech.
• Why mentioned: $1.6B deal with CSL.
• Quote: "CSL agreed to a $1.6 billion deal with OrbiMed-backed Alentis Therapeutics to develop a drug for rare kidney and liver diseases."

Firmus

• Description: Australia-based data center operator.
• Why mentioned: $5.5B IPO with half the shares allocated to existing backers.
• Quote: "Firmus is planning to allocate half of the shares in its $5.5 billion IPO to existing backers including Nvidia and Blackstone, Bloomberg reported."

IntraBio

• Description: Texas-based biotech.
• Why mentioned: $2B acquisition by Shionogi.
• Quote: "IntraBio, which is backed by Oxford Science Enterprises, agreed to be acquired by Tokyo-listed Shionogi in a $2 billion deal."

Quasar Medical

• Description: Singapore-based contract development and manufacturing organization.
• Why mentioned: Boyu Capital weighing a sale at a $1B+ valuation.
• Quote: "Boyu Capital is considering a sale of Singapore-based Quasar Medical, a contract development and manufacturing organization that could be valued at over $1 billion."

TRex Bio

• Description: Autoimmune and inflammatory disease biotech backed by Eli Lilly.
• Why mentioned: Seeking about $133.3M in an IPO.
• Quote: "TRex Bio, which is backed by Eli Lilly, is seeking to raise about $133.3 million in its IPO."

DayOne Data Centers

• Description: Singapore-based data center operator backed by Coatue.
• Why mentioned: Filed publicly for a US IPO.
• Quote: "DayOne Data Centers, which is backed by Coatue, filed publicly for its US IPO."

OCU Group

• Description: UK energy transformation and critical infrastructure services provider.
• Why mentioned: Sold by Triton Partners to TDR Capital.
• Quote: "Triton Partners agreed to the sale of UK-based energy transformation and critical infrastructure services platform provider OCU Group to TDR Capital."

Lapeyre Group

• Description: French manufacturer and distributor of home-improvement products.
• Why mentioned: Mutares selling a controlling stake.
• Quote: "Mutares is selling a controlling stake in Lapeyre Group, a French manufacturer and distributor of home-improvement products."

CAZ Investments

• Description: Houston-based investment firm.
• Why mentioned: Launched the CAZ GP Stakes Growth Fund.
• Quote: "Houston-based firm CAZ Investments launched the CAZ GP Stakes Growth Fund."

Partners Group

• Description: Global private markets manager.
• Why mentioned: Investors voting to wind down a London-listed PE fund for individuals.
• Quote: "Partners Group investors are set to vote to wind down the portfolio of a London-listed fund designed to allow individuals to invest in PE."

4. People Identified

Kyle Walters

• Description: PE research analyst at PitchBook.
• Why mentioned: Provided the framing for the shift in continuation fund usage.
• Quote: "Kyle Walters, a PE research analyst at PitchBook, noted that this form of secondary transaction is likely to be used more selectively in the future, rather than as an 'overflow valve' as it was in 2025."

5. Operating Insights

1. Don't over-index on a liquidity tool built for a stressed market

• If you are a GP or LP, plan for liquidity via traditional exits as they recover rather than relying on structured secondaries.
• Quote: "Continuation funds emerged as an important tool to help PE managers return capital to cash-strapped LPs without having to sell companies for valuations they are unwilling to accept."
• Quote: "The number of PE-backed M&A deals to close in the third quarter was up nearly 6% from the prior quarter and about 7.9% from the same period in 2025."

2. Raise capital into strength: scaling fund size follows demonstrated access to marquee deals

• D.E. Shaw's pitch for a larger Voltaic II rests on visible participation in the biggest AI rounds.
• Quote: "The successor comes to market as the firm's venture arm, D.E. Shaw Ventures, has participated in some of the largest private financings of the AI boom."

3. Allocating IPO shares to existing strategic backers can de-risk large offerings

• Quote: "Firmus is planning to allocate half of the shares in its $5.5 billion IPO to existing backers including Nvidia and Blackstone."

6. Overlooked Insights

1. Fed rate hike as a macro variable in 2026

• The newsletter teases the "impact of the Fed's rate hike" in its Q3 PE breakdown, which implies the rate regime reversed upward in 2026, a notable backdrop for leverage-dependent PE and exit timing.
• Quote: "We take a close look at factors including deal rebounds, a top-heavy exit environment, and the impact of the Fed's rate hike in our Q3 2026 US PE Breakdown."

2. Retail-access PE vehicles and evergreen funds are diverging

• A London-listed vehicle for individual PE investors is being wound down, while evergreen funds improved through 2026, with infrastructure leading and direct lending lagging.
• Quote: "Partners Group investors are set to vote to wind down the portfolio of a London-listed fund designed to allow individuals to invest in PE."
• Quote: "Infrastructure still leads at 6.5%, but gains in private equity, private multi-asset, and real estate pulled the broad Evergreen Fund Index up to 3.3%. Direct lending continues to lag, extending the weak start to the year."