Arcee AI, the startup he founded in 2023, was focusing on post-training—the process by which an existing model is honed for humans. But McQuade saw an opening: Meta had just backed off its push into open-weight models, a vital (and tricky) middle ground in AI. Open-weight models allow companies (and people) to securely run state-of-the-art AI without turning their data over to, say, OpenAI or Anthropic.
But if McQuade wanted to fill the gap, he and Arcee would have to build their own model completely from scratch, a technical and financial mountain to climb.
“We saw an opportunity, and we had $30 million in the bank,” said McQuade. “I said ‘let’s do it’ and I bet the company on it. ‘Let’s spend 65% to 70% of our capital.’”
The startup over the coming months burned about $20 million training four open‑weight models, including a 400‑billion‑parameter model called Trinity Large, released in early 2026. $20 million, in AI, is a shockingly low number—conventional wisdom states that you need billions to train a new model, a belief challenged dramatically when China-based DeepSeek surfaced in 2025, with reports that the top-notch model was trained for under $6 million.
In AI, open-weight models are definitionally geopolitical, and China, so far, has dominated the game. Arcee—whose models have beat Meta’s Llama 3, and have benchmarked on par with Mistral and Chinese models—has been relatively quiet, but is now stepping forward: the startup has raised its Series B at a $1 billion pre-money valuation, Fortune has exclusively learned. The round was led by Vista Equity Partners, Cambium Capital, and Emergence Capital, with participation from Microsoft’s M12, AI10 Ventures, Hitachi, IAG, P7, and Wipro. Arcee declined to disclose the amount raised in this round, but a source familiar with the matter told Fortune it was at least $150 million.
The cash will funnel towards new open-weight models and products, along with growing Arcee’s partnership with the U.S. Department of Energy. (Arcee will also be working extensively with Vista’s portfolio companies.) However, McQuade is very clear: The ultimate goal is to catch China.
“Everyone talks about China versus the U.S.,” said McQuade (who was previously an early employee at Hugging Face, just acquired by Nvidia for almost $13 billion). “My stance is: just do something great. Catch up to them. Do the work… In order for the U.S. to take the absolute lead in the AI race, you have to be in the lead when it comes to closed and open. The U.S. is far ahead in closed source, but kind of dropped the ball on open source.”
McQuade says it’s time to pick up the ball: “We’re not chasing [Poolside’s] Laguna,” he says. “We’re chasing [Beijing-based Z.ai’s] GLM Flash.”
To get there, efficiency is non-negotiable, McQuade said. And, for Arcee, efficiency’s also the game plan: “We can comfortably say we’re the most efficient lab in the world based on what we’ve done.”
Building in AI is a high-wire act on its own, but the game at the model layer is that much more viscerally competitive, in the U.S. and abroad. McQuade didn’t just pivot, he dove into the deep end, and I asked him: Why cannonball, when you could’ve dipped a toe in?
“Gosh, adrenaline? I don’t know, I like to push the envelope,” he said. “In AI, things change so fast, so what’s the point of dipping your toe in. If you fail, you fail, and at least you tried. If you’re going to do something, go all in.”
See you tomorrow,
Allie Garfinkle
X: @agarfinks
Email: [email protected]
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VENTURE CAPITAL
– Exein, a Rome, Italy-based cybersecurity company designed to protect AI-powered machines, raised $270 million in funding. Headline led the round and was joined by Sofina, Goldman Sachs, and others.
– Profound, a New York City-based AI-search marketing software company, raised $180 million in Series D funding. Sequoia and Kleiner Perkins led the round and were joined by existing investors Lightspeed Venture Partners, Khosla Ventures, and South Park Commons.
– Split Pay, a Miami, Fla.-based platform that allows users to split their bills into smaller payments, raised $125 million across Series A and Series B rounds from Khosla Ventures, Thrive Capital, MetaProp, and others.
– Thatch, a San Francisco-based employee health-benefits platform, raised $108 million in Series C funding from The General Partnership, Index Ventures, General Catalyst, Andreessen Horowitz, and others.
– Delos Data, a Palo Alto, Calif.-based AI data-center networking company, raised $100 million from Matri, Playground, Socratic Partners, and others.
– Nuance Labs, a Seattle, Wash.-based AI startup building models that understand human expression, raised $50 million in Series A funding. Lightspeed Venture Partners led the round and was joined by Accel, NVIDIA, South Park Commons, and Define Ventures.
– Jack & Jill, a London, U.K.-based AI hiring platform that matches job seekers with employers, raised $40 million in Series A funding. Air Street Capital led the round and was joined by Creandum and Madrona.
– Branch Energy, a Houston, Texas-based battery developer for commercial buildings and data centers, raised $33 million in Series B funding. Piva Capital and Clean Energy Ventures led the round and were joined by Active Impact Investments, Whitecap Venture Partners, and existing investors.
– Nomos, a Berlin, Germany-based energy developer, raised €20 million ($23 million) in funding. Index Ventures led the round.
– Loora, a Tel Aviv, Israel-based AI English-learning app, raised $22 million in Series B funding. Union Tech Ventures led the round and was joined by vgames and existing investors Emerge, Hearst Ventures, and QP Ventures.
– Buywander, a Seattle, Wash.-based marketplace for auctioning returned and overstocked goods, raised $21 million in Series A funding. Madrona Venture Group and Inspired Capital led the round and were joined by Triple Impact Capital, Silence Ventures, Animal Capital, and angel investors.
– Liquid Compute, a New York City-based marketplace for buying and selling AI-computing capacity, raised $15 million in seed funding. FirstMark and Chemistry led the round.
– G5 Labs, a Boston, Mass.-based AI software-development startup, raised $14 million in seed funding. Pillar VC and Battery Ventures led the round and were joined by Omega Venture Partners, Encoded Ventures, and angel investors.
– Nara Health, a Chicago, Ill.-based third-party administrator reinventing personalized health insurance plans, raised $14 million across a seed and pre-seed round led by Khosla Ventures and joined by Long Journey Ventures, Superior Studios, and angel investors.
– ETFBOOK, a Zurich, Switzerland-based ETF data and analytics company, raised $13 million in funding. Expedition Growth Capital led the round and was joined by existing investor BlackFin Capital Partners.
– Rebuild, a New York City-based insurance-claims software company for restoration contractors, raised $13 million in funding from Asymmetric Capital Partners, Gutter Capital, 25madison, Lightbank, and Green Egg Ventures.
– Keewano, a Tel Aviv, Israel-based database for AI agents, raised $12 million in funding from Hetz Ventures, a16z, and others.
– Robocurve, a San Francisco-based independent tester of AI models that control real robots, raised $10 million in seed funding. Initialized Capital led the round and was joined by Notable Capital, Decasonic, Y Combinator, Halcyon Futures, and others.
– VerifAIX, a Cupertino, Calif.-based chip-design verification software company, raised $5 million in seed funding. Endiya Partners and Bluehill VC led the round.
– Decimal AI, a San Francisco-based AI technical-support platform for software companies, raised $4 million in seed funding. Khosla Ventures and Kearny Jackson led the round.
PRIVATE EQUITY
– KKR and Neuberger agreed to acquire a minority stake in Datavant, a Phoenix, Ariz.-based health data ecosystem. Financial terms were not disclosed.
– RedCloud Capital acquired a majority stake in APS Environmental Group, a Bedford, N.H.-based provider of environmental testing, inspection, consulting, and abatement services. Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
– PSG Equity, a Boston, Mass.-based growth equity firm, raised €4.4 billion for its third Europe fund focused on AI-native businesses and software companies.
PEOPLE
– Periscope Equity, a Chicago, Ill.-based private equity firm, promoted Eric Hinkle to Partner.
