Jared Grusd

🚨 California's SB 53 “Transparency in Frontier Artificial Intelligence Act” was officially signed into law yesterday by Gov. Newsom Who does it apply to? ✅ Large frontier developers: companies with > $500M in annual revenue that train/initiate the training of frontier models. ✅Frontier models: foundation models trained using ≥ 10²⁶ floating-point or integer operations. *These thresholds are intentionally high, but the bill's preamble notes that additional legislation could target smaller companies in the future. 📋 What does the law require? ✅ Risk frameworks: Companies must publish (on their websites) a “frontier AI framework” detailing how they assess and mitigate catastrophic risk, the cybersecurity practices leveraged, and the governance practices they put in place. ✅Transparency reports: Must be issued when deploying or substantially modifying a frontier model. ✅Reporting to state regulators: Summaries of risk assessments must be filed with California’s Office of Emergency Services, and critical safety incidents must be reported within 15 days (24 hours for imminent risks). ✅Whistleblower protections: Companies cannot prevent employees from reporting violations of the law or concerns that a developer's actions pose a danger to public health or safety. Penalties: Noncompliance can result in civil penalties of up to $1 million per violation, enforced by the Attorney General.

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Week 3 of “Venture Capital” at the Santa Clara University School of Law. A local landmark (in Palo Alto): the literal garage where William Hewlett and David Packard launched HP. As for me, safety first out here on these streets 🚴‍♂️… Last week, we discussed ARDC, as well as Arthur Rock and the Traitorous Eight. That story teed-up the technical structure to which we turned today. ARDC made the mistake of organizing as a publicly-traded C corporation. On paper, going public wasn’t a terrible idea: it allowed it to access a broad swath of the capital markets. That said, the structure was costly, restrictive, and burdensome. It also forced the fund into a #Ccorp structure, the #DoubleTaxation of which deeply impacted returns 👎 Arthur Rock and his progeny learned the lessons. First, the cons of going public far exceeded the pros. In the end, VCs determined that they could raise sufficient capital from the private capital markets. No need to go public. Second, by remaining privately-held, they had more optionality with respect to structure - and the limited partnership format proved far more attractive and suitable. With a #LimitedPartnership, there are 2 classes of owners: limited partners and general partners. 1️⃣ Investors provide the capital as #LimitedPartners. In that capacity, they enjoy #LimitedLiability; they are not liable for the debts and obligations of the fund. They are required to be passive - that’s a legal requirement of LPs - but that’s ok. That’s expected anyway. 2️⃣ The venture capitalists themselves play the role of #GeneralPartner; a limited partnership must have at least one GP by law. GPs may be active, and that, too, is consistent with expectations. It’s the VCs who - via the GP - will run the show. But what about limited liability? The GP has unlimited liability, meaning it is indeed liable for the debts and obligations of the fund. Yikes 😬 This feels like a huge disadvantage, and might trigger the organizers to race back to the #corporation format, given that all owners (stockholders) enjoy limited liability? Hmmmm… 🤔 And therein lies the fix! GPs may be entities! They are not required to be “natural persons.” So the VCs simply organize a corporation to act as the GP, with the VCs as its stockholders. That corporation is indeed liable for partnership debts and obligations - but it insulates the assets of the human VC stockholders 🎉 What about taxes? Limited partnerships enjoy #PassThroughTaxation. Profits are taxed only once (not twice). The news is just better and better!🎉 That’s great for the LP investors, but what about the VCs? We just said they are operating via a corporation. Doesn’t that mean double taxation? 🤔 Only if a C. If they make an S-election, and virtually all qualify, then they get to stack “pass-through on top of pass-through.” And today, VCs can, if they wish, use an LLC as the GP, and select either #SCorp or partnership tax treatment. Both of which are pass-through! 🎉 #DWProf

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It may be a new year, but AI, global uncertainty, and regulatory shifts are still primary issues for GCs. If you thought 2026 would be Groundhog Day, California is here to save the day with SB 82! SB 82, effective January 1, 2026, now limits arbitration clauses in consumer agreements to disputes arising under that specific contract. Logical? Absolutely. Defensible? We’ll see. The bill’s proponents cited the example of Disney successfully arguing that a wrongful death claim against its theme park should be arbitrated because the widower, years earlier, signed up for a Disney+ subscription that mandated arbitration. The ensuing debate of the statute’s impact on the FAA will be important to follow (with the argument against SB 82 being that it violates the FAA’s requirement that arbitration agreements be enforced according to their terms and that the FAA preempts any state law singling out arbitration for disfavored treatment). The state is arguing that the bill does not disfavor arbitration itself, instead regulating contract formation and consent (arguing that a consumer cannot meaningfully consent to arbitrate future, unrelated disputes). Is SB 82 an obstacle to the execution of the FAA? Is infinite arbitration reflective of Congress’s objectives with the FAA? These are just some of the important questions at hand. If California’s track record of challenging the FAA is any indicator, the statute could be short-lived. But this Q1, make no doubt about it, many GCs will find themselves having to answer what exposure and risk the new statute places on their businesses.

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Camber Creek led the $3.7 million Seed round for TwinKnowledge, which is tackling an important problem in the built environment. Construction projects get delayed and rework is required because of discrepancies across construction documents, submittals, requests for information, design, and other plans. TwinKnowledge’s AI Agents absorb structured and unstructured project data, surfacing and preventing conflicts before the work begins. We’re excited about our partnership with CEO Ivan Panushev and his team. #construction #AEC #AI #technology https://ow.ly/mBYX50VtaVG

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