Answer: Look at the stack. In a true technology wave, the whole stack changes, not just one layer, says Kindred Ventures’ Steve Jang. And if you look at AI, he says, that’s exactly what’s going on: “Right now you’re seeing it all the way from chips all the way up through the application layer.”

Jang, Kindred’s founder and managing partner, was speaking at Fortune’s Brainstorm AI conference in San Francisco on Monday, on a panel to discuss how VCs are thinking about these bubbly times in the AI market. His point is that the angst over the AI bubble is kind of besides the point. What really matters is whether the underlying tech transformation is real or not. 

Sapphire Ventures partner Cathy Gao, who was also on the panel, said that valuations for some companies have clearly climbed far beyond any sort of fundamentals. But she also noted that the growth curves of certain companies right now “far outstrip the growth curves of companies we’ve ever seen before.”

To help sift through the hype in this environment and find the startups with real staying power, Gao said she uses a three-question test.

First, is the startup’s product a “feature” or a “workflow?” The stand-outs, she says, are “companies that are able to actually embed and fully overtake an existing workflow, while building significant switching costs.”

Second, is distribution built-in? People don’t want to learn how to use another tool, says Gao. The key qualities here are whether the tool is “integrated in usability and in all the other solutions that it needs to be in order for the workflow to be fully functional?”

And finally, does the company get stronger over time? This is called “compounding durability,” says Gao. “With every new user, does the solution get better, does it get cheaper, does it get faster?”

We’ll have more questions, and answers, at Brainstorm AI today. Watch the livestream here.

See you tomorrow,

Alexei Oreskovic
X: @lexnfx
Email: alexei.oreskovic@fortune.com
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Venture Deals

- Unconventional AI, a San Francisco-based developer of chips and computer systems designed for AI, raised $475 million in seed funding. Andreessen Horowitz and Lightspeed led the round and were joined by Sequoia, Lux Capital, DCVC, Future Ventures, Jeff Bezos, and others.

- Airwallex, a San Francisco and Singapore-based payments and banking platform for businesses, raised $330 million in Series G funding. Addition led the round and was joined by T. Rowe Price, Activant, Lingotto, and Robinhood Ventures.

- Blue Current, a Hayward, Calif.-based developer of silicon solid-state batteries, raised $80 million in a Series D extension from Amazon, Koch Disruptive Technologies, Piedmont Capital, Rusheen Capital Partners, and Allen & Company.

- Crown, a São Paulo, Brazil-based stablecoin issuer, raised $13.5 million in Series A funding. Paradigm led the round.

- Resemble AI, a Mountain View, Calif.-based security platform for enterprise AI, raised $13 million in funding from Sony Innovation Fund, Berkeley Frontier Fund, Comcast Ventures, Craft Ventures, and others.

- Scowtt, a Seattle Wash.-based AI-powered advertising optimization platform, raised $12 million in Series A funding. Inspired Capital led the round and was joined by LiveRamp Ventures, Angeles Investors, and Angeles Ventures.

- Equixly, a Verona, Italy-based agentic AI platform designed for API security testing, raised €10 million ($11.6 million) in Series A funding. 33N Ventures led the round and was joined by existing investors.

Private Equity

- ContextLogic agreed to acquire US Salt Parent Holdings, a Watkins Glen, N.Y.-based producer of evaporated salt products, from private equity funds managed by Emerald Lake Capital Management for $907.5 million. 

Exits

- Berkshire Partners agreed to acquire United Flow Technologies, an Irving, Texas-based provider of process and equipment solutions for water and wastewater systems, from H.I.G. Capital. Financial terms were not disclosed.