A major plot twist in a new funding round for Town has revealed a new fault line in the fast-moving – and messy – Silicon Valley gold rush for promising AI assistant startups.

Town is raising $90 million at a $1 billion valuation, three sources tell Upstarts Media, in a Series B funding round co-led by Kirsten Green at existing investor Forerunner Ventures, and Shawn Carolan at new backer Menlo Ventures. Previous investors a16z and First Round are also participating.

But of particular interest is who is not investing in Town’s new funding round, which has not yet been officially announced. Index Ventures, reported by Newcomer last week to be leading the raise, is no longer investing at all in Town, per the sources, despite reaching a signed term sheet in recent days.

The about-face comes after another AI assistant startup in which Index was reported to be co-leading a large-sized investment round, Instinct, complained to the investor about potential conflict of interest, the sources add. Index subsequently withdrew its commitment to Town, as did Conviction, a VC firm with stakes in both companies that had also planned to participate.

Town co-founder and CEO Jean-Denis Greze declined to comment through a spokesperson.

Instinct and founder Noah Shinn didn’t respond to comment requests, nor did representatives of the key VC players involved – lead investors Forerunner and Menlo, plus Index and Conviction – as of publication.

To be clear, our friends at Newcomer didn’t have the initial story wrong, our own sources say: this was an about-face that is unusual for such a buzzy round and major investors involved. We get into what it means for each startup — and the developing AI assistant race — in more detail below.

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