The fund has no carry and the first sieve is done by robots
Investors throw money in AI startups (perhaps not as much as you might think), so it’s no wonder we’re starting to see them leaning on the technology to leverage their most precious resource: time.
In an effort to reduce bias and capture a more diverse group of founders based in Kentucky Connected Enterprises has developed a piece of software that acts as the top-of-funnel. The platform, called Wendal, rates founders based on 13 entrepreneurial traits to determine whether a meeting will prove fruitful for investors. The test takes 15 to 20 minutes and the fund promises to give founders a decision within three days.
Wendal’s genesis was sparked during an ideation session for angel investors who wanted to efficiently and effectively find and support startups in Indiana, Kentucky and Ohio.
“In San Francisco or New York, you can raise money, put up a signup, and have enough deal flow to support a real fund,” says Chris Hjelm, a partner at Connetic.
Outside of these major funding hubs, you need to be more discerning. The question was how. Knowing that the team is at the heart of any startup, the fund went down what Hjelm described as a “behavioural rabbit hole” and sought the help of a business psychologist to define the optimal entrepreneurial behavior profile. They then built Wendal.
I tried out the platform myself, and my fictional company (based heavily on my real company that failed spectacularly) was recommended to the investment team.
Wendal is not the only thing that is unique about this company: it also has no carrier component. Unlike most VC firms who are allowed to keep 20% of the money they generate for their LPs, Connetic wants to make itself available to private investors through financial advisors. It charges a 1.9% fee instead of a direct benefit to a startup’s success.
All of that got me curious about this venture capital fund, so I caught up with Hjelm to talk about the fund, the metrics Wendal measures, how it plans to make its fund structure work, and more.
equality in the machine
By taking the pitch and human factors out of the equation, Connetic believes it has developed a much fairer model for determining who should receive funding. But any AI system is only as good as its training data, so it makes sense to wonder how fair Wendal is or how good it is at determining whether a startup founder is right for a particular market. But Hjelm believes the platform was built to be fair and the data confirms this claim.