The fund has no carry, and algorithms perform the initial screening.
Investors are pouring money into AI startups (perhaps not as much as you might assume), so it’s not surprising that they’re beginning to utilize the technology to maximize their most valuable asset: time.
In an effort to reduce bias and attract a more diverse group of founders, Connetic Ventures of Kentucky has developed software that serves as its top-of-funnel.
The Wendal platform evaluates founders based on thirteen entrepreneurial characteristics to determine whether an investor meeting will be fruitful or not. The evaluation lasts between 15 and 20 minutes, and the fund promises to make a decision within three days.
Wendal was conceived during a brainstorming session for angel investors in Indiana, Kentucky, and Ohio who desired to efficiently discover and support startups in those states.
“In San Francisco or New York, you can raise money, hang a sign, and have enough deal flow to support an actual fund,” said Chris Hjelm, a partner at Connecticut.
Outside of these main funding hubs, greater discernment is required. The inquiry was how. Recognizing that the team is central to any startup, the fund proceeded down what Hjelm termed a “behavioral psychology rabbit hole” and enlisted the assistance of an industrial psychologist to define the optimal entrepreneurial behavioral profile. Then they erected Wendal.
My fictional company (heavily based on my actual company, which failed spectacularly) was recommended to the investment team after I tested the platform myself.
Not only is Wendal unique to this company, but it also lacks a carry component. Contrary to most VC firms, which retain 20% of the funds they generate for their limited partners, Connetic intends to make itself accessible to retail investors via financial advisors. It charges a 1.9% fee instead of a direct return on the success of a startup.
All of this intrigued me about this venture capital fund, so I met with Hjelm to discuss the fund, the metrics that Wendal measures, how it intends to make its fund structure work and other topics.
Investment in the mechanism
Connecticut believes it has devised a significantly more fair model for determining who should receive funding by eliminating the pitch and human factors. A
ny AI system is only as good as its training data, so it is reasonable to question Wendal’s impartiality and its ability to determine whether a startup’s founder is suitable for a particular market. Hjelm, however, believes that the platform was designed with equity in mind, and data supports this claim.