Welcome to Startup Weekly, a fresh human-first presentation on this week’s startup news and trends. To get it delivered to your inbox, subscribe here.
AngelList’s recently closed early-stage venture fund brings back one of my favorite conversations within the world of early-stage startup fundraising: For the data, or not for the data. The $25 million fund bases all of its investments on a key metric that AngelList has been tracking for years: a startup’s ability to rent.
When I spoke to Abraham Othman, head of investment committee and data science at AngelList Ventures, he told me that they win deals because they are less hostile to portfolio companies than other firms. “Our approach? This is our data set, let’s see if we can put money into these,” he said. No more due diligence? No problem.
Of course, there are some challenges with leaning on such signals to invest. As history often reminds us, due diligence matters from a human standpoint—and keeping a founder beyond their ability to attract talent can save firms a headache or legal trouble. Additionally, a startup can get a lot of applicants because of salary, location or recent coverage in a well-known tech blog – which can be good for success, but it can also just result in great marketing. In the case of AngelList, he believes that hiring liquidity outweighs its importance.
As you can probably tell, I think the future of data-driven investments will bring a double-edged sword to our Zoom room (or lack thereof, perhaps). Traditional investing that prioritizes lineage and culture, or the “art” of a founder, has historically left out a whole class of unseen individuals. But the same process, in which you spend five hours chatting with an aspiring entrepreneur, brings a layer of humanity to the decision-makers before they put millions of people into action.
I don’t want to get into due diligence talks again, and investors leaning on data to determine their investment decisions are nothing but a new strategy. It’s the song of late investors, private equity analysts, and your fabulous aunts who love a good earnings report. Early-stage startups and investors from Clearco to SignalFire have spent years building advice on algorithms above predictable returns.
However, in a bull market for the most bullish among us, the premise of a fair, data-based check seems a bit more optimistic than before. Money certainly doesn’t solve all problems – the top reason startups fail today Still due to this failure to raise fresh capital, Add in the gender fundraising gap and a more automated decision-making process suddenly doesn’t seem romantic, it seems inevitable.
For my complete take on this topic, check out my Meczyki.Net+ column: Is Algorithmic VC Investing Friendly Due Diligence?
In the rest of this newsletter, we’ll talk about a new graduate-friendly fund, advocate tech, and Plaid’s growing patchwork of startups. As always, you can follow my thoughts on Twitter @nmasc_ Or listen to me on Equity, a podcast about the business of startups, where we unpack the numbers and nuances behind the headlines.
$1 million lasts a million times longer than before
Led by FlyBridge’s founding partner Jeff Bussgang, Harvard Business School professors put together a $7 million fund to invest in recent graduate students from the university. It is the third installment of the Graduate Syndicate, which officially Per SEC filing closes this week,
Here’s what to know: The Syndicate began a few years ago when business school professors realized that young talent within their classrooms was looking for activation capital. To limit conflicts of interest such as favoritism or power imbalances, Bussgang said the syndicate invests in founders only after they graduate from school. So far, the syndicate has invested in 60 companies, 41% of which are led or co-led by a female founder.
Boosgang on what turned into pre-seed:
A pre-seed round, which is typically around a million dollars, is happening at a time where you can make a ton of progress with just a million dollars looking at no-code, low-code platforms, cloud and scarcity. can. The cost of getting things started. The biggest trend I’ve seen is that these companies can do so much for so little. [and] Because of these there is no code platform… Business founders can be builders, they don’t have to be software developers and this is a great tailwind for the HBS community.
Advice and other bits:
And it’s the start of the week…
Lautrade. When it comes to our new distributed world of work, flexibility is an important but elusive term. Lucky for Lotrades co-founders Raad Ahmed and Ashish Walia, defining the term has been a conversation that has been in the works since 2016. LawTrades wants to change how enterprise companies use legal resources, and give lawyers the opportunity for more flexible, remote work.
Here’s what to know: The startup raised a $6 million Series A round led by Four Cities Capital, with participation from Draper Associates and 500 Startups. As reported by our own Christine Hall, the Lawyer Network has so far generated over $11 million on the platform and over 60,000 hours of work on the platform in 2021, a 200% increase from 2020.
Ahmed on the Moon:
As a company, you’re basically meeting internet strangers and hiring them for hundreds of thousands of dollars and trusting they’re going to do a great job. So there is a solid amount of betting on the supply side. We are around 5% to 6% [lawyers into the platform] – But the real hard part is, how does this day work? Other platforms… There isn’t much transparency in work, so that’s what we’re trying to work on.
We have this handy tool, a time tracking app, that once you’re hired for an engagement, you’re basically logging in every hour you work. We basically make it transparent for customers to see what the Facebook equivalent of a newsfeed is but a work feed. So it updates who is working on what or for how long, on which project and you can give feedback, comment on it and we like ours to do more and more to capture data with minimum work Coming up with clever ways. Lawyers network.
It really allows you to get even more transparency and even more detail in someone’s productivity than if you were right together.
Cognito. but the plaid is gone
TC’s Alex Wilhelm reported this week that fintech giant Plaid has acquired verification platform Cognito for about $250 million. Plaid is actively growing from the fabric that helps fintechs communicate, to a patchwork of services built on top of those key connections.
Here’s what to know: The deal came months after its own acquisition of Plaid, which would have seen it owned by Visa, fell apart and received a new valuation. As we talked about the latest equity, Plaid has matured into hosting a growing startup accelerator, acquiring companies and clearly expanding its strategic ambitions.
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until next time,