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CrowdSmart offers data-driven approach for angels, small funds

With data analysis becoming more prevalent at venture firms, microfund managers, accelerators and individual investors might feel left out of the trend.

After all, smaller funds and angels typically have limited budgets and are unable to pour resources into hiring data scientists and creating advanced analytics to drive deal flow and perform due diligence.

That’s where CrowdSmart comes in.

The San Francisco company this week unveiled Collective Intelligent Investing, a data-driven platform for early-stage-startup investing.

Using algorithms created with natural language processing and machine learning, CrowdSmart’s predictive engine aims to score how likely a startup is to receive follow-on funding at higher valuations.

“We’re about improving the success rate of investments,” said Kim Polese, longtime Silicon Valley entrepreneur and tech executive. Polese is chair of CrowdSmart, which she co-founded in 2015 with CEO Fred Campbell, President and Chief Scientist Thomas Kehler and CTO Markus Guehrs.

The company was bootstrapped with funding from individuals and family offices. Polese and Kehler said they anticipate raising a Series A round by mid-summer.

The company, employing 15, is also looking to expand its services internationally. Polese and Kehler said the model is ideal for accelerators, university startup programs and other early-stage investors. Kehler added that the company is receiving more interest from late-stage funds that want to see which companies will be in the pipeline down the road.

VCJ Venture Data
The CrowdSmart co-founding team (left to right) are CTO Markus Guers, Chair Kim Polese, Chief Scientific Officer and President Tom Kehler and CEO Fred Campbell. Photo courtesy of CrowdSmart.

Polese and Kehler said CrowdSmart analysis helps entrepreneurs, too, providing insights on what investors may seek.

For instance, on their website, CrowdSmart included the testimonial of Sivakumar Nattamai, co-founder and CEO of Cocoon Cam, which provides a video feed via which parents can see live patterns of their baby’s breathing and temperature.

Based on CrowdSmart feedback on what investors were thinking, Nattamai said, he was then “able to add that to my pitchdeck, which resulted in fewer questions from investors.”

The Mountain View, California-based company raised a $4 million Series A round two years ago, following a $1 million seed investment.

“What we do is generate a dataset for each company, an accurate picture of where that company is and will be, and we provide underlying reasons behind that score,” Kehler said.

Interestingly, CrowdSmart reported that with its predictive analysis, women and minority founders have been funded more frequently. Some 40 percent of CrowdSmart-funded companies are led by women.

In addition to providing the data analysis, CrowdSmart also has put money behind its analysis by investing from a $5 million fund. The fund has thus far backed 22 startups, 80 percent of which have gone on to raise up rounds.

CrowdSmart said it receives management fees for the fund it manages, in a one-and-20 structure, and it charges a subscription rate depending on its level of service. Subscription services for its platform, which include deal sourcing, prediction scoring and features, cost from $50,000 to $250,000.

CrowdSmart may raise another collaborative fund to co-invest in future companies that its predictive engine scores.

Recent CrowdSmart startups include SyntiantInvolveSoft and Lensabl.

Robots have not yet replaced VCs, but more firms are hiring data scientists and adding machine-learning algorithms to gauge patterns and provide insights on companies.

Among the firms using quantitative or other AI-power models include Correlation Ventures, SignalFire, EQT Ventures and, Switch Ventures, among others.

Last year, healthcare-focused Foresite Capital raised $668 million for its investment approach, which uses data to calibrate decision making.

Sequoia Capital in 2017 also ramped up its efforts with the addition of former Facebook data director Chandra Narayanan as chief scientist of the firm.

Switch Ventures, which uses predictive analytics to find high-performing entrepreneurs to invest in, bolstered its team in 2018 with a machine-learning engineer Jason Victor, who joined the firm as a data scientist. Victor previously headed data-science, machine-learning and AI initiatives at expansion-stage firm Lumia Capital.

Paul Arnold, founder and sole general partner of Switch, said he’s familiar with CrowdSmart.

“Data-driven approaches are one of the most exciting things in venture investing,” he said. “The results on that are clear. I love what CrowdSmart offers individual angel investors as a way to make better bets.”

Correction: An earlier version of this story indicated CrowdSmart would raise a new fund. It is not fundraising.