Data wants to interrupt your deal flow (again).

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Angel Lists Recently closed early stage venture fund brings back one of my favorite conversations in the world of fundraising for early-stage startups: to date or not to date. The $25 million fund bases all of its investments on a key metric AngelList has tracked for years: a startup’s employability.

When I spoke to Abraham Othman, head of investment committee and data science at AngelList Venture, he told me that they win deals because they are less hostile to portfolio companies than other firms. “Our approach? That’s our data set, let’s see if we can put money into it,” he said. No further due diligence? No problem.

Of course, there are some challenges to relying on such signals to make investments. As history often reminds us, Due diligence is important from a human perspective – and scrutinizing a founder beyond their ability to attract talent can save companies from a headache or legal trouble. Additionally, a startup might get a ton of applicants based on pay, location, or even recent coverage on a popular tech blog — which can bode well for success, but can also just be the result of great marketing. In AngelList’s case, they believe the fluidity of recruitment demand contributes to its importance.

As you can probably see, I think the future of data-driven investing will bring a double-edged sword to our Zoom rooms (or perhaps lack thereof). Traditional investments that prioritize pedigree and culture or a founder’s “art” have left out a whole class of historically overlooked individuals. But the same process where you spend five hours talking to an aspiring entrepreneur adds a layer of humanity to decision makers before they get millions to implement a vision.

I don’t want to get into the due diligence conversation again, and investors relying on data to dictate their investment decisions is far from a new strategy. This is the song of late-stage investors, private equity analysts, and your brilliant aunt who loves a good earnings report. Early-stage startups and investors from ClearCo to SignalFire have spent years building advice on algorithms and assumed returns.

However, in a bull market, even for the most optimistic among us, the premise of an unbiased, data-driven review feels a little more hopeful than before. Money certainly doesn’t solve all problems – the number one reason startups fail today still stems from it Failure to raise new capital. Add in the gender gap in fundraising and suddenly a more automated decision-making process sounds inevitable rather than unromantic.

For my full take on this topic, see my TechCrunch+ column: Is algorithmic VC investment compatible with due diligence?

In the rest of this newsletter, we’ll talk about a new grad-friendly fund, legal technology, 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.

A million dollars lasts a million times longer than before

Led by Flybridge founding partner Jeff Bussgang, Harvard Business School professors assembled a $7 million fund to invest in recent graduate students at the university. This is the third installment of the Graduate Syndicate that officially Closed this week per SEC filings.

Here’s what you should know: The consortium began a few years ago when business school professors realized that young talent was looking for activation capital in their classes. According to Bussgang, in order to limit conflicts of interest such as favoritism or an imbalance of power, the syndicate only invests in founders after they have graduated from school. To date, the consortium has invested in 60 companies, 41% of which are owned or co-led by a female founder.

Busting over the changes in the pre-seed:

A pre-seed round, which usually costs around a million dollars, comes at a moment when you can make a lot of progress with just a million dollars, given the no-code, low-code platforms, the cloud and reducing start-up costs. The biggest trend I’ve seen is that these companies can do so much with so little [and] Because of these no-code platforms, business founders can be builders, they don’t have to be software developers, and that’s a huge tailwind for the HBS community.

Advice and other bits:

Photo credit: Tomertu (opens in a new window) / Shutterstock (opens in a new window) (image has been changed)

And the startup of the week is…

legal professions. In our newly distributed working world, flexibility is an important but elusive concept. Luckily for Raad Ahmed and Ashish Walia, the co-founders of Lawtrades, defining the term is a conversation that’s been in the works since 2016. Lawtrades wants to change the way companies use legal resources, and give lawyers the opportunity to work remotely more flexibly.

Here’s what you should know: The startup raised a $6 million Series A round led by Four Cities Capital, with participation from Draper Associates and 500 startups. To date, the attorney network has earned more than $11 million on the platform and over 60,000 hours of work were logged on the platform in 2021, a 200% increase from 2020. our own reports by Christine Hall.

Ahmed about the moonshot:

As a business, you basically meet internet strangers and hire them for hundreds of thousands of dollars and trust them to do a good job. So there is a solid amount of betting going on on the supply side. We rent about 5% to 6% [lawyers into the platform] – but the really difficult part is, how does this day look operationally? Other platforms… there’s not much working transparency, so we’re trying to work on that.

We have this simple tool, a time tracking app. Once you get hired for a commitment, you basically sign up every hour you work. We’re basically making this transparent for customers to see what equates to a Facebook news feed, but it’s a working feed. So it updates who’s working on what or for how long, on which project, and you can react to it, comment on it, and we’re always finding cleverer ways to collect the data with minimal effort like our network of lawyers.

It actually allows you to gain even more transparency and even more details about someone’s productivity than if you were standing right next to each other.

Recognitions:

Photo credit: Mawardi Bahar / EyeEm (opens in a new window) /Getty Images

Plaid responded to Cognito

Fintech giant Plaid acquired the verification platform Cognito for around $250 million, TC’s Alex Wilhelm reported this week. Plaid has actively evolved from the structure that helps fintechs communicate, to a patchwork of services built on top of these key connections.

Here’s what you should know: The deal comes months after Plaid’s own acquisition, which would have resulted in it being owned by Visa, fell apart and earned it a lofty new rating. Like we talked about the latest equityPlaid has matured to host a growing startup accelerator, acquiring companies and significantly expanding its strategic ambitions.

Cuff Season: