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A quick overview of the venture capital landscape reveals that many funds have a specificity reason to be this helps to summarize it in a few words: some are focused on a specific region, for example, while others are focused on a specific type of technology or business specific to a stage.
The big argument of InReach Ventures, based in London, is that it is the "venture capital firm fueled by the AI" and today announced the closing of its first equity fund for a fee 53 million euros (60 million dollars).
Needle in a haystack
One more thing Venture capital firms share their basic investment methodology: they use research and due diligence to badess the risks badociated with an investment opportunity. These risks vary depending on the stage of a business. Start-up or Series A companies are generally riskier than for-profit growth companies that are already considering an exit. But there is a challenge that is much more important than due diligence: how do venture capitalists find the companies it is worth investing in?
Start-ups are often attracted to the world's leading technology centers, because that's where the money is, whether in Silicon Valley, New York or London. And that's where venture capital companies often find their next investment. It is not as easy to find entrepreneurial opportunities elsewhere, especially in regions such as Europe, since venture capital firms have to spend a lot of time going to outposts and meeting thousands of new businesses every year. And what about startups that are not actively looking for investments, but who would consider accepting funding if it fell on their heads?
These are challenges that InReach Ventures seeks to solve with big data, badysis and artificial intelligence (AI), in order to find the next big project in Europe.
The story up here
InReach Ventures was founded in 2015 by Roberto Bonanzinga, a former partner at Balderton Capital, alongside Ben Smith, a former Yammer / Microsoft engineer, and the former Balderton General Counsel.
John Mesrie. About 3 million euros ($ 3.5 million) was spent on developing its own internal research platform, internally called DIG, which tracks all kinds of data points to discover and evaluate young companies in startup, including trawling on LinkedIn or Facebook. change profiles, company recruiting pages, website traffic, etc.
In many ways, InReach is similar in composition to one of its potential portfolio companies: Data is its motto, over half of its employees are software engineers, and its own technology manager, Smith, was himself. the main developer behind the DIG platform.
"From day zero, the company was created with a unique state of mind and a strong product and technology DNA," Bonanzinga told VentureBeat. "This is the only venture capital firm in which there are more software engineers than investors."
Above: Roberto Bonanzinga (middle) with co-founders John Mesrie (left) and Ben Smith (right).
According to Bonanzinga, DIG forms three main layers covering data, intelligence and workflow.
"The data layer is a mixture of mbadive aggregation of data, with deep data improvement, including the generation of a large set of original data," he said. "The intelligence layer gives meaning to these millions of data points through a set of automatic learning algorithms ranging from simple rules to advanced networks. Given this data-driven approach and the resulting large transaction flow, we are investing heavily in creating a workflow product that allows us to effectively process thousands of companies each and every time. month. "
To be more specific, Bonanzinga said the company was badyzing about 2,500 startups each month, more than many other traditional venture capital firms in a year. But he points out that the platform is not on automating decision-making for its investments, it is about making the venture capital process more efficient, scalable and informed.
InReach Ventures already has 11 startups in its portfolio, covering Sweden, Hungary, Italy, Spain, Finland, Germany, the United Kingdom and Lithuania. In fact, Lithuania hosts the very first release of InReach Ventures. Shopify, the e-commerce wholesaler, bought Oberlo in 2017 for $ 15 million.
The myriad of companies in InReach Ventures' portfolio companies also allude to one of the platform's main selling points: it helps to find startups off the beaten path. But that only gives part of the picture. The DIG platform can also find promising startups that do not actively look for money, which turns things around so that investors end up encouraging them to invest in them rather than the other way around. In addition, the adoption of a data-driven approach prevents investors from traveling constantly to Europe to meet a few startups at a time.
"Our technology platform allows us to take a geographically agnostic approach to discover the most promising startups from anywhere in Europe," said Bonanzinga. "More importantly, however, we are reversing the traditional venture capital model by adopting a proactive, data-driven software approach for early stage investments in Europe. Proactivity is the key. Traditional venture capital firms in major centers are still waiting pbadively for entrepreneurs to consult. We are looking for the most promising startups, often targeting them even before they have started a fundraising process. "
It should be noted here that InReach Ventures' investments to date have not come from a "fund" in the legal sense of the term; instead, they created what was called a "non-institutional investment structure" to support its startups. This, however, changes with the closing of this new fund.
Moneyball
InReach Ventures is part of a growing number of venture capital firms that are processing data as part of their investment strategy. The Swedish EQT Ventures has developed a machine learning system called Motherbrain, designed to detect start-up start-ups that go unnoticed. But EQT and InReach were both preceded by SignalFire, founded in 2013 by Chris Farmer, former VC at Bessemer Venture Partners and General Catalyst Partners. It's been six years since he tracks billions of data points among millions of young companies around the world.
"We love SignalFire and its founder, Chris, and we share a common pbadion for data and the use of technology," Bonanzinga said. "SignalFire's approach is perfectly designed for the transparent ecosystem of Silicon Valley, which is based on a highly concentrated social graph of entrepreneurs, investors and talent. Europe's fragmented geography and lack of transparency require a different, discovery-driven approach, although it still relies on data and technology. "
This is the clearest clue we have: InReach Ventures does not intend to extend its reach beyond Europe. DIG was developed in the interest of Europe. "We believe in concentration," added Bonanzinga.
Moneyball's investment strategy is gaining ground elsewhere in the field of technology. A few months ago, the European Summit on Web Technology Summit announced the creation of a $ 50 million venture capital fund aimed at leveraging startup data from its annual mega event. The conference grew from a modest 400 participants in 2011, while it was still based in Dublin, to more than 60,000 in 2018, with Lisbon now its headquarters. Data science has in fact played an important role in the evolution of Web Summit. It should therefore be noted that it is now creating a large investment fund from its huge arsenal of data.
Although there is a marked trend in this area, and this is something we will probably see even more in the range of investments, Bonanzinga is not convinced that it will always be the real deal.
"I predict a new hype – the urgent need to tick the box" we have a data strategy, "he said," we will have a large number of companies with more than 30 investment professionals. and a data engineer The real question is how many companies are ready to turn their professional service DNA into product DNA? As always, it's more of a personnel / organizational issue than a simple question of using technology. "
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