We’ve seen a few innovations in approaches to venture capital in recent years – most popularly a service model, where VC firms offer ‘value adds’ like Google Ventures’ design sprint sessions or Index Ventures’ Index Network support system for portfolio companies. Actually finding the teams to invest in still generally remains the stuff of contacts and introductions, however. A new fund is looking to change that.
VentureFund.io is a new Palo Alto-based early-stage fund that is taking an innovative approach to identifying potential investment oportunities – an API.
The free-to-use Traction API connects to a startup’s end-user app and presents data like acquisition, activation, revenue, retention, and referral on a dashboard that they can access at any time. The platform uses this data to offer a ‘real-time valuation’ based on the product’s current traction with users. This is based on the observation that early traction is often a signifier of success, as seen with the likes of Airbub, Dropbox, Uber, and WhatsApp.
As you’d expect, data from the dashboard can be shared with VentureFund.io, although we’re told that users can keep this information private if they choose. The product may be revised to allow other investors to access the data in the future.
The ‘real-time valuation’ bugged me a little as I read the product description. Traction data can’t tell the whole story of a startup – factors like market conditions and the quality of the founding team are just as important. However, Venturefund.io says that it uses this ‘valuation’ as a foundation for due-diligence work, noting that “team, vision and market potential matter equally as much.” So, if you use the product, take the automated valuation it gives you with a pinch of salt.
The Traction API is one of a growing number of products aimed at helping investors and entrepreneurs make sense of data about startup growth, including Compass Monitor (which we’ve previously covered) and Mattermark. They all have different spins on the idea, but Traction API is the only one being offered by a specific investor, and it will be interesting to see if the idea catches on with other VCs.
VentureFund.io says that it will reveal more about the people behind it, and its fund size next month.