VC firms are increasingly turning to AI and personality tests to enhance their investment strategies and streamline their operations. Connetic Ventures, a Kentucky-based firm, has developed a software called Wendal to assess founders based on entrepreneurial traits, with the aim of reducing bias and attracting a more diverse group of founders. The platform utilizes 13 entrepreneurial traits to determine the potential success of a meeting between founders and investors. The test takes approximately 15 to 20 minutes, and founders receive a decision within three days.
The development of Wendal was sparked during a brainstorming session for angel investors seeking to discover and support startups across Indiana, Kentucky, and Ohio more efficiently. Instead of relying solely on major funding hubs like San Francisco or New York, Connetic Ventures aimed to be more discerning in their selection process. To achieve this, the fund delved into the realm of behavioral psychology and collaborated with an industrial psychologist to define the optimal entrepreneurial behavioral profile. The result was the creation of Wendal.
I personally tested the Wendal platform and was delighted to find that my fictional company, which drew heavily on my experience with a real failed company, was recommended to the investment team.
Connetic Ventures stands out not only with the use of Wendal but also with its unique fund structure. Unlike most VC firms that retain 20% of the money they generate for their limited partners (LPs), Connetic Ventures aims to engage retail investors through financial advisors. Rather than a direct upside based on a startup’s success, the firm charges a 1.9% fee.
Despite the promises of intelligent software and cutting-edge AI, questions arise about the fairness and accuracy of an AI system like Wendal. However, Chris Hjelm, partner at Connetic Ventures, believes that the platform has been designed to be fair and equitable, with supporting data to back up this claim.
By removing the subjective factors and human biases involved in investment decisions, Connetic Ventures believes it has created a more equitable model for determining who should receive funding. Nonetheless, the accuracy and reliability of Wendal ultimately depend on the quality of its training data.
In summary, the use of AI and personality tests in the investment process is becoming increasingly prevalent among VC firms. Connetic Ventures’ software, Wendal, offers an innovative solution to reduce bias and improve the selection of startups. This, combined with its different fund structure compared to traditional VC firms, makes it an intriguing player in the industry. While questions about equity and accuracy remain, Connetic Ventures is confident in Wendal’s capabilities and its ability to leverage AI technology for more efficient investment decision-making.
