Ensemble raises $100M debut fund to bet on startup teams — but not in the way you think
Virtually all venture capitalists will tell you that they support startups based upon the strength of their founding team. But what about the rest a startup’s employees. New VC Shop Ensemble To see if a team can make a startup succeed, you must look beyond the founders.
Collin West is a co-founder of Ensemble and a managing partner at Ensemble. TechCrunch understands that unlike other VCs his venture capital outlet decides if a startup will be a good investment based purely on its depth. Complete team. The firm uses an in-house, data-driven algorithm to narrow down potential investments based on the entirety of a startup’s employees. This Texas-based firm raised $100 million for its inaugural fund to prove it.
West said that when Ensemble’s founding team — which also includes Conrad Shang, a former venture LP at UTIMCO, and Gopinath Sundaramurthy, previously a data scientist at IBM — was trying to nail down what it was about startups that made them stand out from others in the same sector, they all agreed that it was the companies that were able to attract the best talent.
West stated that even if you meet the founder of the company, you’re only getting to know him and not the rest. “Most of the time the founders aren’t the most interesting members of the team. Companies are buckets full of people — people who decide to work on a specific mission together.”
Although it is not a new approach to finding startups that excel at recruiting, West stated that it is difficult to do. Choosing a sector, then going through every company’s team, is tedious, time-consuming, and virtually impossible to scale.
West stated that Ensemble’s data algorithm tracks employees and narrows down potential investment candidates based on depth. This was done to combat this problem. The Ensemble team starts to dive in from there. West said that although data-driven is not a panacea, it is still a good starting point. Ensemble has a smaller curated listing to help them get started.
West stated, “Using software we can track every person at all the startups.” This software gives us a lot more information than any human brain could handle, especially for venture firms. [We] Effectively sort the industry by team performance in a very objective manner, knowing which companies to focus on and spending a lot less time on those companies.
Ensemble can be industry-agnostic because the algorithm is focused on teams, and not metrics that are more relevant to certain sectors. West stated that one example would be Ensemble’s investment in 3D printing startup ICON Technologies.
“It’s an amazing company to work with, but this is a big task, and it will change the way that home construction is done. It was too risky for a lot VCs,” West stated. “The beauty in using data is that it allows you to push your biases aside and open up to curiosity.”
Due diligence is not the only thing that matters. West stated that one of the firm’s key value-adds to portfolio companies is that they publish a comprehensive report on each company’s staff after they have invested. This report will help startups identify the areas that need improvement and give them a better idea of how to make hiring decisions that can directly impact growth.
As the market struggles with layoffs and a talent war, the focus of the firm on teams is a good fit. Ensemble’s data-driven approach might help it keep better track than traditional VCs, even though every company is trying to find the best-placed professionals. But that doesn’t guarantee a stronger portfolio.
West said, “We just want be where the great team is, full stop.” That is what the beauty of a data-driven team approach to work is. Every company has its team.