Startups

AngelList just closed a $25M fund to back startups based on hiring velocity

Comment

Image Credits: fandijki / Getty Images

Over the past year, AngelList has grown from a platform that connects angel investors with startups to an end-to-end suite of tools, working on everything from fund operations to founder cap table management.

Throughout this growth, the company has quietly amassed millions of data points that show appetite, both from investors and regular employees, for burgeoning startups. And, per SEC filings, AngelList isn’t letting those fresh insights go to waste.

AngelList has quietly landed $25 million for the AngelList Early Stage Quant Fund, a new investment vehicle that plans $250,000 checks into over 100 companies. The largest limited partner in the fund is WorldQuant Ventures, an early-stage investment firm founded by Igor Tulchinsky, who is also the founder of WorldQuant, a quantitative asset management firm. Other investors in Quant Fund include Two Sigma Ventures, KAMCO Ventures, Plexo Capital, Tom Tunguz of Redpoint and AngelList founder Naval Ravikant.

The operation, part of AngelList Venture, will be led by a four-person data team from within the company. In an interview with TechCrunch, Abraham Othman, head of the investment committee and of data science at AngelList Venture, explained that Quant Fund’s mission is to use more quantitative factors to decide which startups to invest in.

“If you think about quant investing in venture, there’s a lot of understanding around the metrics that drive SaaS startup success, particularly B2B startup SaaS,” he said. “It is vastly different for other sectors.” 

His team tracks the velocity of hiring demand for a startup, looking at how many job applications a single company gets within a specific period of time. The signal strips out factors like investor bias, the founder’s networks and even buzzy valuations.

“I do think, in general, one of the aims of AngelList as it moves forward is to manage more institutional capital,” Othman said. “We are taking advantage of some of the data” the platform already has. Other than AngelList’s access fund, a smaller investment vehicle, this is the company’s first, more traditional-looking venture fund.

About 2 million users use AngelList Talent to apply to startups each quarter. Currently, AngelList is primarily going to be investing in startups in the United States and India, because that’s where the majority of applicants on its platform are coming from.

AngelList talent sees about 35,000 companies a quarter get active interest, but only half of those companies are investable early-stage businesses (the rest being Series B+ companies, consulting companies, venture capital firms, etc). Of those 17,000 companies per quarter, AngelList’s data team reaches out to the 20 companies getting the most hiring demand as potential investments.

Othman thinks they win deals because of the cut-and-dry approach, which he thinks is “less adversarial” than other investors who may be more focused on risk factors, or traditional pitches, before writing a check.

“Our approach? This is our data set, let’s see if we can put money into them,” he said.

Othman says that the data-driven approach has led to greater diversity of the startups, both in mission and founder, compared to traditional generalist funds. He estimates that about 50% of founders within the fund’s portfolio identify as women.

There are some challenges with leaning on one, somewhat broad, signal to make investments. As history often reminds us, due diligence matters — and vetting an investment beyond its ability to attract talent can save firms from headaches or legal woes. Additionally, a startup could get a ton of applicants due to pay, location or even recent coverage in a Well Known Tech Blog — which can bode for success, but could also just be a result of great marketing. To Othman, the fact that hiring demand can be impacted by so many different dynamics makes it a positive signal to look at, not a manipulated one.

A future of data-driven investments comes with a key tension: The bias of the “art” of an investment may be what has left out historically overlooked individuals, but it also adds some layer of humanity to decision-makers before they get millions to execute on a vision.

Algorithm-based investing is getting more attention, with Rocketship VC flexing a data-driven investment strategy, ClearCo writing checks based on startup spend and Hum Capital using artificial intelligence to connect businesses to the available funders on the platform.

AngelList has already made several investments with this strategy, putting money into startups such as Piñata, a reward and credit building platform for renters, and Emile, an on-demand educational service for high schoolers. The fund also plans to put money into roll-up vehicles, which allow founders to raise capital from up to 250 accredited investors with a single line on the cap table, but that will be a minority of investments.

It seems that AngelList has been rethinking its recruitment penetration for quite a while now. In the early innings of the pandemic, April 2020, the startup had layoffs that sources say largely impacted the company’s talent arm, which connects job-seekers with startups looking to hire. Then the layoffs came as a response to hiring freezes from tech startups waiting out the economic downturn.

If there’s a repeat of that freeze, Othman thinks that hiring can still work as a “pretty robust signal across economic conditions.” He explained that his team got a glimpse of which companies were recruiting talent in April and May 2020, and said that “companies at the top of the list have since 6’xd their valuation.”

In the past, AngelList CEO Avlok Kohli said that the AngelList will not return to its fundraising marketplace roots. “Our view is that the market is quite efficient, and we can’t offer an experience that is much better than what is happening today,” he said in September.

Today, Kohli’s sentiment seems to be changing, as his company begins to directly invest in the founders on the platform. In an e-mailed statement, Kohli said that “the new fund is a small yet important step to connect institutional capital with startups in a quantitative fashion…we’re the only platform with the dataset and reach to execute an initiative like this.”

More TechCrunch

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

15 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

3 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

3 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data