To make intelligent bets on the current wave of startups, Matt Hartman thinks that venture capitalists will need a deeper understanding of the technology that these startups are building.
Hartman (in the photo above) spent nine years as a Betaworks partner before starting a new company, factorial capital, where he developed a different approach to identify startups with the most promising technological innovations. His mantra: “To invest in software, you have to know how the software works”.
It is not that other VCs ignore technology. But Hartman said that most companies are built to evaluate consumer brands and other companies that have already reached the adaptation of the product market; Technical diligence usually reaches the end of the agreements process and is often limited to consulting the CTO at the company’s existing portfolio companies.
This approach is not up to par, according to Hartman, especially when it comes to Ai and other sectors in which technical differentiation is fundamental.
“Technological startups want capital from people who understand what they are building and most of the risk companies have not actually been established to understand the adaptation of the pre-produced technology market,” he said.
Of course, it is unlikely that a solitary VC will have the technical skills necessary to seriously evaluate a wide variety of startups, therefore the Factorial model is based on a network of technical founders, each focused on the supply of its agreements from its own networks and by the competence areas.
Clement Delague, CEO of Ai Startup Hugging Face (that Hartman supported while he was at BetaWorks), was the first Factorial supply partner. Now the company is announcing some of its other partners: the co-founder of Giphy Alex Chung, the co-founder of Venmo Iqram Magdon-Ismail, the co-founders of the face from Delague Julien Chaumond and Thomas Wolf, the co-founder of Fast Forward Labs Hilary Mason and Beme co-founder Matt Hackett.
Those founders said Hartman, are “better positioned to identify the technical teams and the really new pre-produced market”.
Magdon-Ismail added that he is “enthusiastic about supporting incredible founders such as the substrate (e) Modal through this partnership”.
“The founders love to work with the founders and factorial allows it,” he said.
Hartman is not the only investor who bets that active founders will make better investors than full -time VCs. Techcrunch has recently written on PowerSet, an investment program that provides a small group of founders with $ 1 million each to invest in startups.
In the case of Factorial’s supply partners, Hartman said he could write checks individually and often invest their money together with the company. But when they bring business to factorial, they can make larger bets (the company generally invests $ 500,000) and therefore receive half of the interest transported by these agreements.
Hartman does not yet reveal the size of his first fund, but is targeting 30 startup investments. (There is no share for individual supply partners.) It has added that the factorial model has already allowed him to anticipate much larger companies by investing at the beginning of the promising startups.
The factorial portfolio includes the above substrate and the modal ml, as well as to the factory, Pika, Modal, Patronus, nomic, flower and adaptive.
