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financing details, investors, board members, and management, to industry segments, business stages and exits.” Correlation’s system assesses the risk of each prospective deal by searching for the variables that correlate with the details of successful venture investments in its database.
“Amazingly, nobody has aggregated this data before,” says Coats, who was previously a managing partner at San Diego’s Hamilton Bioventures.
Coats, who oversees the firm’s life sciences deals, founded Correlation Ventures with Trevor Kienzle, who is based in the Bay Area and guides the firm’s tech deals. Coats says they each had spent more than a decade in venture investing at that time, and agreed that the process of funding new companies had become “way too time-consuming” for entrepreneurs and most VCs.
“When I was the lead [venture] investor on a deal, it was very important to be the industry expert,” Coats says, chiefly because of the knowledge and experience that experts bring to the due diligence process. It’s time consuming, but it makes sense for the first one or two venture investors to do that. But Coats says he began asking himself if it was really necessary for each additional venture investor to go through the same extended due diligence process.
“The last thing you wanted was any more VCs like that,” says Coats, who began thinking that what lead VCs and entrepreneurs really want was additional venture investors whose participation would be less complicated—more like a co-investor—and who could decide on joining in a deal in a week or two. So Coats and Kienzle set up Correlation to be a co-investor, not take board seats, and invest quickly—making it easier for … Next Page »