Originally published on St. Louis Business Journal
By Nathan Rubbelke – Reporter, St. Louis Business Journal
In 2015, Dan Conner set out to start his own St. Louis-based venture capital firm.
But he didn’t get too far, at first.
Shortly after launching Ascend Venture Capital, Conner ended up getting “poached” from his own firm, joining St. Louis-based Lewis & Clark Ventures. Today, Conner is back full time at Ascend, positioning the “micro” venture capital firm for growth.
Ascend focuses on providing pre-seed and seed stage investment to data-centric technology startups. It has a portfolio of 13 active investments and has already secured its first exit of a portfolio startup. It made its initial investments across two funds, which raised a combined $5.5 million.
Conner is now positioning the firm to expand, having closed on the first round of financing for a new $25 million investment fund. With new money in tow, Conner feels bullish about the firm’s ability to expand its portfolio. As more companies integrate data and analytics in their operations, Conner is confident additional attractive investment opportunities are ahead for Ascend.
“There are an immense amount of opportunities for an investor like us,” said Conner, founder and general partner of Ascend.
ENGINEERING A STRATEGY
Conner didn’t grow up with ambition to become a venture capitalist. He graduated from Yale University with a bachelor’s degree in mechanical engineering. But he developed an interest in investing while earning his MBA at Washington University.
“I like to say I’m an engineer in recovery,” Conner said.
In addition to his time as Lewis & Clark, Conner has held financial roles at two technology startups. He was previously chief financial officer at Chattanooga, Tennessee-based FreightWaves and director of finance and operations at St. Louis-based Invisibly.
At Ascend, Conner has engineered an operating model that differentiates it from a typical venture capital firm. Its “micro” structure includes raising funds and making investments at smaller dollar amounts than most venture investors. It makes initial investments of about $50,000 to $100,000 in startups.
Ascend’s focus on early stage investments bucks venture capital trends, with an April report published by Pitchbook and the National Venture Capital Association detailing a continuing trend toward larger deal sizes. The study noted that the 722 first financings reported in 2020 was a “historically low figure.”
As it targets early stage candidates for investment, Conner said Ascend scouts companies that develop data technologies and tools for companies. The firm’s portfolio includes companies such as FreightWaves, which provides analytics and forecasting software for the logistics industry, and StoryFit, an Austin-based technology company that provides analytics and data software for the entertainment and publishing markets designed to boost their audience.
Conner said Ascend’s investment thesis is one rooted in the belief that every company today must be a data company to some extent.
“From the minute to the critical, it now seems if you’re making decisions based on experience, you’re making decisions based on guesswork. That is having a massive impact on the world,” he said. “That paradigm shift, to me, is not unlike the paradigm that happened in the late 1980s and 1990s in which everybody needed to be a computing company overnight.”
ON THE EXPANSION HUNT
With initial funding in tow for its third fund, Ascend has started to expand its portfolio. It has made three investments so far from Fund III, which had a first close of $3.8 million in January.
Key to the company’s plans to boost its portfolio will be Conner’s description of himself as a “unicorn hunter” on the search for startups that will eventually reach a valuation north of $1 billion. Foraging is a major aspect of the company’s deal sourcing.
Rather than relying on trusted sources or networks to connect with potential investment targets, Ascend relies on a strategy it describes as encyclopedic in nature.
“We do all of our deal sourcing by sheer volume,” Conner said.
For its first two funds, Ascend reviewed more than 10,000 companies to make its investments. That equates to about 400 companies reviewed per month.
“Based on that number, we generally get to 10 that we look deeper into and then dwindle that down to three or four we actually want to reach out to and talk to,” Conner said.
The firm hopes to scout at least another 10,000 companies for its third fund, which it plans to continue fundraising for throughout the year. In addition to bringing on new funding and expanding its portfolio, Ascend plans to grow its team. The firm currently has two employees, and hopes to add one more by year’s end.
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ABOUT ASCEND VENTURE CAPITAL
Founded: 2015
What it does: A venture capital firm that provides pre-seed and seed investments to data-focused companies
Headquarters: Central West End
Founder: Dan Conner
Portfolio: 13 active investments, one exit