<p><img src="https://static3.businessinsider.com/image/6107fafb39e63d001884dc8b-2400/Drive Capital partner Masha Khusid.jpeg" border="0" alt="Mashua Khusid, a partner at Drive Capital, smiles for a photo at her firm's offices in Columbus, Ohio." data-mce-source="Drive Capital" data-mce-caption="Mashua Khusid is a partner at Drive Capital."></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Masha Khusid, a partner at Drive Capital, opens her inbox each morning to find an email from Herbie, the venture firm's software for investing.</p><p>The email tells her that a startup she's admired in the past has just hired a bunch of new employees. She searches for it in Herbie, a CRM for startups, and sees that it's estimated to run out of cash in September. She makes a note to say hi.</p><p>Khusid says Herbie is the firm's secret weapon in an ultracompetitive funding environment, in which the amount of money sloshing around the private markets means startups have their choice of investors. But the time to close a deal has collapsed from weeks to days, which means venture capitalists have to move quickly to claim their stake in a hot startup. The tight timeline has led some firms to <a href="https://www.ft.com/content/54bb342c-230f-4438-a4d7-7cbde010ea1a">outsource due diligence to consultants</a> or simply <a href="https://www.businessinsider.com/silicon-valley-startups-are-getting-flooded-with-vc-funding-offers-2021-3">skip it</a>.</p><p>In a demo with Insider, Khusid showed us how she uses software to identify a company in a growing sector, research it, and time her approach. She aims to reach out to the founders before they've opened the fundraise.</p><p>So far, Drive has made eight investments after the software flagged those companies to its partners. The firm declined to name those deals, saying that it didn't want to offend the founders by admitting an algorithm tipped them off.</p><h2>The fast and funded</h2><p><img src="https://static1.businessinsider.com/image/61083ad5372268001a5940a4-1920/2 - Atlas.jpeg" border="0" alt="A screenshot of the Herbie app shows all the sectors, or " data-mce-source="Drive Capital" data-mce-caption="A screenshot of the Herbie app shows all the sectors, or &quotthemes,&quot that Drive Capital partners are tracking."></p><p>Founded in 2012, Chris Olsen and Mark Kvamme both left their partner jobs at Sequoia Capital to start a flagship firm in the midwest. They set out to show that big, successful companies could come from the heartland. And they have. Last week, Drive notched its second-largest exit when Pittsburgh's <a href="https://www.businessinsider.com/drive-capital-early-investor-duolingo-ipo-returns-2021-7">Duolingo went public</a> at a <a href="https://www.reuters.com/technology/duolingo-valued-65-bln-shares-soar-debut-2021-07-28/">$6.5 billion</a> market cap.</p><p>The idea for Herbie sprang from Olsen's observation that he invested in startups using data to disrupt industries, but he wondered how those tools could disrupt the way he worked, said Zach Boerger, the firm's director of engineering.</p><p>The result is an application that scrapes each partner's calendar and emails and other data sources to fill a database of more than 50,000 companies, said Boerger, who wrote most of Herbie's code. Each startup has a profile that includes the team and headcount, funding history, pitch decks, and a log of all the times partners at Drive spoke to the startup.</p><p><img src="https://static4.businessinsider.com/image/61083a72c31de7001849d380-1920/5 - Branch Profile - 22.jpeg" border="0" alt="A screenshot from Drive Capital's data app called Herbie." data-mce-source="Drive Capital" data-mce-caption="A screenshot of the Herbie app shows a profile of startup Branch, a Drive portfolio company."></p><p>One useful feature, Khusid said, is a meter that says how long until a company's cash reserves run out. That's based on the amount of capital it's raised and the number of employees, since talent is a startup's biggest cost.</p><p>The firm's partners get a daily digest of startups to watch in their inbox, tailored to their interests.</p><p>Herbie doesn't tell them to invest, Boerger said, but it points them to companies that it thinks are worth a phone call. The software isn't always right, he added, but it has a much higher hit rate than "throwing a dart at a phone book."</p><p>Drive isn't the first venture firm to use data. Chamath Palihapitiya's <a href="https://fortune.com/2017/10/26/social-capital-data-investing/">Social Capital</a> hired an army of data scientists to build software that could evaluate investments, before the firm shut down. <a href="https://www.businessinsider.com/two-sigma-ventures-uses-an-ai-tool-named-georges-to-source-deals-2021-5">Two Sigma Ventures</a> created an artificial intelligence tool to help them find startups. And Alexis Ohanian's <a href="https://www.forbes.com/sites/alexkonrad/2021/06/10/seven-seven-six-alexis-ohanian-new-vc-firm-launches-with-150-million/'sh=7618eade3141">Seven Seven Six</a> has touted its apppart note-taking app, talent directory, and message boardas part of what differentiates the year-old firm.</p><p>Khusid says that Herbie stands apart from Social Capital's tools because it's not meant to replace human investors.</p><p>"That's already been tried and proven to fail," Khusid said. "This is meant to augment how we think."</p><p><a href="https://www.businessinsider.com/drive-capital-ai-tool-herbie-win-funding-deals-2021-8#comments">Join the conversation about this story »</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/kosher-passover-coca-cola-bottles-yellow-cap-bottle-soda-retail-food-drink-jewish-jews-2017-4">Why some Coca-Cola bottles have a yellow cap</a></p>
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