Plano venture capital firm Sentiero Ventures has made the first investment from its new AI-focused fund: A $250,000 investment in Data Sentinel, an enterprise-sensitive data management platform. It kicks off a series of 10 investments for Sentiero Ventures’ $10 million fund.
In March, Sentiero closed on its first round of funding to start investing in software-as-a-service companies that use AI—process automation, cognitive insights, cognitive engagement, and data collection—to power their key solutions.
That allowed the team to move forward with its plans to make ten initial investments up to $500,000 in its portfolio companies.
Founded last year, Sentiero focuses on early-stage SaaS companies that use artificial intelligence as a foundation for their business solutions. Founder and Managing Partner David Evans wants to capitalize on the growing AI sector—one that he says is expected to add $15 trillion to the global economy by 2030.
But Sentiero does things differently. The VC invests in companies that use AI in their core business model.
“It’s a broad charter, but it’s not,” Evans says. “What we do is separate what’s actually useful and what’s novelty.”
The VC describes a Venn diagram of artificial intelligence: What AI can do and what’s useful for a business.
“We find the slice of the overlap in that Venn diagram is much narrower than that most people think,” he says. There’s a lot of AI tech that’s core to a business: “It’s just ‘Hey, we threw AI in there so that we can have some buzzwords.’”
The group takes a unique approach to screening and supporting its investments. Once a deal is done, Sentiero’s investor-advisors support their portfolio companies by offering operating expertise and potential connections to clients and partners.
Sentiero, which means “pathway,” seeks out companies that sit at the “intersection of utility and capability.” That could include verticals in business services, marketing, real estate, financial services, healthcare, or entertainment.
Evans says AI is at a “stage of adoption similar to the web in 1997 and presents a similar opportunity for investors.”
The VC also sees opportunity in Dallas-Fort Worth.
Evans is a relative newcomer to the region—he’s been here for six years and still has a Connecticut area code—but he’s spent a long time studying the region’s ecosystem.
“We wanted to set up here and become active in the startup ecosystem,” he says. “In DFW, the thing that excites me is that because it’s such a nascent ecosystem: it encourages collaboration versus places like New York and Boston and in the Bay—even the deal we just did.”
Other places, you’re in “heavy, heavy competition, rather than saying, who are all the really smart people we can bring to the table to create a mutual win,” Evans says.
There are plenty of opportunities to collaborate in DFW, rather than a proprietary attitude of “I’m going to lose my opportunity if somebody else figures out what a great deal this is.”
Evans cultivates active relationships with Dallas Venture Capital, Interlock, RevTech, and other funders in town. There’s an opportunity to work together for mutual wins rather than a “feeding frenzy” for the team deal.
Early-stage venture capital in DFW
There aren’t a lot of early-stage investors in Dallas-Fort Worth, Evans notes.
The VC says the DFW ecosystem was comfortable with venture in early-stage investment at tail end of the telecom boom. Then when it was time for investors “to stop licking their wounds,” there were other more traditional asset classes that were really attractive, such as real estate and oil and gas.
Evans is looking for that “big moment” that everyone can hang their hat on.
Hopefully, he says, Sentiero can contribute to getting the flywheel going.
“I think part of the struggle is when we got when we got this ecosystem comfortable with venture in early-stage investment, [we] were at the tail end of the telecom boom,” he told Dallas Innovates. “When it became time to stop licking your wounds from the telecom boom, you had other asset classes that were really attractive, asset classes that were more traditional: Real estate and oil and gas.”
Evans looks for the moment where entrepreneurs can build a successful startup with financial flexibility to nurture the investment ecosystem and get it rolling forward.
The VC points to examples of that, such as Tivoli in Austin, where there’s a huge deal that starts a ripple effect. (Tivoli launched in 1989 and was acquired seven years later by IBM for $743 million).
That’s in contrast to Dell, where early employees under No. 500 likely made life-changing, retire-early kind of money and other ecosystems where the the founder and the top executives did really, really well. But, he says, there were also other role players there that made enough money to be able to take some risks, but not enough to where they were never going to work again.
So, he says, “we’re looking for that Tivoli moment here, where we have that really nice big exit that starts driving everything.”
Evans chose Dallas over Austin for Sentiero because he and his team simply felt like they needed to be here. He says they took a long, hard look at DFW and realized how much opportunity there was—and they wanted to be “here in the center of it all.”
When he started Sentiero, he and his team immediately wanted to become active in the startup ecosystem in North Texas. “In DFW,” he says, “the thing that excites me is that because it’s such a nascent ecosystem, it encourages collaboration, versus places like New York and Boston and in the Bay.” There’s not so much intense competition.
“It gives us the ability to work with other investment funds. I can cultivate active relationships with Dallas Venture Capital, Interlock, Revtech, and all the other funders in town and not have it turned into trying to keep it fully proprietary,” Evans says. “There’s the opportunity for us to work together and create mutual wins that you may not have in other markets where it more like a feeding frenzy for the team deal.”
Meet Data Sentinel
For now, Evans and his team plan to keep making deals for their $10M fund. First up is Data Sentinel, which helps businesses manage their data privacy compliance, governance, and quality in real time.
The company, which has its U.S. headquarters in Austin, is said to be a leader in sensitive data management innovation. Its proprietary deep learning technology is meant to discover the “true nature” of an organization’s data across all sources and systems. The tech monitors and measures the data, ensuring compliance with company policies and evolving regulations.
Data Sentinel, which has a team of industry veterans behind it, will use its latest investment to accelerate its growth in the data privacy and sensitive data management software sectors. Sentiero participated in a $2.9 million round of financing led by Brightspark Ventures.
The company also wants to expand its customer base and product offerings.
“Data Sentinel was engineered to put a spotlight on the most impactful parts of your data to enable you to trust, protect, manage, and monetize your data with exceptional outcomes,” Brian Kordelski, Data Sentinel’s chief revenue officer, said in a statement. “We are front and center in arming our customers and prospects, here in Texas and across the US, with a complete data picture to manage their information with confidence and clarity.”
Up next for Evans and Sentiero are three more deals this year, roughly. The founder expects around one a quarter, but if he finds “two great deals in a quarter,” it’ll happen.
His model is unique, considering Sentiero has an advisory board comprised of entrepreneurs who are investors. It’s made up of 20 advisors with visibility across 27 different industries, which amounts to the number of industries that the investor advisors have built businesses in.
That makes Sentiero’s pace a “little bit slower than most,” he says, because it takes time to get materials to our advisory board, give them a chance to look it over, and convene them for a review.
“We actually pass it through our investor advisory board before we ever go to final due diligence on a deal,” Evans says. “But we feel that on the ground kind of experience is valuable—not only for us but for finding companies that truly are useful to our portfolio. We have 20 champions who have a chance to kick the tires on an opportunity. We can engage them in a different way than just ‘here’s my quarterly update on the portfolio.’”
Quincy Preston contributed to this report.
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