Ascend raises $25m for pre-seed AI fund

Seattle-based venture capital firm Ascend is continuing to invest in the artificial intelligence (AI) sector, raising $25 million for its second fund. The firm, which focuses on investing in pre-seed AI companies based largely in the Pacific Northwest, was founded by solo GP Kirby Winfield, who has been involved in the sector either as an investor or founder since the 1990s.

The AI sector has seen a significant increase in interest from investors, with many venture capitalists jumping on the bandwagon. However, Winfield warns that not all investors have the technical expertise required to succeed in this space. "It’s so easy to throw together a vertical AI demo," Winfield told TechCrunch. "You see a lot of folks who would have been decent SaaS founders, trying to be decent AI founders. I would say it is pretty easy to identify who has actual chops from a technical perspective."

As an experienced player in the AI space, Winfield is glad to have been involved in it for so long and is confident that he can avoid some of the mistakes made by newer entrants. He is focused on startups that will utilize the tech to find a better solution, rather than simply investing in AI companies for the sake of it. "AI doesn’t matter," he said. "What matters is the solution you are selling to your customers. Many founders and investors are getting wrapped around the axle and putting the technology and solution before the benefit."

Ascend's second fund follows the success of its first, which raised $15 million and began deploying capital in 2019. However, the firm is stepping away from investing in brands and marketplaces, focusing solely on AI and ML companies in its latest round of funding. Winfield said that many of the limited partners from Fund I were happy to reinvest in Fund II, as the industry's notion around investing in AI has changed dramatically since Winfield raised Fund I.

The latest fund was raised 100% from individuals, with Winfield securing $21 million in the first month the fund was open. The fund consists of two vehicles: one that raised $22.5 million and another that raised $2.5 million from existing portfolio company founders. Winfield said he left the fund open for almost the entirety of 2022, hoping to see additional funds trickle in, a process he also ran for Fund I.

Ascend's focus on the Pacific Northwest may seem limiting to some investors, but Winfield disagrees.

He cites the talent that comes out of Microsoft and Amazon and the companies that are incubated at the nonprofit Allen Institute for Artificial Intelligence, where Winfield has been the investor in residence for nearly six years.

Despite his experience and intention, Winfield may still struggle to compete with the rapidly growing flock of AI investors. Many startups are now rewriting their marketing to call themselves an AI company, which could lead to an oversaturation of the market. Additionally, Winfield does not have the same deep pockets as some of his fellow VCs, such as Bessemer, which recently announced it was putting $1 billion of its already-raised capital toward AI investments.

However, Xembly founder and CEO Pete Christothoulou said that companies should still look to work with VCs like Winfield because not all support is created equal. "An AI fund without the right underpinnings is just money," Christothoulou said. "The money is nice but you want the relationships that the investor can bring. If they can baseline their advice and real technical guidance, that’s where it starts getting really interesting and [Winfield] has a big opportunity."

Overall, Ascend's second fund shows that investors are still interested in the AI space, despite the potential risks and challenges. Winfield's experience