M25, one of the Midwest's most active venture capital firms, has led an oversubscribed pre-seed round for Chicago-based artificial intelligence-powered startup Continuum.
The 2024 Chicago Inno Startup to Watch has raised $1.7 million in pre-seed funding. Continuum has developed B2B automated returns software for wholesale, distribution and manufacturing organizations.
The new capital will help Continuum scale its operations and double its team. M25 led the round with participation from Cambrian Ventures and Clocktower Ventures.
Continuum founder and CEO Alex Witcpalek and his team "have the perfect experience to pursue this complex problem because they have a deep history — they've been working with manufacturers and distributors," Victor Gutwein, founding partner of M25, told Chicago Inno. "This is a huge market that we know is a problem and that we know needs to be fixed."
Gutwein said that while a lot of companies are looking to develop that next AI solution, what they come up with doesn't always make sense, but he found Continuum's software to be a very practical use of the emerging technology.
"AI has opened for new product opportunities to solve problems that were harder to solve before, and we've seen more old-school and traditional industries continue to quickly adopt software and move away from paper and pen," Gutwein said.
M25 still 'very active' in slow VC market
While Gutwein admits that fewer deals are getting done as investors continue to wait for the IPO window to open, he thinks that might change moving forward.
"I do think we've hit a low point on capital deployed, if not just past it," he told Chicago Inno, though he added, "Anecdotally, we've had a pretty steady clip of our existing portfolio companies raising larger rounds from new investors at higher valuations."
Although Gutwein says deal pace has slowed for M25, the firm is still "very active." That runs in contrast to many of the firm's peers as the number of active VC investors in the United States, defined as those making two or more deals, declined by 38% in the first three quarters of 2023, according to PitchBook.
"It's harder to build a syndicate, there's less capital out there, less qualified companies coming to market when capital is harder to find," he said. "So we've been a little slower but we're still very active. We're still seeking new investments and are still leading and co-investing in new deals."
