One of the busiest venture capital firms in the Midwest, M25, led an oversubscribed pre-seed round for Continuum, an AI-powered startup based in Chicago.

Pre-seed fundraising for the 2024 Chicago Inno Startup to Watch has totaled $1.7 million. Continuum has created automated B2B returns software for businesses involved in manufacturing, distribution, and wholesale.

With the additional funding, Continuum will be able to expand its workforce by double. With participation from Clocktower Ventures and Cambrian Ventures, M25 led the round.

Founder and CEO of Continuum Alex Witcpalek, along with 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,” M25 founding partner Victor Gutwein said to Chicago Inno. “This is a huge market that we know is a problem and that we know needs to be fixed.”

Although many businesses are trying to create the next big artificial intelligence (AI) solution, according to Gutwein, the solutions they come up with don’t always make sense. However, he thought Continuum’s software was a very useful application of the developing 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.

Despite The Slowing VC Market, M25 is “Very Active”

As investors continue to wait for the IPO window to open, Gutwein acknowledges that fewer deals are closing, but he believes that could change in the future.

“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.”

The deal pace has slowed for M25, according to Gutwein, but the business is still “very active.” This is in contrast to many of the company’s competitors, as PitchBook reports that the number of active venture capital investors in the US—defined as those who close two or more deals—dropped by 38% in the first three quarters of 2023.

“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.”