Venture Capital Embraces Ai
The life of a venture capitalist is exciting but hectic. Venture capital firms pool income from wealthy individuals and invest in relatively risky startup companies with the goal of higher returns in the short run. They search through hundreds of companies looking for promising startups in need of capital. While these types of investments are riskier than most big banks are willing to take on they can also be more lucrative if a startup takes off. Many venture capitalists spend countless hours sifting through company and market data, as well as visiting companies to confirm that they are able to turn a profit. This is where Ai has the potential to make venture capital firms more efficient. Ai’s machine learning capabilities allow it to analyze market and company data in a fraction of the time as well as predict future returns for companies based on a given set of variables. This would streamline the process of finding lucrative startups and take much of the guess work out by narrowing the options.
With the use of artificial intelligence venture capital firms can filter out noise in order to more efficiently select candidates worth investing in. They can also tailor the software to choose companies in certain fields, or that meet specific criteria. This saves time and money in the form of tedious data analysis and traveling. One VC firm that has greatly benefitted from the integration of Ai software is InReach Ventures. Because of their recent upgrade to Ai technology they have been able to significantly increase the number of deals they do per month and have also had success finding companies internationally before any other firms take notice of their potential.
This is ideal for VC firms because it allows them to get in on the ground floor of the company which offers the opportunity for large returns.
This chart shows the success that InReach has had with their Machine Learning Investment Software
Another VC firm experiencing great success due to revolutions in Ai technology is SignalFire. Signalfire is based in San Francisco and uses a data-driven model to flag companies who are outperforming expectations or working on notable advancements.
The computer can recognize these companies much quicker by sifting through international data made up by a variety of different metrics. Then, humans can decide whether to invest some of their 375 million under management. Some people are weary of Ai technology fearing that it may take many jobs in this amongst other industries. However, this is not the case for VC firms, rather than taking jobs from people Ai is used as an aid to make them more efficient. At the end of the day humans are the ones who make the final calls on whether to invest or not.
Written by Victor Sinopoli, Edited by Rachel Weissman & Alexander Fleiss