The world of venture capitalism is often fraught with major disappointments and huge payoffs. However, before investors have even the slightest hint of the end result of backing a business, they must find a company to fund in the first place – and this can be incredibly challenging in and of itself. That’s why savvy venture capitalists are harnessing the power of artificial intelligence to hone in on the most promising companies. But how does this technology work, and how does pairing AI with venture capitalism benefit society as a whole?
Why does VC need AI?
The process of pinpointing a promising business for investment is not an easy one. It typically requires an extensive amount of travel, research and courting on the part of the VC company. Plus, lesser known start-ups with lower visibility – those operating outside of cities that are considered tech hubs – can be difficult to discover at all. All this on-the-ground work is often exhausting for investors, and it’s always a gamble whether the work will yield returns.
That’s why VC companies turned to technology: at first, they simply applied basic algorithms to track the performances of specific products. Eventually, they realised that this idea had the potential to transform the way they found prospective investments, and software was developed to take even more factors into account.
The application of AI in venture capitalism is essentially the marriage of internet data and machine learning. VC AI software scours the web for information on start-ups, examining their hiring rates, product development, reach and a plethora of other details. Clearly, the use of this software boosts efficiency – but it also allows VC companies to consider start-ups that otherwise would have glided under their radar due to geographical location and lack of professional connections.
The bigger picture
At the end of the day, investors must decide for themselves where to put their money. No machine can entirely replace the professional experience that a seasoned venture capitalist applies when choosing a start-up to fund. However, AI is simplifying the process of discovering new businesses – an application of technology that has massive potential to work for the greater good.
Sure, AI and venture capitalism may not be the first things that come to mind when considering humanitarian resources. But this combination makes funding accessible to those who might not have a chance to get their ideas off the ground otherwise, and it fosters the development of new technology that can be used to benefit humanity.
Indeed, prominent figures in the tech space are increasingly recognising AI’s incredible real-world applications for societal change. For technologists and philanthropists like Mark Zuckerberg and Tej Kohli, wealth and influence can play a positive role in fostering innovation. Investment and research in the field of robotics provide the opportunities for limitless possibilities. Kohli, who invests in disruptive technologies through his company Tej Kohli Ventures, recently announced that , a robotics-focused venture studio, to further explore how software, systems and sensors not so different from those utilised by VCs can transform our world for the better.
While the application of AI to venture capitalism may seem niche at first glance, a closer look reveals just how far its implications reverberate. It seems that AI and VC are a perfect match for each other – and for humanitarian goals, as well.