Historically, success in the venture capital industry has been driven by a relatively small group. However, with AI and computer-based aids, firms can make better, faster, and data-driven decisions from sourcing new investments, due diligence, making investment decisions and much more.

Investing in startups can be a risky and challenging endeavor. Recent research showed that venture-backed startups fail 75% of the time. Having this knowledge alone is enough to give a prudent investor a reason to pause when considering an investment or building a venture. Venture capitals and other investors often have little to go on besides their own instincts and limited research. AI can make the process more manageable and effective. With AI, the investment landscape can be diversified through creating a wider network access for investors and startups.

I conducted research and discovered some interesting benefits of AI to start ups and investors

  • AI can allow investors to determine how early stage startups will perform and can very quickly create a summation of a startup’s probability for success by analyzing its revenue growth, market size, industry experience, among other factors. 
  • It can pool data from various sources and analyze the data to determine what statistics will ultimately result in success. This means that it can predict investment-worthy startups before they even begin fundraising.
  • AI can establish correlations and patterns to make suggestions based on investor's preferences. 
  • Because AI is constantly receiving new information, it evolves as it analyzes new data and grows increasingly accurate and expansive.
  • It can identify up-and-coming startups, apply its algorithm to historical data in order to identify promising businesses. 
  • Use data such as financial information, web ranking, app ranking and social network activity to monitor and analyze millions of companies, something that would be impossible to do manually.

Having identified the benefits, startups can use the same information to their advantage knowing what the trigger points are for investors looking to invest and ensure they are focused on the priority areas of their businesses.

A good AI system should be capable of: 

  • Connecting startups to the right investors by making personalized recommendations for startups within a specific vertical or funding preferences.
  • Making investment funds more efficient and accessible to a new pool of entrepreneurs
  • Counteract emotional investing. We can use AI to complement our intuition.