Tech Investors Will Use AI to Make Funding Decisions by 2025
Tech Investors Will Use AI to Make Funding Decisions by 2025
By 2025, more than 75% of venture capital firms’ investment decisions will be informed using artificial intelligence, says Gartner. Data science and analytics will inevitably be prioritised over decision making traditionally based on “gut feelings.” This means that artificial intelligence might be determining whether a company makes it to a human evaluation at all. This essentially devalues the importance of pitch decks and financials.
And surely that’s a good thing, right? Based on our last report, only 0.66% of startups have a chance of actually receiving any funding – the rest are either being found too late or going completely unnoticed. So what if AI could shift the heavy reliance on personal networks, augment the gut instinct of a successful investor, and avoid the incorrect filtering out of hidden gems that get lost in the massive volume of applications? Ultimately, AI has the capability to place greater precedence on a potential companies’ offerings, and allow perfectly matched investors and startups more likelihood of finding each other.
Successful investors purport to possess a good “gut feeling” when it comes to making sound financial decisions. However, these “feelings” are based mostly on qualitative information infused with quantitative data provided by the technology company, says Gartner’s senior research director, Patrick Stakenas. He believes investment decisions will move towards a more “modern platform-based quantitative process” that includes information gathered from multiple sources. LinkedIn, PitchBook, Crunchbase, and Owler, along with third-party data marketplaces can then be leveraged alongside diverse past and current investments.
Some VCs are already using proprietary platforms to track the performance of millions of companies. For a small cost of over $10 million per year, the Beacon platform draws data from 10 million sources, including academic publications, patent registries, open-source contributions, regulatory filings, company web pages, sales data, social networks, and even raw credit card data. This intel can then flag outperforming companies on an investors’ dashboard, allowing them to see deals ostensibly earlier than traditional venture firms.