VC Firms Have Long Backed AI. Now, They Are Using It.

April 21, 2021

AI’s ability to recognize patterns in data and predict outcomes have raised hopes that it can play an integral role in decision-making. Similar bets are now being made on the technology’s applicability to the venture capital field.

How AI can help make investment decisions

According to Garter analyst, Alastair Woolcock, AI models, and simulations will:

  • Change how financials are reviewed
  • Shape how teams are assessed
  • Alter how growth strategies are perceived

An example

Correlation Ventures, a San-Francisco-based firm, is already employing AI. They currently use a machine-learning tool that reviews information extracted from pitch decks and other information submitted by startups. The information is fed into an algorithm trained on data from more than 100,000 venture financing rounds; the algorithm identifies how factors such as team experience or board composition correlate with future investor returns. The system then generates a score for the subject, which is intended to speed up the investment process.

The predictive capabilities of AI, coupled with the technology’s ability to parse large amounts of data, have made many firms optimistic about the future prospects of using AI. In fact, according to a recent Garter Inc. forecast, “AI will be involved in 75% of venture capital decisions by 2025, up from less than 5% today.

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