The latest technological innovations in artificial intelligence are being used by venture capital funds and groups, as well as accounting firms, to select acquisition targets and startups worth investing in, judging how the technology can give them an edge over their rivals.
With investors under pressure to identify the next high-growth startup at a time when few companies are going public, some argue that deal makers can benefit from using genetic AI for tasks such as evaluating growth potential of a company based on financial analysis.
Artificial intelligence is used by investors to identify fast-growing companies and acquisition targets. Companies often use the technology behind ChatGPT to create an in-house system that, based on their own data, will advise their staff on… advice to provide. Companies have found that their staff are increasingly relying on such systems, adding that recent developments in artificial intelligence have made it “practically useful, particularly in mergers and acquisitions”.
Coatue Brain software embeds generative artificial intelligence into its data platforms, using the technology to “sift” sales research, earnings minutes and pitch decks to extract and condense key points into clear and concise updates .
PitchBook’s AI-driven “predictor exit VC” assesses how likely a company is to go public or be acquired. The data provider claimed the tool, just two months old, had an accuracy rate of 75%.
Meanwhile, venture capital firms Headline and Moonfire Ventures used artificial intelligence to evaluate and compare investment targets based on measures such as web traffic and new users to isolate those with the greatest potential for growth. The VC firm added that it has invested in some businesses, such as password management service Bitwarden, largely based on its AI recommendation.
The increased use of AI in investing has raised questions about the traditional roles of human relations and judgment in the field. Industry analyst group Gartner has estimated that AI and data analytics will inform more than three-quarters of venture capital and early-stage investments by 2025.
London-based Moonfire said it uses artificial intelligence to screen about 50,000 companies each week, assessing, for example, a founder’s experience and potential investment returns. The company used its algorithm to discover and back UK fintech LiveFlow, leading to a $3.5 million capital raise.
However, it should be taken into account that the suggestions of artificial intelligence are often biased, as it uses limited and outdated data.
