Artificial Intelligence: Venture Capitalists Will Use More AI By 2025 (Gartner)

Gartner predicts that AI and data analytics will drive more than three-quarters of VC decision-making.

Those Midas-touched VCs who pick investing winners using a combination of their experience, “gut feel,” and quantitative data will soon play second fiddle to AI and data analytics says a report by Gartner.

According to the report, qualitative and subjective opinions will play a lesser role in the overall decision-making process. Instead, AI models will build up a profile on tech entrepreneurs by gathering information from extraneous sources such as LinkedIn, PitchBook, Crunchbase, and Owler, along with third-party data marketplaces. (WHICH-50)

The pitchbook diminishes in importance

“The traditional pitch experience will significantly shift by 2025 and tech CEOs will need to face investors with AI-enabled models and simulations as traditional pitch decks and financials will be insufficient,” says Patrick Stakenas, senior research director at Gartner.

Inexorably, a modern, platform-based, data-analytical approach will take over from the traditionally interactive and collaborative approach to VC investing.

For tech founders, therefore, the writing is on the wall: For successful fundraising, they must ensure that their digital and social media presence, is updated, accurate and professional. Quantitative data, wherever made available, should also be correct.

“This data is increasingly being used to build sophisticated models that can better determine the viability, strategy, and potential outcome of an investment in a short amount of time. Questions such as when to invest, where to invest, and how much to invest are becoming almost automated,” said Stakenas.

Founders will be digitally pre-assessed

As a result of the pandemic, multi-million funding deals are being concluded through video conferencing and telephonic conversations. It’s no surprise then that AI models have been developed that use natural language processing (NLP) to determine an entrepreneur’s personality traits from real-time or audio recordings.

Apart from the start-up itself, AI and data analytics can also develop a profile of its management team using the same data sources.

VCs can therefore assess the chances of its success at the helm of the project.

“AI tools will be used to determine how likely a leadership team is to succeed based on employment history, field expertise, and previous business success,” says Gartner’s Stakenas.

Related Story:  How CrowdSmart’s Predictive AI Improves VC Investments    

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