How Startup Investors Can Utilize AI To Make Smarter Investments Posted on : Jan 19 - 2019

Investing in startups is a notoriously risky endeavor. Venture-backed startups fail 75% of the time, which often gives investors a reason to pause when considering an investment into a new business.

Last year venture capital activity in the United States reached its highest level since the turn of the millennium. Meanwhile, the number of completed deals dropped to the lowest level since 2013, making it more important than ever for investors to make smarter investments. U.S. venture capital funding jumped to $99.5 billion last year, the second highest recorded total since the peak of the dot-com boom in 2000 , according to PwC and CB Insights’ quarterly MoneyTree Report.

Often, entrepreneurs have little to go on besides their own instincts and limited research. Fortunately, artificial intelligence (AI) can make the funding process more manageable and effective for early-stage investors and provide entrepreneurs with insights when building a new venture. The technology can also help to diversify the investment landscape by allowing startups with a successful outlook to gain a greater influx of capital.

AI As Accelerated Human Intelligence

Due to a generalized fear of the uncontrollable future of automation, many people find AI daunting, however the technology has incredible potential to encourage and support innovative new endeavors. Most AI that exists today is considered to be "narrow AI”, meaning that the technology focuses on one specific task or intelligence in a particular field, rather than a range of tasks. On the other hand, “general AI” is much more sophisticated and able to handle a broad range of tasks, exhibiting intelligence similar to humans.

General AI is something we only expect to see in the distant future. For the moment, AI complements our own human-based intelligence rather than striving to replace it. This is true for most AI present in our technological lives, and it is also growing increasingly true with our investment opportunities.

AI As The Future Of Investing

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 analyze data to determine what statistics will ultimately result in success. This means that it can predict investment-worthy startups before they even begin fundraising.

Many investors are already using AI to help make major investment decisions. Through a combination of algorithms, data mining, and language processing, 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. View More