AI will eat Venture Capital (VC)

Deluge of Startups: A Landscape Ripe for AI Intervention

VC firms invest in startups that change the way we work, play and learn. The latest transformation being fueled are AI startups. Billions have been poured in already. Yet, there is an irony in the VC landscape that most firms continue to hold onto traditional, human-driven processes. With a 10x rise in startups, the burden of due diligence on VC firms has increased. We believe that AI can act as a co-pilot and improve the odds across sourcing, operations, and exits. At Inventus Capital Partners and Silicon Valley Quad (SVQ) we are transforming ourselves into an AI-first Venture fund. Seamlessly combining AI with HI (Human Intelligence), we are reimagining VC through the lens of the very technology that we are backing via our startups.

Our AI and Data Science-First History

This transformation has been in the making for the past few years. Ricardo Araujo , a noted Data Scientist and AI researcher, has been working closely with us for nearly two decades. His crystal ball allowed us to identify signs of high-potential startups from our existing portfolio and make bold and timely decisions on follow-on investments. Ricardo now heads our efforts in data science and AI. His efforts, along with Vikramaditya Sharma and Shikhin Garg , have transformed us into an AI-first? Venture fund. And these superpowers are showing results across our entire funnel.

Ricardo and I spent most of our time over the past few years using tech and data science to improve our internal operations and make more informed pro-rata decisions. We wanted to apply AI to other parts of the funnel, but it was too expensive and cumbersome. This year, the LLMs have brought the barrier down significantly, and we are extending our superpowers to other parts of the funnel, specifically investment matchmaking and due diligence.

AI-Driven Matching of Startups with Suitable Investors?

Our Chief of Staff, Shikhin Garg , put on his cape and took the new superpower for a spin recently to help productize fundraising. Network mapping by AI can turn matchmaking into a 24/7/365 effort. Shikhin used our tech to Identify and matchmake our startups with follow-on VCs, advisors, and customers. For example, The AI-powered network mapping tool resulted in a Series A lead term sheet for Aarna Networks- from a VC that wasn't on our radar. Happy founders.

Last month, we further extended the superpower to help with sourcing and screening. This was the topic of discussion at a recent panel discussion moderated by Amit Pande , EVP Strategy & CMO at Aviso AI . "Will AI eat venture capital?" Amit interviewed Ricardo and me, but he also pulled in one of our LPs, Lalitesh Katragadda , who is also a founder/CEO of Indihood and Google #Mapmaker Founder. Check out this 20 min panel discussion on Youtube:

AI-Driven Sourcing and Due Diligence for Early-Stage Investors

The true value of AI will be unlocked as it becomes a true co-pilot for the investing partners by improving HI (Human Intelligence ) with AI (Artificial Intelligence). A key test of this is sourcing and diligence. The number of seed startups annually looking for funding has increased by 10x in the past 15 years, but our ability as investors to wade through this hasn't kept up. This is a much harder problem because selecting the right mix of startups has huge implications on returns. AI co-pilots can be decision-making accelerators to sift through reams of founder pitches and company data at lightning speed, aiding sharper decision-making while managing hidden risks given the many information asymmetries of early-stage investing.?

At Inventus, we want to give the partners more time on the qualitative aspect of decision-making. We believe that AI can be leveraged to synthesize both qualitative and quantitative data into simple natural language memos, freeing up our investors' time for more informed decision-making.?I like to share results of our superpowers with live examples in the following video (13 min)

The entry of AI into the world of private investing is game-changing especially for early-stage funds where the problem is harder than just crunching data as there isn’t much available in data to analyze. Furthermore, fresh MBA analysts and principals lack the experience to be able to effectively make qualitative judgments about startups and their founders. Smaller funds also have limited fees to hire a large analyst team. All these issues are ripe for AI to make a significant impact.

We are confident that the net:net impact will improve fund returns because of

1. Superior portfolio construction with an improved diligence process
2. Reduced loss ratio from improved operations and helping founders find scale via customer matchmaking and productizing fundraising and
3. Building and maintaining a community of LPs, VCs, and C-level execs to support and nourish the founders.
4. Improved exit opportunities through fundraising and M&A matchmaking

We believe these superpowers should be shared. Hence, we intend to open up our product to other seed VCs to collaborate and gain from our efforts. Bear with us as we are testing it out internally first. Comment below if you are interested. Moreover, we will also share our results with founders so that they can improve and create amazing startups whether or not we are able to fund them.

Data-driven deal hunting isn’t sci-fi, and AI can be harnessed for deal sourcing, due diligence, and portfolio management, automating mundane tasks to unlock more time for monumental, world-changing conversations and investments. We are making the transition to AI first and doing it methodically by combining the best of HI and AI.

Hit us with your thoughts in the comments below!

#AI #CoPilots #AIAnalyst #VentureCapital #Innovation Inventus Capital Partners Indihood Silicon Valley Quad (SVQ) Kanwal Rekhi Raju Reddy BV Jagadeesh John Dougery Raj-Ann Gill Vikramaditya Sharma