VC and AI

16 Sep 2019 by svet

During weekends I was researching one question, which boggled my mind for quite a while - Is AI doing better than Blockchain "crowd" while picking successful DLT startups?

As we've seen on Grayscale's example, even the most reputed venture capitalists are not doing well (to say the least) in our market. Do other VCs, which extensively apply data-driven approach to investing, outperform their peers (in DLT and/or other industries)?

There are not too many information available on this subject in open access. Even if big funds are, indeed, using AI, they, understandably, keep quite about it. However, for some of them it's impossible to hide in plain sight. Such as for "Google Venture", which unlimited access to our personal and business information makes it almost too easy.

GV (fund size - $2.4 billion) has more than a hundred startups listed on its site but it's unclear what's their "success rate". At the same time, Google search itself suggests that "The odds of receiving an equity check from Andreessen Horowitz is just 0.7%, and the chances of your startup being successful after that are only 8%."

Does GV perform better than AH? Does AH use AI too? According to some sources it actually does, along with other much less known, mostly "small-time" VCs like "Connetic Ventures", "EQT Ventures", "Correlation Ventures", "645 Ventures", "e.ventures", "Fly Ventures", "InReach Ventures" and "WR Hambrecht Ventures".

Apparently, despite AI being a "hot topic" for almost a decade among VCs, it's predominately fledgling "Ventures" (2-5 years old), which are fully indulging themselves in AI (and being public about it at the same time). With a fund's lifespan of 8 to 12 years it's simply too early to tell the difference between AI and traditional approaches to investing.

Meanwhile, PitchBook's survey (Feb, 2019) says that "only 38% of Venture Capital investors currently use data to source and evaluate investments opportunities". It means that 62% of all VCs are still rely on their "hunch" without even bothering themselves with "data" (forget about AI :)).

Well, as it comes to investing, it appears that most of us - VCs or "blockchainers" - are just average people thinking that we are above average :)