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January 16, 2024
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From Efficiency to Alpha: AI Ushers in a New VC Era

TLDR: Venture Capital’s New Era: AI’s Journey From Enhancing Operational Efficiency To Alpha Generation

In this article by Forbes, the author discusses the role of artificial intelligence (AI) in venture capital (VC) funds and how it is transforming the industry. The author interviews Dr. Mohammad Rasouli, an AI researcher from Stanford University, to understand the current and potential impacts of AI on VC funds. The key points of the article are:

  • VC firms are using AI tools to enhance operational efficiency and generate alpha (unparalleled investment opportunities).
  • Leading firms like Sequoia, A16Z, and Tiger Capital are already using AI for tasks such as data analysis, document generation, and sourcing deals.
  • One example of a successful AI implementation is EQT Ventures’ project Motherbrain, which uses AI to identify promising investment opportunities.
  • VC funds of the future will leverage a “Platform Approach” where AI is integrated into all aspects of the business, from fundraising to transformation and exit.
  • AI can be used to source founders, not just companies, by analyzing signals such as changes in LinkedIn activity.
  • There are privacy concerns with using AI in VC funds, as neural networks are black boxes and may record sensitive information.
  • AI can save time and money for VC funds by automating tasks such as reporting and investment memos.
  • VC firms face a dilemma of whether to build an in-house AI system or purchase existing tools, and a middle ground solution may be partnering with a third party to develop a tailored AI strategy.
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