Gartner predicts that artificial intelligence (AI) will replace “gut feel” in influencing investment decisions by venture capitalists and early-stage investors.
Venture capitalists have long relied on a mysterious combination of data, KPIs and gut feeling to select which companies to invest in. According to Gartner, however, AI is poised to replace the ever-elusive gut feeling some 75% of investors.
“Successful investors are purported to have a good ‘gut feel’ — the ability to make sound financial decisions from mostly qualitative information alongside the quantitative data provided by the technology company,” said Patrick Stakenas, senior research director at Gartner. “However, this ‘impossible to quantify inner voice’ grown from personal experience is decreasingly playing a role in investment decision making. 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.”
By 2025, AI will help investors transition to a quantitative process based on advanced analytics. Information will be gathered from a variety of sources, including Crunchbase, LinkedIn, Owler, PitchBook and others. This data can then be used by AI to assess a company’s viability.
“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 Mr. Stakenas.