Venture capital funds, private equity groups and accounting firms are using cutting-edge artificial intelligence to select startups to acquire and invest in, betting the technology will give them an edge over their rivals. there is
Big 4 accountant KPMG, hedge fund Coatue, and venture capital firm Headline are among the companies that are using the latest AI tools to advise clients and help guide their trades.
With few companies to go public, investors are under pressure to identify the next high-growth start-up, and dealmakers are generating AI for tasks such as assessing a company’s growth potential based on financial analysis. Some claim to benefit from using
“By being able to train or use models that are significantly more efficient initially, we can gain an edge in certain areas of our business that are difficult for latecomers to do,” says Per Eddin, KPMG’s US innovation lead. said Mr. Deal advisory and strategic business. “For any particular use case, it’s important to get there first.”
Triggered by the release of OpenAI’s popular ChatGPT, a chatbot that provides human-like answers to questions, the pace of artificial intelligence development over the past six months has prompted investors to seek out fast-growing companies and acquisitions. I’ve come to use tools to identify targets.
KPMG used the technology behind ChatGPT to create a unique data-driven system to help advise staff. The company said it saw a lot of usage in his month when the tool was in use, adding that recent advances in AI have made the tool “practically useful.” . . Especially in M&A. ”
Coatue’s software, Coatue Brain, integrates generative AI into its data platform and uses its technology to scrutinize sell-side surveys, earnings records, and sales pitches, extracting key takeaways into concise narratives.
PitchBook’s AI-powered VC Exit Prediction Tool assesses how likely a company is to go public or be acquired. The data provider claims the tool was 75 percent accurate two months ago.
Venture capital firms Headline and Moonfire Ventures, meanwhile, use generative AI to evaluate and compare investments based on metrics like web traffic and new users, isolating the companies with the greatest growth potential. bottom.
That way, partners can focus on thousands instead of millions, Headline said. The VC firm has invested in some businesses, such as password management service Bitwarden, mainly based on AI recommendations, he added.
The increasing use of AI in investing calls into question the traditional role of human relationships and judgments in this area. Industry analyst group Gartner estimates that by 2025, more than three-quarters of venture capital and early-stage investments will be informed by AI and data analytics.
“I don’t think this threatens the traditional role of VCs,” said Headline founding partner Mathias Schilling. “The whole concept is co-pilot. We get smarter when we engage with companies.”
London-based Moonfire said it used AI to review about 50,000 companies each week, evaluating factors such as founder experience and investment return potential. The company used algorithms to discover and power UK fintech LiveFlow, leading a $3.5 million seed fundraiser.
“Thanks to what has happened in the last four months, we see significant improvements in algorithms,” said Matthias Jungmann, founder of Moonfire and co-founder of European venture capital firm Atomico. says.
Moonfire seeks to mitigate potential algorithmic biases by setting rules that prevent the AI from considering certain attributes, such as gender, when evaluating company founders.
But Ann Glover, CEO of venture capital firm Amadeus Capital Partners, said generative AI is nevertheless prone to biases, saying that the tool uses limited historical data to I added that there is.
“It’s impossible to think that a human would have to make such a decision based on AI behavior,” Glover says. “For those of us who are investing in the cutting edge, there is not much written about what we want.”
