The power of AI lies in in its predictive power. If there is enough data, conventional thinking goes, a machine learning algorithm can predict just about anything, such as which word will appear next in a sentence. Given that potential, it’s not surprising that entrepreneurial investment firms have looked to using AI to inform their decision-making.
There’s certainly plenty of data you could use to train an AI-powered due diligence or investment recommendation tool, including resources like LinkedIn, PitchBook, Crunchbase, Owler, and other third-party data marketplaces. With this, AI-driven financial research platforms claim that they can predict a startup’s ability to attract investment, and there may be some truth in this. A study of hedge fund performance found that AI-driven funds generated higher average monthly returns than their human-led counterparts over a 15-year period.