Is AI the end of the shark tank as we know it?
To say that artificial intelligence (AI) has had an upswing in 2023, is an understatement. While a lot of the focus has been paid around the likes of ChatGPT, DALL-E and autonomous self-driving, there is a particular use case for AI that has yet to reach mainstream adoption: raising capital.
Today, most capital investment decisions into tech companies are still based on PDFs, traditional storytelling and shark tank-like processes – making the financial industry extremely laggard compared to the big data innovation found at most major tech companies. While some of the most valuable tech companies like Google, Apple and Amazon have reaped the fruits of VC investments over the last decades, the current structure remains inaccessible by thousands of founders and companies.
So, in order to disrupt the current fundraising process, improve diversity, and pave the way for the next generation of tech companies, we must all ask ourselves if we can afford to not adopt AI and a data-informed decision framework?
AI + Merit = Opportunity
According to data from Dealroom, less than 10 percent of all VC investments in Europe went to female-led companies in 2022. The funding divide and lack of diversity when it comes to securing capital has been covered extensively, but still remains a pressing issue if we are to tap into the true levels of innovation around the world.
Traditionally, the ability of a startup to raise funds has depended on the networking skills and pitching ability of the founders. While this is still important in early stages, later when there’s a product with data showing its market fit, the analysis of that data will tell a potential investor a much more nuanced picture. If you ask me, it’s more objective and less biased to look at thousands of data points than on one powerpoint presentation.
We need more data-driven investment decisions and lower barriers to entry for entrepreneurs to get funding. By democratizing how to grow your company smartly and raise the right type of money, at the right time, we will contribute to a more diverse innovation ecosystem.
Despite popular belief, the data points used to evaluate companies around the world are fairly universal, making it an ideal challenge to tackle from an AI perspective. So by adopting a data-informed framework, not only widens the pool of companies viable for future investment, but they will compete on the same unbiased terms. It doesn’t matter where you went to school, who your parents are, or if you have the right network. It will all boil down to the data and the predictable growth and profitability of the individual company.
Benefits to both sides of the equation
Beyond increasing the number of companies considered for potential capital investments, the adoption of AI has benefits to both startups and investors alike.
From an investors’ perspective, AI can automate much of the due diligence process, which is typically time-consuming and resource-intensive. By using AI to analyze financial statements, legal documents, and other relevant information, investors can streamline the due diligence process and reduce the time and cost of determining their investment strategy. Also, the analysis can be used at scale, to source deals that will make a good investment case. And investors can become more proactive and identify potential deals in less competitive spaces.
For startups, AI can be used for predictive modelling to simulate future outcomes and growth possibilities, factoring in complexity such as market trends and funding alternatives. This can help startups be more proactive in their fundraising efforts and invest their capital smarter.
Inclusion improves innovation
Because underrepresented founders come from different backgrounds, they bring diverse experiences and perspectives that enable them to bring new solutions to the world, offering new ideas that can uniquely address sizable and emerging markets. I’ve personally seen how startup fundraising works from both sides, and the only way to diversify the innovation space and move the needle on the funding gap is for investors to establish more funding options and commit capital based on unbiased data.
There is currently no one-size-fits-all solution to the funding divide, and simply talking about the need for change isn’t enough. AI will undoubtedly play an integral part in how companies around the world are evaluated, directly impacting their ability to raise capital, and thereby making the traditional pdf pitching and shark-tank processes ripe for disruption.
As founders, investors and builders, it’s our responsibility to work together and use the resources available to us that can increase our likelihood of success. We must succeed — the impact unique ideas bring to the world is too important not to.
Gilion changes the growth experience for founders – through providing access to groundbreaking scaleup loans the frontier of growth forecasting. Gilion is now live in Sweden, Denmark, Finland and Germany. Gilion was founded in 2021 by serial entrepreneur Oliver Hildebrandt, veteran banker Axel Bruzelius, Spotify's former VP of Analytics and former EQT Ventures founding Partner Henrik Landgren.
Fredrik Westin, Head of Communications
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