“Ohanian says his focus for 2018 is to roll out software that will automate some investment decisions. This may also increase deal flow diversity and help founders gain access to the firm’s network more efficiently.”
Why this matters?
- The argument often put forward by VC software proponents is that by taken human bias out of the decision making process, more diverse founders will be able to secure capital. Social Capital are a strong example of this, having backed 42% female and majority non-white founders so far. Although Ohanian had been quoted this week talking about the importance of this, it seems strange that he was unaware of this (according to the article). Still, clearly this is a strong fit for his ideals, so it makes sense on this level.
Ohanian’s main argument though is that “venture is so technologically backwards
”. That’s a hard point to argue against, although it is worth noting that in addition to Social Capital, there are a fair number of firms who have started to put technology at the forefront of their investment processes, a couple of firms that jump to mind are InReach Ventures and EQT Ventures (this is a good article
- Still, the majority of these firms utilising technology in this way are largely using it for pipeline purposes, not for decision making. It’s fair to say that we will continue to see more and more VC funds adding this to their lockers, but I struggle to see more than a handful becoming full-stack in this regard, from scouting to investment.
- Why’s that? Because investment is still a relationship game. Building a company takes more than just money, it takes emotional support, human connection and understanding. And this foundation starts to be built pre-investment and assists the decision making process. Taking this out of the equation removes the very bedrock of VC investments.
- TL;DR: We are safe for now 🤖