The role of Artificial Intelligence in CVC

It’s rare to read a business magazine, or watch a news programme these days without seeing some analysis of Artificial Intelligence (AI). ChatGPT, the chatbot launched by OpenAI in November 2022, has become the fastest growing technology of all time, currently with more than 1 billion visits a month.

So, we asked it a question that’s important to us at BTV particularly, and to CVC in general...

ChatGPT’s answer was that it can play a significant role in the CVC decision making process. Here are the examples it gave:

Startup screening and sourcing

AI can assist in screening and sourcing potential investment targets. By utilising natural language processing (NLP) and machine learning techniques, AI can analyse vast amounts of data from various sources such as news articles, social media, and industry reports to identify startups that align with the investor's strategic goals and investment criteria.

Data analysis and due diligence

AI can help analyse large volumes of data related to potential investment opportunities, such as financial statements, market trends, competitive landscapes, and customer feedback. By using machine learning algorithms, AI can identify patterns and extract insights to support due diligence processes, enabling more informed investment decisions.

Predictive analytics

AI can leverage historical data on startup performance, market dynamics, and industry trends to build predictive models. These models can assess the potential success of a startup and forecast its future growth trajectory. By incorporating such predictive analytics, CVCs can make more data-driven investment decisions and mitigate risks associated with uncertainty.

Portfolio management

AI can support CVCs in managing their investment portfolios. It can track and analyse the performance of individual investments, identify key success factors, and provide recommendations for optimising portfolio composition or allocation of resources.

Market intelligence

AI-powered tools can continuously monitor and gather information about emerging trends, technologies, and competitors in specific industries. This market intelligence can help CVCs identify strategic investment opportunities and make informed decisions based on real-time market dynamics.

ChatGPT ended its answer:

“It's important to note that while AI can enhance CVC decision making, human expertise and judgment remain crucial. AI systems should be used as decision-support tools, and final investment decisions should involve a combination of data-driven insights and human analysis.”

How did Chat GPT do? Here’s BTV’s view...

It’s difficult to know to what extent ChatGPT has mastered the art of manipulation (it’s bound to have done a bit of machine learning with Machiavelli’s The Prince, after all).

It’s certainly in AI’s interests to provide a positive answer to the question we asked. What ambitious bot is going to say ‘no’ to that?

But whimsical notions about the extent to which chatbots have sentience aside, ChatGPT’s answer does highlight some interesting propositions.

In terms of large-scale analysis of data, in the areas of due diligence, scouting, screening and market intelligence, AI certainly has a role. ChatGPT suggests utilising natural language processing (NPL) for screening and sourcing, analysing huge amounts of data to identify startups.

Within BTV’s working method, we are already doing this, using portfolio management platforms including Affinity and Vestberry, which utilise AI/algorithms, to help us manage our scouting/portfolio efforts.

We’ve also invested into machine learning companies such as Parallel Dots, an image recognition platform that generates real-time, data-backed KPI insights for FMCG companies, that is part of our portfolio. So we have a business interest in the workings of AI.

The problem with using AI as a research tool in general, though, is that it may provide background market intelligence (see ChatGPT’s point five, above), but, until it becomes more sophisticated and nuanced, it’s unlikely to provide all the answers.

Chat GPT is only as good as the data it is absorbing. That’s why its answer may look competent and appealing, when it comes to a deep-dive analysis, does it really say anything of substance?

Does it offer innovative solutions to gaining market-leading insights and can it really help CVCs to pick the perfect investment? Or is the chatbot’s answer simply a regurgitation of uncontroversial proclamations skimmed from the internet’s surface?

Perhaps the most educational, enlightening, and important statements aren’t found in Chat GPT’s ‘five points’ at all, but in its final paragraph.

To BTV, CVC isn’t just about dry data and statistical interpretation and evaluation. It’s a business marriage of two parties – a corporate and a startup - based on good faith as well as analysis.

And at the heart of every successful marriage is a good relationship – a human relationship.

At BTV, we go beyond investment alone to develop strategic partnerships with our portfolio companies and their ambitious founders. We’re invested in people as well as products and businesses.

Our relationships can start with an email, or a symposium meet-and-greet. It may arise out of a conversation with a colleague or a mentor. It’s then fostered over hours of meetings, calls and hangouts, and it’s based on trust, compatibility and gut instinct.

Building and maintaining the strategic relationship and rationale for the investment with the corporate is vitally important. And that requires human skills. Every BTV/CVC investment needs to fit with BAT’s evolving strategy and we work to find sponsors and teams across BAT who will help integrate the investments into the corporate.

This is the same for any CVC, and we believe that this needs to be led by people. It requires time spent together, in person, planning and developing, and involves shared ambitions and common goals.

There are many serious and difficult business conversations to be had along the way but there are also deep and engaging shared experiences, smiles and laughs between the BTV team, our portfolio company founders and our corporate too. And those human connections are something AI can’t provide – yet!