VC Exit Predictor is a sort of oracle for startups. This is because this tool uses AI (artificial intelligence) to examine growth possibilities for this type of business.
In practice, it is as if the tool could predict the future of startups. VC Exit Predictor is the work of Pitchbook, a financial software and data company.
How does it work
To perform its function as an oracle, the tool created by the company performs the analysis of various data (for example, active businesses and investors). Thus, the Predictor generates scores on the company’s expectations of being acquired, going public, becoming self-sustaining, or failing.
As for its effectiveness rate, it was close to 75%. That is, the AI tool touched the fate of more than seven out of ten startups it analyzed. These tests took place with old scenarios of some startups.
To ensure accuracy, forecasts are made for venture capital-backed companies that have received at least two rounds of venture capital financing agreements.
McKinley McGinn, Market Intelligence Product Manager at PitchBook
However, this oracle is not omniscient. It’s just that the AI tool can’t predict extreme situations. For example, pandemics, natural disasters and geopolitical conflicts. And this type of occurrence also affects the life and health of startups.
More than 3/4 of initial valuations in venture capital will be informed by artificial intelligence and data analytics by 2025. This is the projection prepared by Gartner, one of the largest information technology (IT) consultancies in the world .
But predictive tools aren’t perfect. Therefore, investors are expected not to rely solely on oracles like the one at Pitchbook to make their financial decisions. Especially if there are no third-party audits of the algorithms in question.
With information from TechCrunch
Featured image: Artur Debat / Getty Images
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The “AI oracle” post predicts the success (or failure) of startups that first appeared on Olhar Digital.
Source: Olhar Digital