AI Angel: How machine learning is assisting venture capital.
Hone Capital is the Silicon Valley-based arm of a large venture-capital and private-equity firms in China, CSC Group. In order to gain a competitive advantage, in 2015 Hone invested heavily into the development of a machine learning model to aid in investing decisions. In order to build the model they used a database of 30,000 deals from the past decade and tracked 400 different characteristics, and from that found 20 factors that were predictive of success. The insights gained from this analysis allowed the fund to identify deals they would have normally overlooked and readjust tactics to make success a more likely outcome. After the implementation of machine learning analytic models, Hone Capital’s deal success rate has risen to over twice than the industry average (average success rate was 16% Hone had a 40%). This use case demonstrates the vast value of insights gained from AI analysis and how it can be used to optimize instead of replacing business processes.