AI’s impact on early stage investing

I was listening to an interview with David Tisch a few weeks ago that had a profound impact on the way I see the startup investment landscape.

If the name doesn’t ring a bell, David Tisch is the Managing Partner at BoxGroup and the Co-Founder of TechStars NYC. He’s an extremely accomplished Founder and investor.

In the interview, Harry Stebbings and David were talking about the widespread fear that AI is going to make many knowledge jobs obsolete.

Is AI really going to replace most knowledge workers? And, does this apply to venture investors, too?

David’s take: Investors aren’t going anywhere… At least not all of them.

And, he’s got a great point.

There’s a substantial difference between the skill sets required for early-stage venture investing vs. late-stage.

This is how I like to frame it:
🧮  Late-stage investing is more math & science than it is art
🎨  Early-stage investing is more art than science

Within late-stage investing, there are countless opportunities to integrate AI into the due diligence process. A mature company raising its Series D round is going to have a lot more information (data and financials) to synthesize. The question that a late-stage investor must answer is relatively straightforward: Based on this company’s past financial performance, can they achieve the milestones they’ve set? It’s a math decision.

Early-stage, on the other hand, is all about relationships and people. There is little to no information (sales, performance, financial) to use for reference, so early-stage investors are required to answer two basic, qualitative questions:

1.  Is this a billion-dollar market opportunity?
2.  Is this the team that will capitalize on that opportunity?

They’re two completely different skill sets. And, one is much harder to replicate than the other.

As a result, I don’t think that AI is going to squeeze early-stage investors out of venture. And, to be honest, this makes me confident that early-stage investors will be able to provide value for a long time.

The great news is that AI can serve as an effective tool for investors in all stages.

Like many other technological leaps, AI acts as a tool that can eliminate entire job functions, freeing up all investors to focus on only the most important (non-menial) parts of the job.

The future is going to be incredible.

(pod episode 🔗 down below!)