“Frontier investing” by Iantoons
This new cartoon illustrates how the venture capital industry is evolving.
The venture capital industry was for a long-time a cottage industry, where many investors would not want to travel outside a day’s drive of Sand Hill Road in Silicon Valley.
While the industry expanded from less than 500 VCs in the mid-1990s to 2,500 today, many of the top investors still believe that the industry is more art than science.
A Harvard Business School working paper by Paul Gompers investigated how VCs’ personal networks and prior successes influenced their deal sourcing and investment choices.
The paper’s findings indicated that many investors leaned on pattern matching, looking for characteristics and backgrounds they had seen in successful start-ups before.
By the late 2010s, a new type of venture firm started appearing, those that used data from the likes of Pitchbook, GitHub and LinkedIn to better sift through large data sets of early-stage start-ups for patterns.
Now the wheel is turning again. With advances in AI, AI agents are being created that can act autonomously of human interaction to make investment decisions in early-stage projects.
Whether these AI agent projects can beat the returns of the top 5% of venture funds remains to be seen, but it probably puts the remaining human fund managers in an uncomfortable position to keep justifying their management fees.
You can find more Iantoons cartoons here.
