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AI tools are transforming how venture capital firms do business, from automating deal sourcing to using relationship intelligence to close deals faster. In the VC world, if you aren’t adopting AI technologies, you’re starting to fall behind the competition—it’s no longer something you can choose to ignore.
But which AI VC tools should you be adding to your toolbox? In this article, we’ll explain why you should incorporate AI technology into your firm and highlight nine tools transforming the venture capital industry.
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How artificial intelligence tools can improve operations in venture capital firms
In the venture capital industry, cutting-edge technologies can provide a sought-after edge. Unsurprisingly, VC firms are finding ways to incorporate AI-powered solutions into their workflows. AI tools streamline operations, provide deeper insights, and help VCs make more informed investment decisions.
Here are three key ways that AI is making an impact in venture capital.
1. Increasing operational efficiency
AI has the power to automate many of the time-consuming tasks involved in deal sourcing, such as filtering through the thousands of startups to find those that have the most potential and match your firm’s investment thesis. AI-driven solutions can also help with data analysis, market research, and data entry, reducing the time venture capitalists spend on these tasks and allowing them to focus on more strategic decisions.
Speaking during a recent webinar on how AI will transform dealmaking, Andre Retterath, Partner at Earlybird Ventures described the experience of his firm. He said “We’ve seen that we can leverage AI across the tech stack, so for every single task that we do, we can use AI to become more efficient, more effective, and also leverage data-driven approaches and AI to become more inclusive.”
2. Improving decision-making
AI algorithms and tools can process and analyze vast amounts of data to help investors make better decisions about potential investment opportunities. Whether providing predictive analytics on market trends, evaluating a startup’s potential valuation, or providing data-driven insights to replace subjective judgments, AI gives venture capitalists the insights they need to make decisions confidently.
3. Monitoring performance
Another benefit of AI in venture capital is the ability to conduct data analysis in real-time. Tools designed to monitor portfolio companies can track performance and alert investors to potential opportunities and risks. This real-time tracking ensures venture capitalists can quickly respond and optimize their investment strategy for success.
Key use cases for AI in venture capital
AI in venture capital is versatile. With the right tools, you can reduce manual work, improve operations, and make data-driven decisions that bolster your investment process. Five years ago, being data-driven and using AI technologies may have seemed like a nice-to-have for VC firms. But today, AI has become essential to how modern venture capital firms run their businesses—the number of data-driven firms jumped 20% from 2023 to 2024.
These five use cases illustrate how venture capital firms are using AI.
1. Deal flow automation
One of the most powerful ways VCs use AI is by automating the deal flow process. AI tools that can parse data to identify potential investment opportunities are speeding up the process and allowing venture capitalists to focus on engaging with high-potential deals.
2. Data entry automation
When you have as wide of a network as most VCs, data entry can monopolize your time. By using AI to automate data entry, you can save hundreds of hours of manual data entry every year. Solutions like Affinity take every company interaction and automatically create and update a CRM record enriched with the data you need to build deals.
3. Startup evaluation and due diligence
As you move into the evaluation and due diligence stages of the deal lifecycle, AI can analyze datasets to assess a startup’s financial health, potential, and viability. By allowing AI to conduct a thorough data analysis, venture capitalists can reduce some of the risks associated with investing in early-stage startups.
“Processing a whole lot of unstructured data might be particularly relevant when you're looking for different signals," explains Adam Perelman, Engineering Manager of ChatGPT at OpenAI. "You want to evaluate tons of different founder profiles, you want to evaluate a market, or you want to understand user feedback, things like that. AI can play a really powerful role here.”
4. Portfolio management and monitoring
Effectively managing and monitoring their portfolios is essential for venture capitalists. AI helps enhance these processes with real-time insights that keep VCs aware of potential risks and opportunities. This real-time information keeps VC firms up-to-date on what’s happening with their investments so they can make informed decisions quickly to mitigate risks.
5. Deal negotiation and term sheet generation
Through the use of language models like Generative Pre-trained Transformer (more commonly known as GPT), AI has also impacted how VCs navigate the deal negotiation and term sheet generation process. Using data-driven insights provided by AI tools, VCs can optimize investment terms to ensure both parties are happy with the proposed terms.
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9 AI tools being used in venture capital
Many VC firms are in the process of deciding whether to purchase AI tools or develop capabilities in-house.
Having evaluated hundreds of tools over several years, Retterath shared his advice on the topic: "I would go for an 80/20 approach because there's a lot available off the shelf today. There’s less need to build stuff yourself versus five years back. And there are tools like Affinity that are very close to offering a single source of truth that unifies different information. This is what I would look for. Keep the stack simple, as few tools as possible to try to get as much done as you can. And then really think about what you actually want to achieve. Is it efficiency? Is it coverage? Is it accuracy in data?”
These are nine AI tools that venture capital firms are using to streamline the deal sourcing process, manage their portfolios, and automate their day-to-day tasks.
1. Affinity
A CRM powered by AI, Affinity is designed to help venture capitalists find, manage, and close more high-quality deals.
Affinity integrates relationship intelligence and key analytics into deal sourcing, deal flow management, portfolio support, and fundraising workflows. It automatically captures relationship insights, enabling you to manage your network and deal flow directly from your CRM. It also provides the warmest path to key decision makers, so you can find and close more deals faster.
Check out some of Affinity’s additional AI capabilities:
- Industry Insights can be used in deal sourcing and portfolio management to create an AI-generated list of companies that directly compete with a target company you’re viewing, and monitor changes to a competitive landscape.
- Affinity Notetaker is an AI meeting companion trained to understand private capital context. Use it to transcribe your conversations, create structured meeting notes including action items as next steps, and sync notes to the Affinity records of all external participants.
- Deal Assist is a chatbot that uses notes and files captured throughout your meetings and emails to provide insight into your deals. Throughout a deal’s lifecycle—and especially during due diligence—Deal Assist gives users clear answers generated from an analysis of the various types of meeting notes, transcripts, pitch decks, financial documents, and other relevant assets.
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2. ChatGPT
Developed by OpenAI, ChatGPT may be one of the most recognizable AI solutions currently on the market. It is an advanced language model that generates human-like text based on the content it receives. In the world of venture capital, ChatGPT can be used to create automated responses to typical investor questions, review pitch decks, analyze and forecast market trends, and generate reports or term sheets.
3. Quid
Using generative AI, Quid helps you visualize complex data to identify patterns that might go unnoticed. Quid aims to help businesses identify those patterns, turning them into actionable predictions that can be used to create profit. Quid amalgamates data from various sources to develop a comprehensive market ecosystem that can provide VCs with a competitive advantage. This can help VCs understand broader marketing dynamics and identify new opportunities within emerging sectors.
4. TechScout
TechScout is an AI tool that helps discover and evaluate emerging technologies and startups. It was designed to find high-potential investments early. When venture capitalists are looking to stay ahead of trends, they turn to TechScout to gain detailed insights on the latest tech innovations across various industries. Those who rely on TechScout use it to assess the technological viability and potential market impact of new technologies to help them make more strategic VC investing decisions.
5. Tracxn
Tracxn is an AI-powered startup tracker that follows over three million companies from various industries, providing real-time insights to the platform’s users. An excellent tool to help streamline deal sourcing, Tracxn helps venture capitalists stay on top of the most promising investment opportunities around the world. Its complex analytics and comprehensive database help VCs save time and resources while making informed investment decisions quickly.
6. Merlin
Venture capitalists rely heavily on two things—their knowledge and their network. Merlin is an AI tool that can help you streamline and automate how you consume knowledge and manage your network via LinkedIn. It’s hard to stay on top of all the information you should consume as a VC. From articles to webinars to reports, there’s a lot online that could add to your knowledge base. But the time commitment is quite steep. Merlin makes information more digestible by summarizing articles, blogs, and videos, leaving you with key takeaways and an understanding of each piece of content. Merlin can also help you on LinkedIn by automating tasks like connecting with people with similar interests, joining relevant groups, and engaging with connections.
7. Caena
Caena helps automate finding potential investment opportunities that align with your VC firm’s investment thesis. With Caena, you can auto-filter inbound deals based on specific criteria, so you don’t have to read hundreds of pitch decks to find the right opportunities for your firm. Additionally, Caena helps early-stage startups with their fundraising efforts by providing valuable insights into their positioning within the market.
8. Fireflies.ai
Get the most out of your meetings with Fireflies.ai, an automated notetaker that transcribes and summarizes voice conversations. Fireflies.ai also allows you to search through and analyze the conversations, create action items, and let your team collaborate on a meeting by adding comments, pins, and reactions to parts of the conversation.
9. Grata
Grata is a deal sourcing platform built on machine learning (ML) and natural language processing (NLP) that helps VCs find, research, and engage with private companies. It was founded in 2016 and is a robust source of private company data, with large language models (LLMs) based on over 1.2 billion pages and three years of historical data. Grata helps connect you with private companies and their executives, giving you a competitive edge so you can be first to a new deal.
Find, manage, and close more deals with Affinity
Finding the right deals can be a billion-dollar problem for venture capitalists, and finding them without investing hours entering data into and analyzing a spreadsheet can be time-consuming. With Affinity’s relationship intelligence and other AI offerings, you can easily generate and access people and company insights to understand the right startups to invest in, gain visibility into warm introductions, and manage your deals in one place.
Interested in learning more? Reach out to us for a personalized demo.
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VC AI tool FAQs
How can you use AI for VC?
Venture capital firms use AI to automate manual and repetitive tasks, streamline their deal sourcing process, generate term sheets and other documents, and conduct in-depth research in seconds.
How will AI affect venture capital?
AI is having a positive impact on the venture capital industry. VCs can better understand the investment landscape by using AI to analyze large amounts of unstructured data. Often, AI pinpoints promising investment opportunities that would have taken venture capitalists hours of work to discover.
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