Some firms are using AI algorithms to help with investment decisions
Venture capitalists who have long funded artificial intelligence startups are beginning to use the technology to search for a competitive edge in their own investment decisions.
Venture-capital firms see an opportunity in applying algorithms to the voluminous amount of data that their businesses collect. Correlation Ventures, for instance, built its own system to analyze troves of startup data, including from pitch decks supplied by founders seeking funding. EQT Ventures is using its own AI platform to rank investment opportunities.
These are nascent efforts but one forecast suggests adoption is about to pick up. AI will be involved in 75% of venture capital investment decisions by 2025, up from less than 5% today, according to a recent Gartner Inc. forecast.
AI’s ability to recognize patterns in data and predict likely outcomes has raised hopes that it can play a bigger role in decision-making in fields such as finance and healthcare. Now, similar bets are being placed in venture capital.
“Finally, we’re at the tipping point where that gut feel is going to be transformed using artificial intelligence,” said Gartner analyst Alastair Woolcock.
The venture capital industry is going to employ AI models and simulations that will change how financials are reviewed, how teams are assessed, and how growth strategies are viewed, according to Mr. Woolcock. “All of these classic human-driven assessments are going to be improved upon by AI,” he said.
For now, the use of AI in venture capital is still at the early stages. In one effort, Correlation Ventures, a San Francisco-based co-investment firm with about $365 million under management, uses a machine-learning tool to decide whether the firm should invest in a company, said co-founder and managing director David Coats. Correlation only participates in financing rounds that have a lead investor.
The tool, developed internally, reviews information extracted by humans from pitch decks and other materials submitted by startups. The information is fed into an algorithm trained on data from more than 100,000 venture financing rounds, Mr. Coats said. The algorithm identifies how factors such as team experience or board composition correlate with future investor returns. The system, which generates a score for its subject, is designed to speed up the investment process. “We commit to making investment decisions in under two weeks, but have done so in less than 24 hours,” Mr. Coats said.
EQT Ventures, based in Stockholm, uses an internally developed AI platform dubbed Motherbrain to guide workflow for employees, said EQT partner Henrik Landgren.
The platform is based on a proprietary database that contains information such as startup financials, web traffic and team member employment history. It scores investment prospects on a scale of 1 to 340, Mr. Landgren said. Investment professionals can then explore the highest ranking prospects first.
The company made four investments from its first fund that likely wouldn’t have happened but for Motherbrain, Mr. Landgren said. One of those companies, Peakon, was sold to WorkdayInc. earlier this year, and Mr. Landgren said the profit from that deal effectively covered the cost of the other three investments. So if the other three investments have positive returns as well, he said, it will be “complete upside.”
Sapphire Ventures, a Palo Alto, Calif.-based firm with more than $5.7 billion under management, is considering using AI to make predictions for existing portfolio companies.
Jai Das, president and partner of Sapphire, said he doesn’t believe AI will replace human judgment.
“I think the gut is never going to go away, but I think it’ll be much more driven by data and analysis than before,” Mr. Das said. “And you’ll have data to show that people who say I’m voting with my gut, either they’re right or not.”
By 2025, more than 75% of venture capital and early-stage investor executive reviews will be informed by AI and data analytics. In other words, AI might determine whether a company makes it to a human evaluation at all, de-emphasizing the importance of pitch decks and financials. That’s according to a new whitepaper by Gartner, which predicts that in the next four years, the AI- and data-science-equipped investor will become commonplace.
Increased advanced analytics capabilities are shifting the early-stage venture investing strategy away from “gut feel” and qualitative decision-making to a “platform-based” quantitative process, according to Gartner senior research director Patrick Stakenas. Stakenas says data gathered from sources like LinkedIn, PitchBook, Crunchbase, and Owler, along with third-party data marketplaces, will be leveraged alongside diverse past and current investments.
“This data is increasingly being used to build sophisticated models that can better determine the viability, strategy, and potential outcome of an investment in a short amount of time. Questions such as when to invest, where to invest, and how much to invest are becoming almost automated,” Stakenas said. “The personality traits and work patterns required for success will be quantified in the same manner that the product and its use in the market, market size, and financial details are currently measured. AI tools will be used to determine how likely a leadership team is to succeed based on employment history, field expertise, and previous business success.”
As the Gartner report points out, current technology is capable of providing insights into customer desires and predicting future behavior. Unique profiles can be built with little to no human input and further developed via natural language processing AI that can determine qualities about a person from real-time or audio recordings. While this technology is currently used primarily for marketing and sales purposes, by 2025 investment organizations will be leveraging it to determine which leadership teams are most likely to succeed.
One venture capital firm — San Francisco, California-based Signalfire — is already using a proprietary platform called Beacon to track the performance of more than 6 million companies. At a cost of over $10 million per year, the platform draws on 10 million data sources, including academic publications, patent registries, open source contributions, regulatory filings, company webpages, sales data, social networks, and even raw credit card data. Companies that are outperforming are flagged up on a dashboard, allowing Signalfire to see deals ostensibly earlier than traditional venture firms.
This isn’t to suggest that AI and machine learning are — or will be — a silver bullet when it comes to investment decisions. In an experiment last November, Harvard Business Review built an investment algorithm and compared its performance with the returns of 255 angel investors. Leveraging state-of-the-art techniques, a team trained the system to select the most promising investment opportunities among 623 deals from one of the largest European angel networks. The model, whose decisions were based on the same data available to investors, outperformed novice investors but fared worse than experienced investors.
Part of the problem with Harvard Business Review’s model was that it exhibited biases experienced investors did not. For example, the algorithm tended to pick white entrepreneurs rather than entrepreneurs of color and preferred investing in startups with male founders. That’s potentially because women and founders from other underrepresented groups tend to be disadvantaged in the funding process and ultimately raise less venture capital.
Because it might not be possible to completely eliminate these forms of bias, it’s crucial that investors take a “hybrid approach” to AI-informed decision-making with humans in the loop, according to Harvard Business Review. While it’s true that algorithms can have an easier time picking out better portfolios because they analyze data at scale, potentially avoiding bad investments, there’s always a tradeoff between fairness and efficiency.
“Managers and investors should consider that algorithms produce predictions about potential future outcomes rather than decisions. Depending on how predictions are intended to be used, they are based on human judgement that may (or may not) result in improved decision-making and action,” Harvard Business Review wrote in its analysis. “In complex and uncertain decision environments, the central question is, thus, not whether human decision-making should be replaced, but rather how it should be augmented by combining the strengths of human and artificial intelligence.”
Eric Newcomer, former reporter for Bloomberg and tech industry insider, shares how media relations must adapt in the current landscape of the ‘techlash.’
For those of us in the PR industry, the idea of sidelining the media might seem counterproductive. After all, so many of us have built our professional identities around our ability to work effectively with the press, and we take pride in securing media coverage for our companies and clients.
Nonetheless, some major players in the tech and venture capital industries are apparently “breaking up” with the media, ending their once-cozy relationships with reporters and the outlets that employ them. These companies, sensing a growing gap between their interests and those of media outlets, have begun producing their own reporting instead of chasing coverage. Like it or not, PR professionals and journalists might have to learn to adjust to this new trend.
Thankfully, communications people are an adaptive bunch, and we’re no strangers to disruption.
The digital revolution in business, coupled with an explosion of online news sources, presents the PR profession with an opportunity. Companies are now building out and “owning” their own digital media channels, becoming media and content producers in their own right. This gives PR professionals an unprecedented chance to craft stories, controlling the narrative around their clients without having to rely on third parties.
There may, however, be a dark side to this trend. Without oversight from independent journalists, will companies become unaccountable to the public and consumers?
At a recent PRSA Silicon Valley #FridayForum event, PRSA SV Board Member Caroline James moderated a discussion about these topics with tech journalist Eric Newcomer. The discussion was inspired by Newcomer’s January 19, 2021 article “The Unauthorized Story of Andreessen Horowitz.” (Newcomer is a former reporter for Bloomberg and The Information who struck out on his own six months ago with Newcomer.co, a Substack newsletter.)
Silicon Valley exists on the internet
Newcomer, who has been Brooklyn-based for the past two years, embraces the notion that “Silicon Valley exists on the internet,” meaning tech reporters do not need to be physically present in the San Francisco Bay Area, even if the companies they cover are based there. He did live in San Francisco during the early-to-late 2010s, however, and he remembers that era as the “heyday” of the tech industry’s romance with the media. PR people eagerly pursued coverage, and the tech industry was confident it had Silicon Valley journalists on its side.
Less than a decade ago, Newcomer says, reporters and the public had an incredibly positive view of tech companies. Founders, investors, PR people and the media all seemed to be aligned, and the line between journalism and PR could sometimes seem blurry. Newcomer emphasizes, however, that at the time tech seemed to deserve the gushing reporting it often received. Many objective factors (unicorn valuations, large investor funding hauls and impressively credentialed boards) supported the conclusion that tech startups were worthy of the overwhelmingly positive media coverage they received.
In his article, Newcomer portrayed a period when influential PR people, such as Margit Wennmachers, partner at Andreesen Horowitz and former CEO of PR agency Outcast, would court journalists over drinks at The Battery or host intimate dinner parties in her San Francisco home. Since Margit was the media’s connection to important venture capitalists, hot new entrepreneurs and tech founders, journalists coveted invites to her soirees.
However, Newcomer says those days of warmth between the media and the tech industry appear to have cooled. Propelled by an “accountability culture” that began to emerge during the Trump era, embodied by things like the #MeToo movement, as well as by tech scandals like the collapse of Theranos, reporters stopped singing PR’s tune and started scrutinizing the tech industry’s flaws more closely. This more critical trend in coverage provoked strong reactions from PR people, some of whom began stonewalling media outlets.
One way this reaction manifested itself was in companies deciding to produce their own stories rather than relying on journalists. Newcomer gives the example of Andreesen Horowitz in his recent article, which after building a robust internal editorial house and content marketing platform, no longer seems to proactively reach out to the press.
But Newcomer questions whether cutting out the media as an independent voice and truth arbiter is the right way to go for the tech and venture capital industries. He notes that the public is bound to have questions about powerful companies, and without independent reporters on the beat, they might not be able to get straight answers. Additionally, while avoiding close scrutiny from credible journalists might benefit companies in the short-term, in the long-term companies that don’t face tough questions can grow complacent, harming both their own interests and society as a whole.
From Harvard student newspaper to Newcomer.co
Newcomer began paving a career in journalism at Harvard, where he wrote for the student newspaper The Crimson, and later worked as an intern at his hometown paper, The Macon Telegraph. Jessica Lessin, founder and editor of The Informationand a Harvard alumna, recruited Newcomer to her publication soon thereafter. As a budding reporter at The Information, he began covering startups and venture capitalists (VCs) in Silicon Valley.
He was inspired by Lessin’s way of thinking about the news. Her style and approach to journalism helped define his own. She helped him understand what matters in journalism and what it means to be an independent reporter in Silicon Valley. He believes in the subscription model, and learned a lot from The Information and Bloomberg experience.
Now that he’s struck out on his own, Newcomer wants to mix his unique “voice” with straightforward reporting. He said the community has been “super welcoming” to him as a Substack reporter. “Silicon Valley is open to upstarts and new ideas,” he says. He currently has about 1,000 paid subscribers and aims to produce one paid post and one free post each week. Newcomer says he likes telling the inside story, commenting that there are a lot of great reporters explaining Silicon Valley to the outside, but he has fun explaining Silicon Valley to itself.
Email correspondence. Journalists are busy, and it’s not practical for them to respond to every email, Newcomer says. He does try to return emails that he feels are directly tailored to him, as opposed to form emails indiscriminately blasted out to many journalists. Nonetheless, he doesn’t mind receiving emails and he’s happy for companies to keep him in the loop.
Story types. When a series one fundraising announcement (S1) comes out, he looks at the ownership and uses that to determine whether to do a profile on the early investors. If a VC firm is participating in an S1, and their PR people reach out offering to help build out the story, Newcomer is likely to cooperate.
Sector stories. Newcomer does sector stories where he’ll get tips and talk to VCs. Right now, the software as a service (SaaS) sector is hot.
Direct sources and PR. Newcomer maintains relationships with people throughout the companies he covers, but that doesn’t mean he prefers to supersede the PR person. He finds it useful when PR professionals know a lot about what is going on and can give even more color than the subject they’re offering up as a spokesperson. He says there are some PR people, however, that are highly risk averse, and their overly protective approach can deter him from working with them.
The startups he watches. Newcomer will consider where the top VC firms are investing and try to track their startups. He said sometimes this starts with following a particular sector. He says one way for an early-stage startup to draw his attention and get coverage is to have an interesting thesis. While he mainly follows late-stage startups, if someone he knows and trusts flags an early startup as an up-and-coming company, he’s likely to take notice.
Newcomer sums up how PR people can work well with journalists with this advice: “A lot of good relationships start with good stories, and once there’s a good story, there’s trust that there will be others.”
MỐI QUAN HỆ GIỮA CÔNG NGHỆ, QUỸ ĐẦU TƯ MẠO HIỂM VÀ TRUYỀN THÔNG ĐANG CÓ NHIỀU BIẾN CHUYỂN.
Trong thời gian gần đây, mối quan hệ giữa các VCs, ngành công nghệ và giới truyền thông đang có nhiều thay đổi. Một trong những sự kiện đáng chú ý là việc một số ông lớn công nghệ và VCs đang nở rộ xu hướng “tự chủ truyền thông” thay vì hợp tác với với các phóng viên hay các hãng tin theo kiểu truyền thống. Lí do là vì các VCs và các công ty công nghệ nhận thấy sự gia tăng khoảng cách ngày càng lớn giữa lợi ích của mình và lợi ích mà các phương tiện truyền thông đang theo đuổi. Thế nên thay vì bắt tay với các hãng tin và nhà báo, họ quyết định tự xây dựng các kênh truyền thông kỹ thuật số, tự sản xuất nội dung truyền thông cũng như lên kế hoạch quảng bá cho riêng mình.
Theo đó, cùng với cuộc cách mạng kỹ thuật số trong kinh doanh và sự bùng nổ của các nguồn tin tức trực tuyến; việc các doanh nghiệp có hướng đến tự chủ truyền thông mở ra cho các chuyên gia PR một cơ hội vàng. Ngắn gọn thì họ có thể phác thảo, tạo dựng và điều chỉnh phương thức diễn ngôn của những câu chuyện truyền thông xung quanh khách hàng của mình mà không cần phải phụ thuộc vào bên thứ ba. Tuy nhiên, xu hướng này cũng tồn tại những rủi ro đáng kể.
Câu hỏi được đặt ra ở đây chính là nếu không có sự giám sát của các nhà báo độc lập, liệu trách nhiệm của các doanh nghiệp “tự chủ truyền thông” có được đảm bảo trước công chúng và người tiêu dùng hay không? Tại sự kiện #FridayForum của PRSA Silicon Valley mới đây , một thành viên thuộc Hội đồng Quản trị PRSA SV là Caroline James, cùng với nhà báo công nghệ Eric Newcomer, đã điều phối một phiên thảo luận về những vấn đề trên. Dưới đây là những chia sẻ về mối quan hệ giữa truyền thông và giới khởi nghiệp cũng như một số lời khuyên cho các chuyên gia PR từ Newcomer xuyên suốt phiên thảo luận ấy.
Một số thông tin về nhà báo công nghệ – khởi nghiệp Eric Newcomer: ông là một phóng viên kỳ cựu từng theo học và bắt đầu theo nghiệp báo chí tại Harvard. Ông cũng từng là một cây bút uy tín và sắc sảo trực thuộc Bloomberg và The Information trước khi tách ra làm riêng và thành công với Newcomer.co, và Substack newsletter. Khi còn là một phóng viên mới bắt đầu của The Information, ông đã bắt đầu đưa tin về các startups và VC ở Thung lũng Silicon.
Có một “thung lũng Silicon tồn tại trên internet”
Newcomer khẳng định rằng có một “Thung lũng Silicon tồn tại trên internet”, nơi mà các phóng viên công nghệ không cần phải có mặt đưa tin trực tiếp tại Khu vực Vịnh San Francisco, ngay cả khi các công ty của họ đặt trụ sở tại đó. Gần một thập kỷ sinh sống và hòa mình vào thành phố vịnh được đặt theo tên thánh Francis từ những năm 2010, Newcomer hoài niệm khi đó là “thời kỳ hoàng kim” của mối quan hệ lãng mạn giữa giới truyền thông và ngành công nghệ. Đó là thời kỳ những người làm PR hăng hái và nhiệt huyết theo đuổi việc đưa tin, và ngành công nghệ có thể an tâm rằng họ luôn có các nhà báo ở Thung lũng Silicon đứng về phía mình.
Đó cũng là kỷ nguyên mà các phóng viên và công chúng có cái nhìn vô cùng tích cực về các công ty công nghệ. Giữa những người sáng lập, nhà đầu tư, các chuyên gia PR và giới truyền thông dường như có chung một sợi dây liên kết , và ranh giới giữa báo chí với giới PR còn khá mờ nhạt đôi khi. Tuy nhiên, ông nhấn mạnh rằng vào thời điểm đó, giới công nghệ thực sự xứng đáng với sự chú ý truyền thông đáng kể mà họ nhận được.
Nhiều yếu tố khách quan (như việc định giá các startups kỳ lân, các thương vụ gọi vốn với các nhà đầu tư lớn và những ban quản trị, điều hành có năng lực và độ tín nhiệm cao trong các công ty khi ấy) đã ủng hộ kết luận rằng các startups công nghệ xứng đáng với mức độ phủ sóng truyền thông tích cực vào thời điểm lúc bây giờ. Ấy nhưng cũng theo Newcomer, những ngày ấm áp và vui vẻ giữa giới truyền thông và ngành công nghệ ấy dường như đã nguội lạnh. Dưới thời Trump, “văn hóa trách nhiệm giải trình” (accountability culture) xuất hiện và được thúc đẩy mạnh mẽ, thể hiện qua những phong trào như #MeToo, cùng với các vụ bê bối công nghệ như sự sụp đổ của Theranos, các phóng viên đã ngừng chia sẻ sự đồng điệu với giới PR và bắt đầu soi xét những sai phạm, thiếu sót nhiều hơn. Xu hướng này đã dẫn đến những phản ứng mạnh mẽ từ những người làm PR, một số người thậm chí còn cố gắng cản trở các công tác truyền thông.
Một trong những cách phản ứng của các công ty chính là quyết định “tự chủ truyền thông” mà không dựa vào những nhà báo. Một trong những ví dụ có thể kể đến chính là Andreesen Horowitz; sau khi tự xây dựng một nền tảng tiếp thị nội dung cùng với một tòa soạn nội bộ vững chắc, doanh nghiệp này đã không còn chủ động tiếp cận với báo chí nữa. Vấn đề được đặt ra ở đây chính là việc loại bỏ các phương tiện truyền thông như một tiếng nói độc lập liệu có phải là hướng đi đúng đắn cho ngành công nghệ và các VCs hay không. Công chúng nhất định có những ngờ vực và các câu hỏi dành cho các công ty lớn, nhưng nếu không có góc nhìn từ các phóng viên độc lập , những câu trả lời đến từ mỗi phía doanh nghiệp sẽ khó có thể được đón nhận hoàn toàn. Bên cạnh đó, việc tránh né sự phê bình có thể đem lại một số lợi ích cho các công ty một cách ngắn hạn, nhưng khi nhìn xa hơn, việc không phải đối mặt với những câu hỏi mang tính xây dựng và phản biện từ các nhà báo uy tín có thể sẽ khiến doanh nghiệp trở nên tự mãn, và gây hại cho cả lợi ích của doanh nghiệp cũng như xã hội nói chung.
Một số lời khuyên cho những chuyên gia PR
Trong suốt phiên thảo luận, Newcomer đã đề cập đến blog của Aaron Zamost “Tại sao một số phóng viên lại khó làm việc hơn những người khác” và chia sẻ những lời khuyên như sau cho các chuyên gia PR: Về việc phản hồi email (Email correspondence): sự thật là các nhà báo luôn bận rộn và việc trả lời mọi email được gửi tới là không thực tế. Newcomer luôn cố gắng hồi đáp những email mà anh cảm thấy được gửi đích danh cho mình thay vì là những email được gửi hàng loạt.
Tuy nhiên, ông cũng không ngại nhận email và khuyến khích việc các công ty luôn cập nhật thông tin với ông.
Các loại câu chuyện truyền thông (story types): khi vòng gây quỹ series 1 (S1) được thông báo, Newcomer truy vấn quyền sở hữu của các công ty và dựa vào thông tin đó để quyết định việc làm hồ sơ doanh nghiệp (profile) cho các nhà đầu tư từ sớm này. Nếu một VCs đang tham gia S1 và chuyên viên PR của họ liên hệ nhằm kêu gọi sự hỗ trợ xây dựng câu chuyện truyền thông, ông sẽ cân nhắc hợp tác.
Các câu chuyện truyền thông chuyên ngành (sector stories): Newcomer xây dựng những câu chuyện truyền thông đi sâu vào các lĩnh vực khởi nghiệp với việc lắng nghe những chia sẻ và bí quyết từ các VCs. Hiện tại, lĩnh vực phần mềm dạng dịch vụ (SaaS) có thể nói là nổi trội nhất.
Nguồn tin trực tiếp và PR (Direct sources and PR): Newcomer duy trì mối quan hệ với các công ty mà ông phụ trách, tuy nhiên điều này không đồng nghĩa với việc ông muốn thay thế chuyên viên PR. Ông nhận thấy việc duy trì các mối quan hệ như trên vô cùng hữu ích, khi các chuyên gia PR cập nhật sâu sát những sự kiện đang diễn ra và thậm chí có thể cung cấp thêm nhiều chiều kích mới cho các chủ thể với tư cách là phát ngôn viên. Ông cũng lưu ý rằng có một số chuyên viên PR ngại rủi ro và cách tiếp cận đầy phòng bị của họ có thể ngăn cản ông hợp tác
Các startups mà ông theo dõi (The startups he watches): Newcomer sẽ lưu ý việc các VCs hàng đầu đang tập trung đầu tư vào đâu để từ đó theo dõi những startups được họ rót vốn. Ông cho biết đôi khi điều này bắt đầu với việc theo dõi một lĩnh vực cụ thể.
Ông cũng nêu thêm một cách để một công ty khởi nghiệp ở giai đoạn đầu thu hút sự được sự chú ý của ông và được đưa tin có thể là nhờ một luận đề thú vị . Mặc dù ông chủ yếu theo dõi các startups ở giai đoạn cuối, nhưng nếu ai đó mà ông biết và tin tưởng gợi ý cho ông một startups ở giai đoạn sớm với nhiều tiềm năng, ông sẽ cân nhắc.
Kết
Newcomer đúc kết lại cách mà giới PR và các nhà báo có thể làm việc với nhau thông qua lời khuyên:”Nhiều mối quan hệ tốt được bắt đầu từ những câu chuyện thú vị, và một khi đã có những câu chuyện thú vị với nhau, niềm tin đôi bên sẽ được đắp bồi.”
Many startups are confused about how to find angel investors, while investors are discouraged by the lack of transparency of information about startup investments. Nguyen Ngoc Tien (aka Tien Nguyen), founder and CEO of Wiziin Vietnam, saw this pain point and created a platform to connect investors with startups and quality SMEs, using artificial intelligence (AI) to help startups manage investor relationships and find potential investors, while giving investors real-time and accurate information of startups to help manage their portfolio.
In a recent online interview, Digitimes talked to Nguyen to understand what value this new platform may create for the new venture ecosystem.
Q: Could you briefly introduce your background? And what brought you to start your entrepreneurial journey?
A: My background is business strategy. And in 2010, I started my first project in e-learning. And we provide the Mass Open Online Courses (MOOC) services for universities. After that startup, I created a new one in Hong Kong, offering cards for loyalty programs for, say, members of Chamber of Commerce. At that point of time, that businesses was very promising, because people used physical cards, but we offered them digital cards with which they could redeem their loyalty rewards. We then exited from this business to a Japanese investor.
And then I created my third venture, an outsource platform for software. The Vietnamese engineers of that platform were excellent, and we offered good prices. The outsourcing industry bloom at that point of time allowed us to expand and invest more in other projects in Internet of Things (IoT) and social network.
And in 2016, I got a scholarship from the Irish government to study in Ireland in strategy. Therefore, my main academic background is business strategy and military strategy. After that master’s program, I went to Beijing, and did a project as a strategic researcher. At the same time, I remained an entrepreneur, I opened companies in Ireland and in England, respectively, both focusing on artificial intelligence and big data.
At that point of time, by doing projects with my professors in University College Dublin and the Silicon Dock in Ireland, I realized the real roles and interactions of innovation-based startups and VCs. So I joined Act Venture Capital, which managed a fund of EUR500 million, backed by the European Central Bank. We invested in renewable energy projects, in biotech, and tech companies. I managed that for four years. And then I came back here in Vietnam, but I remain a limited partner (LP) of the firm.
I realized that there is a gap in investment in the Asia Pacific region. It is also very difficult to do due-diligence because information sometimes is not very transparent, and not accurate. However, as an investor, we need to release the money. Keeping the money in our pocket is a waste. So that’s why we try to narrow the gap by creating Wiziin. Wiziin is an investment platform where we try to collect transparent and accurate information from startups and investors and make them available real-time. And we not only have the matching services to provide for both, we also provide the tools. It costs startups a lot of time to maintain investor relationships to raise funds. Wiziin helps them maintain investor relations on the platform. Startups can focus on their daily operation activities, but when they need to raise funds, they can use Wiziin to find appropriate investors. And for the investors, by using the investor dashboard, they can keep track of whichever startups in their portfolio.
I believe that we can create more options for both – not just for investors but also for entrepreneurs.
Q: How does AI come to play at Wiziin? How do you make AI work for your platform?
A: After years of experience working in big data and AI projects, as an investor, I understand that the first stage of AI should be data. When we try to find one good enough startup, we scan through thousands of startups, and do tons of work just to find the right ones. I realized that some of our analysts, sometimes they get lost in the job, and sometimes they are a little bit biased, when they try to do the initial screening for the startup.
So, first, we gather data big enough for analysis. We have got more than 60,000 Vietnamese SMEs data ready for the platform. I believe in the future there will be more because we will expand coverage to entire Asia Pacific region. Why SME? Because in the region the number of SMEs is huge. And with that data, we need to calculate and analyze everything, but it is impossible to do so much work. So, we developed an AI bot that can program themselves. So, the bot programs itself every day by gathering data. When SMEs upload their data to us, such as financial data, operational data and founders’ data, we collect everything with high level of privacy standards in order to fuel the investment decision making process.
We collect four kinds of data: first, the background of the founding team. The second one is the technology that they use. Do they have patents, licenses? Anything like that. The third thing is market data, about the market and their market share. And the fourth is financial data: revenues, earnings, how much money the founders are putting into the company, etc. We also try our best to collect and analyze data from reliable third parties, like the government.
After some analysis, our AI bot will generate an evaluation. So, through time we believe that our valuation will be as close as the valuation that happens in real life. And we try to introduce a kind of machine learning method so that the bot can program itself every day to keep it accurate. That transparent information can assist the decision-making efficiency for investors, because sometimes the investors do not really know what they like. Sometimes they got some policy or criteria to screen investments, but when they make a decision, sometimes it’s very intuitive. So, we need a tool to take care of the SMEs and startups and also the buyer side and learn about their behavior. Only behaviour reflects investment decisions.
Q: Can you explain more about learning the behavior? Also, do you let investors set up their own preferences?
A: The backbone of our platform is that we learn from behavior. So we collect the historical behavior of the investor. For example, I got a case study, which is a local investor. We analyzed hundreds of cases that she already invested, and we realized that 80% of her portfolio has had something to do with sustainable environment or helping women in society.
We learn from that, and then we can see she is a social-impact investor. She never told us about it, she probably had never realized that she wanted to invest in impact investment. But now we learn from that behavior. And then we suggest a list of companies heavy with social enterprises. We also have the features that investor can customize. But at the end of the day with the tons of data, it’s better to let the AI bot do the job. Investors can set their customization, but that may not be necessary. But it’s also the options they may choose.
Q: So right now, your focus is still on Vietnam. Do you have plans for future expansions?
A: Yes, we have focused on Vietnam. And our next strategy is to open this platgofrm for European investors. We also have plans for expansions in Southeast Asia by the end of 2021, so we can pull in more investors in Singapore, Malaysia and Thailand. Now we have some Indonesian SMEs on our platform and some from India. In 2022, if it goes smoothly, we hope to introduce the financial market, where we can introduce more options for investors. For example, investors currently can only invest in equity, like they can buy equity from SMEs, but in 2022 we hope that we can offer convertible notes, which means they can give loans to the SMEs and can convert to equity if the KPI do not match. Or we can create a kind of lending services from investors for SMEs with a suitable interest rate. But for that we will focus on Asia Pacific, because the SMEs in Vietnam may be not as many as those in the whole region; it’s true also in terms of the number of investors. Especially the investors in Vietnam mainly are the government and some big corporate venture capital funds; there aren’t many real investors with huge amounts here yet. The startup ecosystem here is: within more than 110 active funds, Vietnamese investors contribute 25%, another 25% from Singapore, and 17% from the US. In the future the numbers of European, Korean and Chinese VC will rise.
On the other hand, we also see the importance of converting the individual traditional investor to venture investment, so that they can have more investment options with more risks and more rewards. This market helps us to scale, especially when we focus on Asia Pacific. So we must focus more on Asia Pacific in the next three to five years for enough volume of the market.
Q: I see. So the SMEs you’re referring to is not only the startups, you mean they can also be on the investor side?
A: Yes, the SMEs mean those we connect from both sides and we work with as a platform – we work with stakeholders and investors. SMEs do not mean only startups. Startups are just a portion of it. We also aim at SMEs that can or want to integrate innovations into what they do, and SMEs that need funding. Even though they are traditional, they know that they want to have new ways of business, which we can help. So, the whole system is for small and medium enterprises, not only startups.
Q: I suppose there are many hidden champions – which may be family businesses, but are very competitive in their technologies – that could be discovered by your platform. Is that your purpose of including SMEs which are not startups into your platform?
A: Yes. Because for an economy like Vietnam, we don’t have many tech firms yet, and we have more traditional enterprises. We need kind of synergies of both. It’s not enough to have startups only; we have SMEs that know how to do business with a brand, have know-how, or need funds to grow their businesses. Many startups are good at technology, know about innovation, young, strong, but do not have enough experience in the market. So we want the whole ecosystem that can create synergies for themselves.
Q: What is Vietnam’s startup landscape right now? And how can both sides create synergy to optimize the value of collaboration?
A: The Vietnamese startup ecosystem is quite young and has a lot of potential. Back in 2008, American firms like IDG venture invested in Vietnamese ICT companies, but they invested in software companies mostly. But now Samsung and Philips have set up factories here, and later this year Apple will also be investing here. I must say that this is the time of doing technology business. The government has encouraged this a lot; they put it into the Five-Year Economic Plan. And what Vietnam has now is the capability to make software, and capability of using some designs for hardware and mass production. But in the next 10 to 15 years, I would say that Vietnam will have the ability to design the hardware, semiconductor, and similar stuff. So, invest now; we know these businesses will bear fruit in the next five or 10 years. And the startup ecosystem will be crowded very soon, because after Vietnam and EU signed the Free Trade Agreement, European VCs are now aware of this market and will want to jump on the bandwagon here, like Japan. The Japanese also have VCs around here. They have some tractions in this market. So, as I will say this is the right time for investors to get into the market. And as an investor, we can consider Vietnam as a player with the ability of creating high value products, not just a market with a huge population. A population of more than 90 million is remarkable, so there is great potential that will materialize in the next five or 10 years.
Q: Can you talk more about Vietnam’s design capability?
A: We’re talking about the next 10 to 15 years. In the case of eSilicon (which designs and manufactures digital CMOS and finFET ASICs chips), they are based in Silicon Valley, but 80% of their engineers are Vietnamese. And they have managed to sell the company at US$216 million to Inphi. They hire Vietnamese engineers for design work and then they send those engineers to Silicon Valley to work for the mother company. I believe that in the next 10 to 15 years, when these engineers want to return and contribute to Vietnam, that is the right time for a wave of hardware creation and production.
And there’s a company that we work with – Akselos.
About 90% of their engineers are Vietnamese. It is an Internet of Things (IoT) company that creates the world’s fastest and most advanced engineering simulation technology. So normally, if you have a failed wind turbine in the sea, it will take more than three weeks to send the engineer up, take it down, and then fix it.
Akselos has a solution, which takes just three hours: they can detect everything that happened via sensor data, and send the engineers up to fix it. So Akselos has US$10 million from Shell as a grant. And that’s a very interesting case about a Vietnamese engineers that can work for a global firm. So I believe in the human resources and entrepreneurial spirit, especially in the ability and the ambition of the founders. We can find good talent here. We don’t have advanced technology yet, but we will in a very near future.
Q: How can Taiwan and Vietnam work together to create synergy?
A: In my opinion, let’s have a look at the strengths and weaknesses. We must say that Taiwanese technology is remarkable in the world, everybody knows that. But there are limitations of the island. I seem similarities between Ireland, where I lived several years, and Taiwan. In Ireland, they just have five million people. But Ireland has great industry, so we invested in the technology companies located in the Silicon Dock in Dublin, continental Europe and America.
And investment will be the key for Taiwan, to reach new markets, to create more value and create more jobs. So I believe that investment in a growing country is what Taiwanese companies should have a look at. I believe that Taiwanese firms can invest in technology in Vietnam, Indonesia, in the ASEAN region. So people can see the value that Taiwanese company can add to those economies. The Taiwanese companies then can own some pieces of the bigger pie. Not limited to the Taiwanese pie but enjoy the pie of the whole region. What is Taiwan’s advantage? I believe that is the advanced technology, especially hardware, and stable financial resources.
This can be suitable for the ecosystem in Southeast Asia. The key is investment in technology around this region. And also, in the next five or 10 years, I believe that we can be a place to mobilize investments to other countries. Because the FTA that we have signed with other countries, there are hot money chasing after technology, so we can also mobilize the investments from Vietnam to some companies in Taiwan and create more jobs. For Taiwan, investing overseas is the key.
