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Google Ventures uses algorithms to approve or kill VC investments

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Re: Google Ventures uses algorithms to approve or kill VC investments

#31

Post by s73v3r_ »

Matticus_Rex wrote: post #21
s73v3r_ wrote: post #3

Wow. They can't bother to have people working in customer service, and now they can't even bother to have people working on where they invest their money? Please tell me that the execs are next to be automated.

"Can't bother" There are numerous areas, including hiring, in which algorithms are provably better at some jobs. The fact that you choose to do something one way doesn't indicate that you "can't even bother" to do it another way.

I feel you've never dealt with Google's customer service, otherwise you wouldn't be saying this. They clearly cannot bother having competent customer support staff, or staff with the agency to actually do anything. And I feel that's largely because they rely so much on their automated systems to try and take care of it.

Re: Google Ventures uses algorithms to approve or kill VC investments

#32

Post by rdlecler1 »

_hyn3 wrote: post #28
aaavl2821 wrote: post #5

> Inputs into "The Machine" include round size, syndicate partners, past investors, industry sector and the delta between prior valuation and current valuation. The algorithm then ranks deals on a 10-point scale, with green said to represent 8 or above I'm sure there are more inputs than this, but from that list you'd imagine they basically pick deals based on who else is investing. which is not that different from m…

> they basically pick deals based on who else is investing. Another phrase for that is "herd" mentality, which will hopefully result in de-risked "safe" investing, but VC's are supposed to be looking for true breakout possibilities. If LP's wanted safe, they'd buy Treasury notes.

VCs are looking for breakout returns for investors. A syndicate of top VCs can be a kingmaker event that also discourages other investors from backing would-be startups.

Re: Google Ventures uses algorithms to approve or kill VC investments

#34

Post by shanghaiaway »

_hyn3 wrote: post #28
aaavl2821 wrote: post #5

> Inputs into "The Machine" include round size, syndicate partners, past investors, industry sector and the delta between prior valuation and current valuation. The algorithm then ranks deals on a 10-point scale, with green said to represent 8 or above I'm sure there are more inputs than this, but from that list you'd imagine they basically pick deals based on who else is investing. which is not that different from m…

> they basically pick deals based on who else is investing. Another phrase for that is "herd" mentality, which will hopefully result in de-risked "safe" investing, but VC's are supposed to be looking for true breakout possibilities. If LP's wanted safe, they'd buy Treasury notes.

Now they have an alibi for their herd mentality

Re: Google Ventures uses algorithms to approve or kill VC investments

#35

Post by writepub »

_hyn3 wrote: post #28
aaavl2821 wrote: post #5

> Inputs into "The Machine" include round size, syndicate partners, past investors, industry sector and the delta between prior valuation and current valuation. The algorithm then ranks deals on a 10-point scale, with green said to represent 8 or above I'm sure there are more inputs than this, but from that list you'd imagine they basically pick deals based on who else is investing. which is not that different from m…

> they basically pick deals based on who else is investing. Another phrase for that is "herd" mentality, which will hopefully result in de-risked "safe" investing, but VC's are supposed to be looking for true breakout possibilities. If LP's wanted safe, they'd buy Treasury notes.

There are huge gains to be had in herd-ing. For instance, if everyone herds towards Uber instead of Lyft, you effectively pick Uber as the winner by merely herding, instead of merit or market economics

Re: Google Ventures uses algorithms to approve or kill VC investments

#36

Post by visarga »

pkaye wrote: post #19
JumpCrisscross wrote: post #15

Earlier quoted context omitted.

By 2014, "checklists" and "investment criteria" had rebranded themselves as "algorithms" across most of finance.

And by 2018 they have been re-branded as "machine learning algorithms."

Just a fancy formula that works based on people generated input. Without people input said formula would be useless.

Re: Google Ventures uses algorithms to approve or kill VC investments

#37

Post by visarga »

jamez1 wrote: post #33

This is nothing new, most funds treat portfolio construction as an optimization problem, where the objective function is some risk over return metric. "The Machine" is an optimizer, all they've done is build one that looks at early stage companies.

G also has inside access to a lot of information from search and email. Could be using that to optimise their portfolio.

Re: Google Ventures uses algorithms to approve or kill VC investments

#38

Post by baccheion »

Best-performing seed round investors:

     7.5724 . . . . True Ventures 

     6.6294 . . . . Accel Partners
     6.1189 . . . . Seedcamp 

     4.7562 . . . . Nxtp Labs
     4.7474 . . . . Y Combinator
     4.4846 . . . . Softtech Vc
     4.4720 . . . . Gecad Group 2
     4.4720 . . . . Radu Georgescu
     4.4246 . . . . Creandum
     4.3653 . . . . Sv Angel
     4.3636 . . . . Google Ventures
     4.3016 . . . . Greylock

     3.9381 . . . . Baseline Ventures
     3.8225 . . . . First Round Capital
     3.7816 . . . . Mitch Kapor
     3.6702 . . . . Atomico
     3.5938 . . . . Felicis Ventures
     3.3963 . . . . Freestyle Capital
     3.2857 . . . . Yee Lee
     3.2183 . . . . Naval Ravikant
     3.1193 . . . . Boldstart Ventures
     3.1038 . . . . Keadyn
     3.1007 . . . . Birchmere Ventures
     3.0376 . . . . Betaworks
     3.0012 . . . . Hyde Park Angels 

     2.8730 . . . . Ff Angel Llc
     2.8578 . . . . Slow Ventures
     2.8268 . . . . Rose Tech Ventures
     2.8052 . . . . Chicago Ventures
     2.7709 . . . . I5Invest
     2.6940 . . . . K9 Ventures
     2.6469 . . . . Founders Co Op
     2.6132 . . . . Oleg Tscheltzoff
     2.5637 . . . . Nyc Seed
     2.5558 . . . . Ta Venture
     2.5148 . . . . Geoff Ralston
     2.4748 . . . . Cnm Ventures
     2.4327 . . . . Genacast Ventures
     2.3829 . . . . Wi Harper Group
     2.3526 . . . . Allen Morgan
     2.3171 . . . . W Media Ventures
     2.2827 . . . . Oliver Jung
     2.2532 . . . . Amplify La
     2.2509 . . . . Chris Devore
     2.2481 . . . . Dharmesh Shah
     2.2291 . . . . Innospring
     2.2290 . . . . The Accelerator Group
     2.1947 . . . . Gary Vaynerchuk
     2.1791 . . . . Crunchfund
     2.1772 . . . . Jon Callaghan
     2.1700 . . . . Oca Ventures
     2.1666 . . . . Kfw
     2.1652 . . . . Plataforma Capital Partners
     2.1136 . . . . High Tech Gruenderfonds
     2.1079 . . . . Marc Simoncini
     2.0933 . . . . Tom Mcinerney
     2.0908 . . . . Steve Anderson
     2.0879 . . . . Battery Ventures
     2.0590 . . . . New York Venture Partners
     2.0256 . . . . Emerge
     2.0038 . . . . Andy Appelbaum
Worst-performing seed round investors:

    -6.9802 . . . . Wayra

    -5.8839 . . . . Start Up Chile
    -5.0805 . . . . Startupbootcamp

    -4.0593 . . . . Jumpstartinc

    -3.8784 . . . . Sosventures

    -2.7610 . . . . Start Engine
    -2.6717 . . . . Social Starts
    -2.5748 . . . . Ff Venture Capital
    -2.5641 . . . . Ben Franklin Technology Partners Of Southeastern Pennsylvania
    -2.5460 . . . . Ace And Company
    -2.4309 . . . . Quest Venture Partners
    -2.0690 . . . . Masschallenge
Best-performing series A round investors:

     7.0711 . . . . Greycroft Partners

     5.5854 . . . . Venrock
     5.4365 . . . . Trinity Ventures

     4.9683 . . . . Intel Capital
     4.9600 . . . . Scott Banister
     4.9400 . . . . Kleiner Perkins Caufield Byers
     4.8362 . . . . Redpoint Ventures
     4.6803 . . . . Ron Conway
     4.5240 . . . . Sv Angel
     4.3989 . . . . Crosslink Capital
     4.3097 . . . . Storm Ventures
     4.0204 . . . . Shasta Ventures

     3.9124 . . . . E Ventures
     3.6809 . . . . Leapfrog Ventures
     3.5279 . . . . Khosla Ventures
     3.3344 . . . . Valor Capital
     3.2867 . . . . Accel Partners
     3.2164 . . . . Austin Ventures
     3.1917 . . . . Accelerator Ventures
     3.1199 . . . . Inveready Technology Investment Group
     3.0892 . . . . Signia Venture Partners
     3.0283 . . . . Mangrove Capital Partners

     2.9607 . . . . Alliance Of Angels
     2.9039 . . . . Ventures West
     2.8911 . . . . Novartis Venture Fund
     2.8627 . . . . Carmel Ventures
     2.8622 . . . . Brightspark Ventures
     2.8440 . . . . Omnes Capital
     2.8099 . . . . Reid Hoffman
     2.7943 . . . . Alta Partners
     2.7847 . . . . Partech International
     2.7432 . . . . Balderton Capital
     2.7391 . . . . Helion Venture Partners
     2.7341 . . . . Wellington Partners
     2.6948 . . . . Mercury Fund
     2.6859 . . . . Sofinnova Partners
     2.6841 . . . . Holtzbrinck Ventures
     2.6694 . . . . Metamorphic Ventures Llc
     2.6218 . . . . Frazier Healthcare Ventures
     2.5929 . . . . Doughty Hanson Technology Ventures
     2.5796 . . . . Bessemer Venture Partners
     2.5772 . . . . Menlo Ventures
     2.5608 . . . . Divergent Ventures
     2.5439 . . . . Jafco Asia
     2.5071 . . . . Vanedge
     2.4915 . . . . Amadeus Capital Partners
     2.4576 . . . . Texas Venture Labs
     2.4355 . . . . Newfund Management
     2.3769 . . . . August Capital
     2.3561 . . . . Dave Morin
     2.3195 . . . . Xange Private Equity
     2.3058 . . . . 3Ts Capital Partners
     2.3021 . . . . Hummer Winblad Venture Partners
     2.2973 . . . . Flybridge Capital
     2.2966 . . . . High Tech Gruenderfonds
     2.2782 . . . . 5Am Ventures
     2.2499 . . . . Constellation Ventures
     2.2463 . . . . Opus Capital
     2.2099 . . . . Softbank Capital
     2.1956 . . . . Miramar Venture Partners
     2.1705 . . . . Oregon Angel Fund
     2.1541 . . . . Greylock Partners Israel
     2.1507 . . . . Schroders Private Bank
     2.1277 . . . . Dcm
     2.1233 . . . . Alta Berkeley Venture Partners
     2.1211 . . . . Qualcomm
     2.0847 . . . . Mountain Partners
     2.0840 . . . . Boxgroup
     2.0605 . . . . Azure Capital Partners
     2.0559 . . . . Legend Capital
     2.0505 . . . . High Peaks Venture Partners
     2.0434 . . . . Ggv Capital
     2.0280 . . . . Kpg Ventures
     2.0204 . . . . David Tisch
     2.0045 . . . . Bluerun Ventures
Worst-performing series A round investors:

    -3.1130 . . . . Founders Fund
    -3.0555 . . . . Andreessen Horowitz
    -3.0272 . . . . Emergence Capital Partners

    -2.9966 . . . . Crp Companhia De Participacoes
    -2.6290 . . . . Techcolumbus 2
    -2.4801 . . . . Sigma Partners
    -2.4795 . . . . Nexus Venture Partners
    -2.4344 . . . . J Hunt Holdings
    -2.4001 . . . . Sevin Rosen Funds
    -2.3166 . . . . Commonangels
    -2.2516 . . . . Oca Ventures
    -2.2448 . . . . Long River Ventures
    -2.2120 . . . . Alloy Ventures
    -2.2035 . . . . Eden Ventures
    -2.1966 . . . . Granite Ventures
    -2.1778 . . . . Allegis Capital
    -2.1778 . . . . Shenzhen Capital Group
    -2.1708 . . . . Morgenthaler Ventures
    -2.1347 . . . . Golden Seeds
    -2.0325 . . . . Split Rock Partners

Re: Google Ventures uses algorithms to approve or kill VC investments

#39

Post by taurath »

writepub wrote: post #35
_hyn3 wrote: post #28

Earlier quoted context omitted.

> they basically pick deals based on who else is investing. Another phrase for that is "herd" mentality, which will hopefully result in de-risked "safe" investing, but VC's are supposed to be looking for true breakout possibilities. If LP's wanted safe, they'd buy Treasury notes.

There are huge gains to be had in herd-ing. For instance, if everyone herds towards Uber instead of Lyft, you effectively pick Uber as the winner by merely herding, instead of merit or market economics

And in that case, the worst possible outcome is to have many competing funded companies in the same space. Merit doesn’t enter into it much.

Re: Google Ventures uses algorithms to approve or kill VC investments

#40

Post by taurath »

oldgradstudent wrote: post #27
droopyEyelids wrote: post #23

Earlier quoted context omitted.

If a significant chunk of VCs invest based on an algorithm following the investments of other VCs running the same algo... positive feedback loop. Juicebox squeezer receives $120m investment.

Supposedly, a lot of this was going on during the (previous) housing bubble. https://www.wired.com/2009/02/wp-quant/

And right now companies are absurdly cash rich and the hardest problem is where to invest the money.
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