A growing number of venture capital firms are turning to algorithms to identify potentially lucrative start-up investments, while also eliminating bias, according to researchers at MIT. The new approach is based on a mathematical model that predicts the likelihood that an investment will be successful. The researchers said a reluctance to trust algorithms in such decision-making is still an obstacle and suggested allowing a little human control would ease aversion.
A growing number of venture capital firms are turning to algorithms to identify potentially lucrative start-up investments, while also eliminating bias, according to researchers at MIT. They said executives who relied on gut instinct alone could miss golden opportunities, while firms such as Social Capital, which prioritises data rather than emotions, have yielded a diverse, more global selection of start-ups. The researchers said a reluctance to trust algorithms in such decision-making is still an obstacle and suggested allowing a little human control would ease aversion.