AI Helps VC Firms Cut Costs and Improve Funding Process Efficiency

From healthcare to finance and spend management, artificial intelligence (AI) continues to disrupt industries, enabling firms to cut costs, increase efficiency and unlock new growth opportunities. And it’s no different in the venture space, says Mattias Ljungman, founder at U.K.-based Moonfire Ventures.

In fact, beyond the AI-related investment opportunities catching VCs’ eye, Ljungman told PYMNTS that the technology has been a “source of significant technical disruption” across the entire venture capital (VC) value chain, enabling firms to automate and improve funding decision-making by merging AI and machine learning efficiency with human insight.

“It makes us a bit more effective at identifying good opportunities,” Mike Arpaia, a partner at the firm, added. “It’s also just a fun and an interesting way to participate in an emerging technology which is going to be very transformative.”

To that end, Moonfire, which recently raised $115 million to support AI-centric early-stage European startups, can filter through between 50,000 and 60,000 funding applications per week, narrowing it down to about 100 opportunities that fit its general investment thesis.

Once that list is generated, the firm performs a more comprehensive analysis of the shortlisted companies, using AI and natural language processing models to identify the most compelling founders, create investment memos and summarize information from different data providers, among others.

Overall, Ljungman said with AI and machine learning doing the heavy lifting, they now have additional time to focus on a key aspect of the investment process, which is engaging and building relationships with founders.

“Using these systems allows us to have that time and efficiency to build relationships with founders and cater to their needs as they take on what is usually a very bold vision of changing an ecosystem and ultimately society [at large],” Ljungman said.

Keeping EU Homegrown Tech Talent at Home

The rise of AI in Europe has led lawmakers in the region — as in other parts of the world — to want to regulate the industry, with the introduction of an EU AI Act that is slated to become the first comprehensive legislation in the world governing the technology’s use.

In fact, earlier this month, EU lawmakers voted on new transparency regulations for generative AI applications like ChatGPT, part of a broader package of AI rules that also includes a ban on the use of facial recognition in public and on predictive policing tools, PYMNTS reported.

Depending on how the AI regulation pans out, Ljungman cautioned against taking a hard-line approach that could stifle innovation and competition, and slow firms’ progress in the fast-growing space.

“Although we respect the idea, the last thing that we want is to slow things down. We should allow people to use these technologies because it will spur growth [and] allow us to have better societies,” he noted.

Arpaia also highlighted the potential risk of holding back European companies and the “harm that a country or region can do to its future dominance or competitiveness in this ecosystem” if regulations are too strict.

Moving forward, Ljungman expressed optimism about the European startup ecosystem, taking into consideration the increasing number of founders building successful companies and helping to create a thriving ecosystem across the region in the last decade.

And while governments have played a significant role in that progress, Ljungman said more can be done to ensure the region’s startups are not left behind. “Whether it’s providing incentives, investing in certain technologies or creating centers of excellence … we need to continue to foster growth to help the ecosystem [thrive].”

Finally, Ljungman said it’s also about ensuring that European tech talent, who have been the driving force behind key innovations in the AI and machine learning spaces, is not lost to North American Big Tech firms. “We’ve done a good job of creating those long-term thinkers, but they ended up in other parts of the world so we have to make sure that we retain and build those competencies here.”