Looking to Technology to Get an Edge in Deal Making

More private-equity firms are using artificial intelligence technology to gain an edge in sourcing deals

Using artificial intelligence can gain an edge when sourcing deals.
Using artificial intelligence can gain an edge when sourcing deals.  Getty Images

Venture-capital firms dominate the investment flow for artificial intelligence companies. But that doesn’t mean that growth-equity and private-equity firms aren’t getting in on the act as well, albeit for different reasons.

An increasing number of private-equity investors are leveraging AI and other technology products as a way to help them make the best deals.

It is no secret growth-equity and private-equity firms often compete for the same deals and court many of the same companies. Hoping to rely less on associates cold calling companies early on to establish relationships, private-equity shops have looked to software to expedite the process and find the best matches.

San Francisco-based Enter Capital has created its own proprietary in-house software platform the firm uses to track potential deals that fit its investment thesis. The software, known as Ivy, helps the firm manage its deal flow and generate leads for potential target companies.

Enter Capital began to work on the product—designed to cut cold calling out of the equation for private investors—12 to 14 months ago and rolled the product out six months ago, said William Duran, a director at the firm.

“It does the same thing a person would do—going through LinkedIn and looking for companies,” he said, adding the software also grabs data from social media profiles as well as from business information platform Crunchbase. The data, he said, enables the software to narrow down a list of companies that best fit the firm’s investment profile, rather than through the laborious work of reaching out directly by phone in hopes of a match.

The firm also provides the deal sourcing software as a service to 11 other firms that invest in sectors it doesn’t back. According to Mr. Duran, firms that use its software platform learned about the product through word-of-mouth.

Technology-focused Insight Venture Partners is another firm that has leveraged artificial intelligence to help source deals. The firm is using a proprietary software platform that is currently in beta mode to help it source deals, said Deven Parekh, a managing director at Insight.

“We are investing in cutting-edge technology as a firm, we’re making sure to apply that to our own businesses,” he said. Continuing investment in this type of sourcing technology is an area Insight is plans to pursue in the future.

Although private-equity firms may not be snapping up that many early-stage artificial intelligence companies just yet, it is clear they’re eager to leverage the technology to aid them in the investment process.

AI may never completely replace human beings when it comes to sourcing investments and managing deal flow, but it certainly gives firms some additional help when seeking opportunities in an increasingly competitive environment.












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