Algorithms Could Help VC Firm Level Playing Field for Women

Venture Capital firms fund tech startups based on relationships and “intuition,” according to a story in Statistics from the National Venture Capital Association show that 89 percent of partners at VC firms are male; consequently the vast majority of funding goes to ventures headed by men⎯$68.2 billion in 2017 compared to $1.9 billion for firms headed by women.

That may change if an automated system weighted according to criteria catches on.

Social Capital, a Silicon Valley VC firm, has been testing an automated system for a year. Of 5,000 start-ups reviewed, it funded 60, including 18 run by women. The system, known as Capital as a Service (CaaS), was developed by a woman, Ashley Carroll, who has three degrees from Stanford University and who formerly worked at Inc. and two start-ups.

The system allows start-ups to upload data without having met the VC operators. If algorithms considered them a good bet for investing, then Social Capital would fund them. For now, investments have ranged from $50,000 to $250,000, but if the system pays off, amounts could go up to millions of dollars.