New software tool viewed as critical board member for its ability to analyze and predict success of potential investments VC firm may make
Are boards ready to give a seat at their table to a piece of artificial intelligence purportedly able to make investment decisions?
That question may sound like something governance experts shouldn't have to wrestle with until, say, the year 2040. But guess what? The future is nigh.
On May 13 a Hong Kong-based venture capital firm called Deep Knowledge Ventures (DKV) said it has formally acknowledged an algorithm software called VITAL as an equal member of its board of directors. VITAL stands for Validating Investment Tool for Advancing Life Sciences and is described as an artificial intelligence (AI) instrument for investment decision making that focuses on crunching market data for a subset of companies in the regenerative medical sector. That sector is part of the biotechnology industry in which DKV focuses seed investments.
DKV's 'board consists of five anonymous partners, all high-net-worth individuals from Hong Kong, the UK, China and Russia with backgrounds in IT, biotechnology and finance,' says DKV's senior partner Dmitry Kaminskiy in an email. Kaminskiy heads the board.
What's extraordinary is that VITAL's board 'appointment' was announced in conjunction with news of its launch by Aging Analytics UK, a new business that provides market intelligence on the regenerative medicine sector to pension funds, insurers and governments. Aging Analytics licenses VITAL from the Moscow Center for Biogerontology and Regenerative Medicine, which Kaminskiy co-founded.
‘VITAL is a critical member of our board because of its ability to analyze potential investments the board might make and to predict the success or failure of a biomedical project,’ Kaminskiy says in his email. ‘Part of the beauty of VITAL is its ability to make unbiased, analytical, unemotional decisions.'
To be clear, there isn't a robot seated at DKV's board table. Rather, VITAL provides its analytical data before the board makes any investment decisions. And while the machine has no voice, it is able to communicate. 'Its language is a bit far from human natural speech yet,’ says Kaminskiy, but IT specialists are already working on this. ‘We can, however, ask it the crucial questions and get proper answers.'
One feature that drew DKV to VITAL is its ability to automate the due diligence process, using 'historical datasets to uncover trends that are not immediately obvious to humans,' according to the press release.
In his email response, Kaminskiy emphasizes that VITAL's due diligence is completely unbiased and unaffected by human political, economic and self-interests. 'It simply uses the databases to both analyze and predict the success or failure of a project,' he explains. 'The rest of our board might have an idea of a particular type of company that VITAL would then consider.'
Aging Analytics' long-term goal is to create software capable of making autonomous investment decisions, the press release says. Presumably that would include the ability to evaluate data more nuanced than projections for market success of new technologies.
Venture capital firms' boards have relatively limited governance demands. One wonders whether a piece of software like VITAL could ever be suited to the far more rigorous and shaded governance demands facing the boards of multinational companies, such as weighing potential conflicts of interests involving third-party service providers or the appropriate controls to prevent or detect fraud. Kaminskiy's response isn't straightforward, but something may have been lost in translation.
'The software is designed to analyze projects in the biomedical space [though] it could in theory make analytical decisions about anything,' he says.
The age of Boards 2.0 may be closer than we think.
