Can AI replace the VC analyst?

This article summarizes an episode of Venture Capital’s video series featuring Roberto Bonanzinga, co-founder of InReach Ventures.

Image credit: Timmy Loen

Roberto Bonanzinga, co-founder of InReach Ventures, argues that AI will make the traditional way of funding companies based on personal networks useless. His method using AI changes how investors find founders and questions the need for big teams and high costs.

AI is the only way to find undiscovered founders

Venture capital has long relied on personal network but that way of working fails in a continent with many separate tech centers. Depending on introductions from friends means investors are only looking in a small area, missing the talented people outside their group of friends.

Bonanzinga says, “In Europe, the geographic fragmentation is huge. The next Spotify can start in Milan, Lisbon, or Berlin; you never know. If you really want to invest at that stage, there is a big problem: discovery.”

The problems persist even when investors and founders finally meet. The usual way of raising money makes founders put on a show. A good presentation can often hide a bad idea. This focus on style instead of the real idea wastes time. It also stops investors from understanding the actual plan of the founder.

Bonanzinga avoids this issue by rejecting the standard pitch deck entirely. He explains, “We don’t use PowerPoint presentations. We don’t believe in pitching. It’s incredible the moment in which you remove the slide. What you want as an investor is to understand what the insights are that the team has.”

The analyst class is being replaced by agents

In the usual way, founders reach out when they need money. This makes investors wait for deals to come to them. But what if a firm could find good teams before they were ready to ask for money?

Bonanzinga notes, “We usually proactively contact these entrepreneurs at a time in which they are building the MVP (Minimum Viable Product). They just don’t even want to talk to investors. The first question they ask us is: ‘How do you know we exist?'”

This new way of finding companies changes how the firm is organized. For decades, the way to get into venture capital was simple: start as a junior analyst, show you were good, and work your way up to partner.

But when AI can do the work of finding and checking companies that junior employees used to do, that career path disappears.

“I don’t think there will be any more of this thing of, ‘I do something as a junior so that I learn and then I become the senior.’ This thing is not going to work anymore. The junior jobs [are] disappearing,” he argues.

Cutting out the junior gatekeepers
Founders often spend weeks talking to associates who cannot decide to invest. This wastes a startup’s time and creates a barrier between the founder and the people who can invest.

Bonanzinga believes, “[There is an] opportunity to create a new type of venture firm that will be GP (General Partners)-only. Entrepreneurs deserve that you speak to the decision-makers.”

The plan for a modern AI-first fund