Can software replace VCs?

July 1, 2011, 5:57 PM UTC

Taking the Moneyball approach to venture capital.

Can I be replaced by a piece of software?

Apparently there is a new data analysis product called Quid that is able to detect what sectors in a given industry are ripe for innovation, and direct venture capitalists toward the best opportunities. Since that is a key function of what me and my colleagues do, it is a relief to think that I can outsource it to someone (something?) who won’t bring their personal issues to the office or drink the last of the coffee without replacing the pot.

According to Venture Capital Journal, you can visualize Quid as follows:

But imagine plugging data into a computer, such as hiring trends and past rounds of funding for thousands of companies in a sector, and then having software that crunches the numbers and predicts what areas are untapped by startups and ripe for investment opportunities. That way, when a gung-ho entrepreneur walks in a firm’s door with a startup idea that goes after the market sector predicted by the algorithm, a VC knows whether to listen to the pitch, or play on the iPad while the entrepreneur talks.

Guess I won’t have to expend all that extra energy paying attention to at least half of those who visit my office. iPad, here I come.

Quid was developed by Sean Gourley, who originally invented the technology to predict insurgency in war-prone nations. Gourley is reported to “have used public information culled from cell phones, texting and attack data from media reports, nonprofit organizations and the United Nations to look for signatures of insurgency. He ran his statistics through a computer program and discovered universal patterns of war. The characteristics looked the same across Afghanistan, Sri Lanka, Columbia, Rwanda and Peru.”

I like the war metaphor, as it is perfect for the male-dominated business of venture capital. What better than a war-detection machine to identify the killer app to destroy the competition? Venture capital in a nutshell (artillery shell?).

So wither Quid? The good news is that it will not demand carried interest in exchange for its insight. The bad news is that it will probably not be able to free my colleagues or me entirely from the drudgery of working for a living. I can hear the disappointment as those forced to interact with VCs realize that they are probably not going to be completely replaced by software after all. But having done this for a while, I have no doubt that the spoils of war in venture investing are won through a combination of data analysis, intuition and good old-fashioned luck.

Alas, back to work.

Lisa Suennen is a co-founder and Managing Member of Psilos Group, a healthcare-focused venture capital firm with over $577 million under management.

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