Reddit’s Alexis Ohanian Thinks Software Will Dominate Venture Capital
This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Reddit co-founder Alexis Ohanian announced Wednesday that he would be stepping down from his daily role at the company (he will continue to serve on Reddit’s board).
Ohanian said he will return to Initialized Capital, an early-stage VC firm he co-founded with Garry Tan, as a full-time general partner. The firm has more than $250 million in assets under management, and its investments include Coinbase, Instacart, Zenefits, Opendoor, Soylent, and Cruise Automation.
Now, he plans to double down on investment opportunities in emerging technologies such as blockchain, and says the firm will participate in upcoming initial coin offerings.
“The threat that ICOs pose long-term are to VC firms that aren’t very good because the onus will be on investors to justify why founders should take their money and not use other ways to get it,” he told Term Sheet. “We’re up for that challenge.”
How do they plan to do this? Ohanian says his focus for 2018 is to roll out software that will automate some investment decisions. This may also increase deal flow diversity and help founders gain access to the firm’s network more efficiently.
“It’s a challenge for all of venture,” he said about investing in non-white-male founders. “We have to get it right. Believe me, I used to think about this before I had a black daughter, and I really think about this now on another level because it’s so personal to me.”
As we’ve seen with Social Capital’s “capital-as-a-service” platform, diversity improves when human bias is taken out of investment decision-making. For context, Social Capital evaluated nearly 3,000 companies during its private beta and committed to funding several dozen across 12 countries. CEO demographics skewed 42% female and majority non-white.
Though Ohanian wasn’t familiar with Social Capital’s data-focused investment platform, his response to the findings was, “hell yeah.” So why aren’t more firms fully embracing the data?
“It’s ironic because venture capital firms talk about investing in founders who are building the future and replacing file cabinets with software and yet venture is so technologically backwards,” he said. “That’s because very, very few people running these firms are product people.”
It looks like data-driven venture investing will only accelerate in the future. It remains to be seen how well quantitative recommendations are accepted in a world of big personalities and a strong belief in “the pickers.”