Hong Kong based venture capital firm Deep Knowledge Ventures (DKV) has appointed a machine learning program to its board. Called VITAL, it's an "equal member" that will uncover trends "not immediately obvious to humans" in order to make investment recommendations.
This is probably an attempt to attract media attention, but it could truly be the start of a larger trend; it's the world's first software program to be appointed as a board member. The move could also herald a new direction in the way venture capital is done.
The tool was developed by Aging Analytics UK who's licensing it out to DKV, a capital fund that focuses on companies developing therapies for age-related diseases and regenerative medicine. DKV will use VITAL (Validating Investment Tool for Advancing Life Sciences) to analyze financing trends in databases of life science companies in an effort to predict successful investments.
It works by poring over massive data sets and applying machine learning to predict which life science companies will make successful investments.
The company has already used VITAL to inform investment decisions in two start-up life science companies, Pathway Pharmaceuticals, Limited in Hong Kong and InSilico Medicine, Inc in Baltimore, USA. The long-term goal is to get the intelligence to the stage where it'll be capable of autonomously allocating an investment portfolio. Eventually, the software is expected to get an equal vote on investment decisions.
"The variables involved in the long-term success of a biotechnology company are many and complex," said DKV Senior Partner Dmitry Kaminskiy in a prepared statement. "We were attracted to a software tool that could in large part automate due diligence and use historical data-sets to uncover trends that are not immediately obvious to humans surveying top-line data. We plan to incorporate new information from prospective investments into the databases to compare the outcomes against our selected investments."
BetaBeat's Jordyn Taylor managed to speak to Kaminskiy:
Will VITAL actually be incorporated into the board of director meetings?
On the meetings investors will firstly discuss the analytical reviews made by VITAL. All the decisions on investing will be made strictly after VITAL provides it's data. We say that VITAL has been acknowledged as an equal member of the board of directors, because it's opinion (actually, the analysis) will be considered as probably the most important one. So basically yes, it will be incorporated into meetings.
Will it be a bunch of humans plus one computer sitting around a table?
No, don't take it literally.
And will people actually take its advice as seriously as the advice from other board members?
Humans are emotional and subjective. They can make mistakes, but unlike the machines they can make brilliant intuitive decisions. Machines like VITAL use only logic. The intuition of the human investors together with machine's logic with give a perfect collaborative team. The risk of the mistake will be minimized.
A fascinating and unsettling development, one that reminds me of how high-speed stock trading has revolutionized that sector.
Image: Willyam Bradberry/Shutterstock.