Paper: arXiv 2311.06251

Authors: Mohammad Rasouli, Ravi Chiruvolu, Ali Risheh

Abstract

With the investment landscape becoming more competitive, efficiently scaling deal sourcing and improving deal insights have become a dominant strategy for funds. While funds are already spending significant efforts on these two tasks, they cannot be scaled with traditional approaches; hence, there is a surge in automating them. Many third party software providers have emerged recently to address this need with productivity solutions, but they fail due to a lack of personalization for the fund, privacy constraints, and natural limits of software use cases. Therefore, most major funds and many smaller funds have started developing their in-house AI platforms: a game changer for the industry. These platforms grow smarter by direct interactions with the fund and can be used to provide personalized use cases. Recent developments in large language models, e.g. ChatGPT, have provided an opportunity for other funds to also develop their own AI platforms. While not having an AI platform now is not a competitive disadvantage, it will be in two years. Funds require a practical plan and corresponding risk assessments for such AI platforms.

Complexity vs Empirical Score

  • Math Complexity: 1.0/10
  • Empirical Rigor: 2.0/10
  • Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper provides a conceptual overview and qualitative discussion on the adoption of internal AI platforms in investment funds. It lacks quantitative models, mathematical formulations, and empirical backtesting or data analysis.

Research Flowchart

  flowchart TD
    A[Research Goal: Evaluate AI Platforms in PE/VC for Deal Sourcing & Insights] --> B[Identify Traditional Scaling Limits & 3rd-Party Software Drawbacks]
    B --> C[Analyze In-House AI Platform Development & LLM Integration]
    C --> D[Assess Operational Risks & Implementation Requirements]
    D --> E[Outcome 1: In-House AI Platforms Outperform Generic 3rd-Party Software]
    D --> F[Outcome 2: AI Platforms Will Become a Core Competitive Necessity Within 2 Years]