This post is part of the Hacker Noon Shareholder Series, where we interview some of the super-investors who made the site you're on right now possible.
George Georgallides is the co-founder of Darwin: an AI-enabled platform that uses machine learning models and aggregates corresponding expert evaluations to assess the overall risk and attractiveness of a startups for both investors and founders. We sat down with Georgallides to learn more about this fascinating application of AI and machine learning.
Q1 How exactly does Darwin use A.I. and the wisdom of experts to make financing an innovation less risky and more transparent for both entrepreneurs and investors?
Our team spent two years researching the process of making investment decisions at the earliest stage, initially examining groups of experts making those decisions - the status quo - and later various machine learning approaches. What emerged was the combination of experts and AI in a collaborative process on what each does best. Machine learning is great at processing vast amounts of complex data. Experts among other things are great at making intuitive decisions or interpreting data creatively. We call that Hybrid Intelligence.
Darwin uses machine learning models and aggregates corresponding expert evaluations to assess the overall risk and attractiveness of a startup. Darwin also actively learns from the evaluations and creates digital twins of each expert to scale the decision-making process further.
"For investors, Hybrid Intelligence provides both a de-risking and scalability partner."
When using Darwin, founders receive feedback on the overall attractiveness of their idea before going to an investor. The process is dynamic - they can test how changes impact their score as much as they want. In addition, they receive feedback on how to improve and, ultimately, the means to accelerate their funding.
For investors, Hybrid Intelligence provides both a de-risking and scalability partner. Darwin enhances investors’ due diligence stack and allows them to evaluate more deal flow in a timely and knowledgeable manner.
Q2 Much has been written about just how far AI can go in terms of performing complex decision-making tasks. Darwin is advocating for Hybrid Intelligence as the new frontier for collaboration between humans and AI - can you tell us more about Darwin's application/s of that?
The applications for Hybrid Intelligence can certainly go far beyond just the early stage innovation environment and really apply to any complex decision-making tasks where uncertainty is high. Medical imaging, sports predictions and movie production are just some examples.
Beyond better decision-making though, we also believe that Hybrid Intelligence is a piece of the puzzle in shaping the future of work. One where A.I is not replacing humans but is integrated with humans. For tasks that human intuition is critical, we can now scale it and digitize it. More importantly, for the first time, through the use of our digital twin technology, humans can monetize their intelligence in a way in which they don't have to actively do the work. They can ‘outsource’ their intelligence and monetize it passively.
Overall, we believe that Hybrid Intelligence has the potential to help align AI and human goals.
Q3 How is building an AI investment platform different from building other VC companies?
There are some similarities in that, VC funds source deals and conduct due diligence in order to find profitable investment opportunities. But the similarities end there.
First of all, Darwin doesn’t invest in startups itself. Rather, Darwin is an intelligence partner representing the interests of both founders and investors. Building Darwin involved years of research and data gathering from founders, accelerators, investors and other stakeholders followed by technical execution and ongoing development to build a scalable solution for identifying successful investment opportunities.
Second, unlike VCs, Darwin places a big emphasis on helping founders develop their ideas and make them investable whereas VCs mostly work with startups ready to receive funding.
Third, Darwin can scale its core competency whereas a VC fund is inherently limited by how many people work directly or indirectly at the fund. Darwin can help remove that bottleneck for VCs.
There are certainly many other ways that Darwin, being a platform, differs from a VC, which is a service company. But the important thing to note, as I mentioned, is that Darwin is a complement to the VC process.
Q4 Darwin has developed a Digital Disruption Design (D3) model that helps corporations, investors and entrepreneurs with concrete strategic decision-making and data-driven decisions - walk us through that framework, and how it’s integrated into Darwin’s process?
We developed the Digital Disruption Design (D3) model with the support of business incubators, accelerators, VCs and corporate innovation arms. We built on the idea of the Lean Startup for iterative development, testing, and learning in order to provide a process that helps entrepreneurs make decisions.
The model has been tested in collaboration with the University of St. Gallen with over 200 participating digital ventures. D3 guides innovators through the use of data-driven methods for validating their assumptions and build their ideas. It’s a stage gate process with decision points at the end of each stage. Each stage is an iterative process of making decisions, testing hypothesis, validating assumptions, and learning. It also provides a set of decision possibilities for each dimension and metrics for making the progress measurable. This framework is integrated into the Darwin platform.
The D3 model can be applied for a variety of stakeholders, including startups developing their ideas or corporate venturers trying to define innovation pathways. In addition, we believe it can help incubators, accelerators, and investors monitor their portfolio’s progress.
Q5 The VC market is still fairly non-inclusive, in terms of who can actively participate. How might Darwin aid in democratizing opportunities on both sides of the fence - for both investors and entrepreneurs?
We’ve met with hundreds of investors and entrepreneurs across the world in the past two years. What we’ve learned is that there’s an incredible opportunity to make cross-border and cross-cultural connections for all parties involved. There are many opportunities to leverage hybrid intelligence to integrate otherwise timid early stage investors by equipping them with more confidence on what represents a good investment opportunity by connecting the dots. In addition, there’s a big opportunity to present highly qualified deals from under-represented areas of the US and the world to investors who otherwise would not be exposed to those deals - thereby making the access to “smart money” more widespread.
Q5 For entrepreneurs interested in joining Darwin’s innovation platform, what can they expect in terms of investment opportunities, users/customers, mentorship?
We want to work with founders as early as idea-stage and help them cultivate their startup all the way through fundraising.
First and foremost, we want to help them get feedback on whether their product has product-market fit. We’ve seen too many founders spend months fundraising with no success before they’ve validated if they provide enough value in their market. On Darwin, they can get feedback from investors and other industry experts on their business model, team-solution fit, traction and much more.
Darwin also wants to help startups improve their chances of fundraising by providing opportunities to create traction. One way we are doing that is by matching startups with corporations who are willing to be a startup’s first paying customer. In addition, we’re focused on providing value to the startups through a growing network of partner offers.
Something really exciting that we are working on bringing to founders very soon, is the ability to get feedback from the digital twin of the investor they want to pitch and adapt the product to make a killer pitch before the real meeting.
Overall, Darwin wants to make fundraising and more transparent for founders and help them go to market the right way.
Q6 What are the key actions early-stage startup founders should focus on to reduce their risk of failure?
Product-market fit and execution top the list in a fairly wide spectrum of variables that can impact early stage success or failure. The biggest challenge we’ve heard, from first-time founders especially, is not knowing how to go about validating their idea and what to focus on with regards to early execution in order to make their venture more attractive to investors and potential users/customers. That’s why we think Darwin fills such a big piece of that puzzle in providing an on-demand tool to get support on both those key areas.
Q7 What’s a ‘digital twin’, and how does Darwin use this to help startups succeed in pitching?
A digital twin is a digital copy of a user on Darwin. Our machine learning models actively learn from the input of Darwin experts. That means we can employ the knowledge of experts even without their physical input to increase the confidence in the evaluation of a particular idea. Our digital twin feature is still in development as we gather data from those users but when it’s ready to launch, will include VCs, successful entrepreneurs, and other specialists.
Q8 For VCs looking for investable startups, what’s to be gained from joining Darwin as an investor?
Almost every VC that identifies herself as such will have more deal flow than they can evaluate at present. What we offer is a scalable way to vet not only that deal flow, but also additional opportunities originating from our partners around the world with less time spent on due diligence. This way, VCs are less likely to miss out on an investment opportunity because they “didn’t have enough time”.
Furthermore, due to the fact that opportunities on Darwin are evaluated by a diverse brain trust of industry experts and then further evaluated by our AI, VCs can use Darwin to de-risk their own investment decisions. This ensures that they don’t miss out on deals because of cognitive biases or limited knowledge on an opportunity’s addressable market, and at the same time not make bad investments due to overconfidence.
"The early stage investment space is such a foundational driver in shaping the future of our world... Darwin is trying to organize the vast number of incredible innovation opportunities that exist, help shape them through the platform and present them to investors who can help place them in the market."
Using Darwin’s digital twin technology, VCs can also optimize what opportunities they see based on their investment preferences and only see deals that are pre-qualified for them to invest in. This allows for faster and more confident investment decisions.
Lastly, Darwin offers several upgrades to the VC tech stack to help VCs better manage their data internally, better manage their relationship with startups and their industry reputation in general.
Q8 What’s your take on impact investing - is this a trend Darwin subscribes to when making decisions about who to partner with?
The early stage investment space is such a foundational driver in shaping the future of our world. Companies who were born less than a decade ago are transforming transportation, housing, work, energy and so much more. Darwin is trying to organize the vast number of incredible innovation opportunities that exist, help shape them through the platform and present them to investors who can help place them in the market. In that spirit, we invite founders, investors, accelerators and other key stakeholders from the impact investing community to partner with Darwin in making capital allocation in impactful innovations more efficient.
Not only investors and founders can join Darwin. Accelerators, experts and startup scouts are all encouraged to apply on their site. Learn more at askdarwin.com; and check out more of the Hacker Noon Shareholder Series.