Category: Finance

This post about the future of Venture Capital and ICOs (Initial Coin Offerings) is an excerpt from the full article, found here at toptal.com. I focused on the Machine Learning and human talent aspects and how they will impact the future of the industry. Another post of interest about the future of the crowdfunding market can be found here. -Spencer

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BY MELISSA LIN – FINANCE EDITOR @ TOPTAL (link to original article)

Key Highlights

Artificial Intelligence (AI) Is Exploding
  • The widespread adoption of AI across industries is predicted to drive global revenues of $12.5 billion in 2017 and $47 billion in 2020 with a CAGR of 55.1% from 2016 to 2020.
  • The industries that will invest the most in these technologies are banking and retail, followed by healthcare and manufacturing.
  • Economists designate general purpose technologies (GPT) as those important enough to spur protracted economic growth and societal advancements. For example, electricity is a GPT. A recent Harvard Business Review article designates AI as the most important GPT of our era.
Risk Management
  • PayPal has been able to boost security by leveraging deep learning technology. PayPal’s fraud is relatively low at 0.32% of revenue, a figure far better than the 1.32% average that merchants see.
  • While a linear model can consume 20-30 variables, deep-learning technology can command thousands of data points.
AI Trading
  • For years, investment management companies have relied on computers to make trades. Around 9% of all funds, managing $197 billion, rely on large statistical models built by data scientists.
  • However, these models are often static, require human intervention, and don’t perform as well when the market changes. Therefore, funds are increasingly migrating towards true artificial intelligence models that analyze large volumes of data and continue to improve themselves.
  • In 2000, Goldman Sachs’ US cash equities trading desk in its New York headquarters employed 600 traders. Today, it has two equity traders, with machines doing the rest.
Robo-advisory
  • For investors, robo-advice can offer up to 70% in cost savings in certain services.
  • Some established investment firms are buying existing robo-advisors, such as Invesco’s acquisition of Jemstep and Blackrock’s purchase of FutureAdvisor. Others are even creating their own robo-advisors, such as FidelityGo and Schwab’s Intelligent Advisory.
  • 77% of wealth management clients trust their financial advisors and 81% indicate that face-to-face interaction is important.
Insurance Underwriting and Claims
  • PWC report predicts that AI will have automated a considerable amount of underwriting by 2020, especially in mature markets where data is available.
  • In a 2013 Oxford study analyzing over 700 professions to determine which were most susceptible to computerization, insurance underwriters were included in the top five most susceptible.
  • Underwriting may leverage not only machine learning but also wearable technology and deep learning facial analysis technology.

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What does financing the future look like? We all know incredible advancements in technology have made new discoveries and products available to millions of people worldwide. But can those same people look to the technology of crowdfunding to help finance their dreams, and by extension, our future? Here is a sobering article on the current state of crowdfunding and what will have to be done to ensure crowdfunding can live up to expectations. -Spencer

[Update: Here’s a complementary article with a top 10 list of problems that can happen once your campaign is funded. The article is by John Hawthorne at floship.]

BY TOBY CLARENCE-SMITH – FINANCE BLOG LEAD EDITOR @ TOPTAL. [Original article posted here]

In April 2012, then President Obama signed into law the Jump-Start Our Business Start-Ups bill, otherwise known as the JOBS act. In the midst of a recovery from the devastating after-effects of the Financial Crisis, the move was hailed as “a ‘potential game changer’ for fledgling businesses in need of financing.”

In particular, the bill unlocked the promise of equity crowdfunding, an activity which, simply put, allowed companies to raise money from any willing investors via the internet. As President Obama himself put it, by removing these restrictions, the JOBS act promised to allow “start-ups and small business […] access to a big, new pool of potential investors—namely, the American people […] For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in.”

To be clear, the process of raising money from private investors is nothing new. However, in most countries, including the US, there have historically been rules regarding such an activity that tended to exclude the average person on the street from investing in these deals. In the US for instance, in order to invest in the equity of private companies, individuals needed to be approved accredited investors, or go through regulated middlemen, both of which limited the playing field and created barriers to mass participation. The JOBS act, and the promise of equity crowdfunding, changed all that.

Nearly five years on though, equity crowdfunding continues to remain a fairly limited niche activity. Despite a few success stories, the grandiose predictions of industry-wide disruption haven’t come to fruition. In this article, we take a look at the current state of the equity crowdfunding market in the US, and assess the challenges it needs to overcome in order to live up to its promises.Read More »

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