Artificial Intelligence in Startup Investment Decision-Making

Abstract

Artificial intelligence (AI) is currently exhibiting rapid changes in shaping and enhancing the entrepreneurial landscape, including the startup ecosystem. While prior research has addressed innovative financial startup systems such as AI-based credit scoring and AI for financial fraud detection, the current understanding of AI’s optimal role in startup evaluation remains fragmented. This study addresses the need to critically assess how AI is actually reshaping a part of the startup ecosystem, namely startup investors such as angel investors, venture-capitals, corporate venture capital, governments, financial advisors, and private equities. This systematic literature review with bibliometric analysis examines the landscape of AI applications in startup investment decision-making across articles published over the past decade in Scopus-indexed journals. Using PRISMA systematic literature review protocols and VOSviewer, 623 articles were considered, and 67 were fully reviewed that were related to artificial intelligence, investment, and startups. We identify three phases in the implementation of AI in this area: methodological sophistication, relational learning, and generative AI. Our review also revealed several research gaps pertaining to its application or usage in several different levels of the startup investment stage. This study offers practical guidelines for practitioners and a theoretical foundation for subsequent research on AI. This research contributes to the entrepreneurship, technology management, and financial management literature by mapping evidence and identifying promising research directions for developing AI frameworks within the startup ecosystem. This study also implies that while investors should attempt AI-driven instruments for decision-making, final human calibration and evaluation should still be done to provide sound alignment with startup investors’ financial or investment decisions. As such, the findings provide emphasis on responsible AI adoption within the startup ecosystem.