When most venture capitalists want approval to make a new investment, they go to their partners. When venture capitalists at GV do it, they go to something called “The Machine.”
Axios has learned that the firm, formerly known as Google Ventures, for years has used an algorithm that effectively permits or prohibits both new and follow-on investments.
Staffers plug in all sorts of deal details into “The Machine” — which is programmed with all sorts of market data, and returns traffic signal-like outputs. Green means go. Red means stop. Yellow means proceed with caution, but sources say it’s usually the practical equivalent of red.
It was initially designed and used as a due diligence assistant that could be overruled but, according to three sources, it has evolved into a de facto investment committee.
History: GV was formed in 2009 as one of the first venture firms to employ engineers whose primary job was to work with portfolio companies on technical challenges. But, in the early days, there weren’t too many portfolio companies yet, so the engineers were tasked first with building a dealflow management tool dubbed “Vortex,” and then with what would become “The Machine.”