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Google Ventures leverages an algorithm called "The Machine" when making investment decisions. The algo accounts for a broad variety of market and deal data (e.g. round size, syndicate partners, past investors, sector, etc.) - ultimately producing a green, yellow, or read signal for the investment team.
Inputs into "The Machine" include round size, syndicate partners, past investors, industry sector and the delta between prior valuation and current valuation. The algorithm then ranks deals on a 10-point scale, with green said to represent 8 or above. There have been some pretty predictable problems. The first is that some GV investors have been known to try gaming the machine, manipulating inputs to get the desired results. Second, each subsequent version of the software can change the score of existing portfolio companies, which complicates follow-on investment processes.
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