Due diligence reshaping AI investing strategy – News

As companies race to modernize with emerging technologies, due diligence has become the quiet differentiator separating bold moves from reckless ones.

No longer confined to risk reports, it now shapes how organizations assess transparency, governance and long-term impact. By using due diligence early, leaders can innovate with confidence — balancing ambition with accountability, according to Rob Biederman (pictured), managing partner at Asymmetric Capital Partners.

“We’ve made investments in the future of work,” Biederman said. “The company I founded is a future work company. We think AI is an incredibly important trend. It’s going to change every single industry. Any other technological development, it’s not the case that you can just throw any kind of dart against the dartboard and make money. Nintey-nine percent of AI deals are going to be big disappointments. The secret is finding the 1% or the 10 basis points of deals that are going to return all the value.”

Biederman spoke with theCUBE’s Dave Vellante at theCUBE + NYSE Wired: AI Factories – Data Centers of the Future event, during an exclusive broadcast on theCUBE, News Media’s livestreaming studio. They discussed why completing due diligence is essential for responsible adoption and sound investment in AI. 

Why valuation orientation is essential in doing due diligence with AI

Valuation orientation transforms doing due diligence when it come to AI from a risk checklist into a forward-looking measure of business value — ensuring adoption is not only responsible but profitable. By focusing beyond compliance and feasibility, it highlights how AI drives growth, efficiency, innovation and competitive advantage, according to Biederman.

“We bring more of a kind of nuts-and-bolts valuation orientation,” he said. “It’s a pretty simple process. We basically say, ‘What is the chance, based on the amount we can invest and at what valuation, that we’re able to return our $137 million fund off this investment?’ I think one thing that VCs sometimes don’t calibrate is the ultimate market size multiplied by the chance of winning that market by how well the cash flows are going to be valued by the public market, by a private equity firm”

Unit economics is vital in venture capital because it offers a data-driven lens to evaluate whether a startup’s business model is truly viable and scalable. By measuring the profit or loss of a single product or service unit, investors can assess the path to sustainable growth, Biederman pointed out. 

“I think we’ve been lucky to partner with founders that have a really good attitude about cash and understand unit economics really well,” he said. “We made a large investment in 2022 in a Latin American e-commerce company that scaled unbelievably well. We backed it at around one or two [million] of revenue. I think they’re going to do about 50 million in revenue this year, and they’ve done it in an incredibly cash efficient way. We’re looking for founders that we think can understand great unit economics and then be able to create enterprise value out of those unit economics.”

Here’s the complete video interview, part of News’s and theCUBE’s coverage of theCUBE + NYSE Wired: AI Factories – Data Centers of the Future event:

Photo: News