Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Stay on top of the latest market trends

Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Axios on your phone

Get breaking news and scoops on the go with the Axios app.

Download for free.

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Lazaro Gamio/Axios

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."

What we're hearing: 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.

The backdrop: 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."

  • Another impetus was that few of the early GV investors had much, if any, investing experience. So "The Machine" would leverage the firm's strengths (engineering) as a bulwark against its weakness (proven VC chops).
  • The engineers were also asked to have "The Machine" help source deal opportunities, but that wasn't viewed as a terribly successful effort.
  • The first hints of this came in 2013, when then-GV CEO Bill Maris told the NY Times: "We have access to the world's largest data sets you can imagine, our cloud computing infrastructure is the biggest ever. It would be foolish to just go out and make gut investments."
  • What Maris didn't say in that piece, in part because it wasn't quite so codified yet, was the color-coding system that virtually took "gut" out of it entirely.

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.

  • But the biggest may be that venture capital is as much art as science, intuition as calculation. But several GV investors tell me that "The Machine" has ripped out their guts, possibly costing them lucrative opportunities (particularly some of the more risky bets that often turn into venture's biggest wins).
  • At this point, GV is not alone in using algorithms as a due diligence tool. EQT Ventures in Europe is said to have something it called Motherboard, while beleaguered Social Capital has been on a mission to largely remove the human element. But none seem as tied to the software as GV, even though a fourth source insists that it's "just a guide" and that "the partnership" still has final say.

GV declined comment for this story.

Please subscribe to my podcast, which launches Monday: iTunes. Google Play. Spotify. More.

Go deeper

2 hours ago - Sports

The new faces of NBC's Olympics coverage

Photo illustration: Aïda Amer/Axios. Photo: Cy Cyr/PGA Tour via Getty Images

A new(ish) face will be leading NBCUniversal's prime-time coverage of the 2021 Tokyo Olympic Games: veteran sportscaster Mike Tirico.

Why it matters: It's Tirico's first run as prime-time host for the Summer Olympics. Legendary broadcaster Bob Costas hosted 12 Olympic Games between 1988 and 2016 for NBC before handing over the prime-time spot to Tirico in 2018.

Ina Fried, author of Login
2 hours ago - Sports

Behind the scenes at the COVID Olympics

Photo illustration: Brendan Lynch/Axios, Photo: Steph Chambers/Getty Images

TOKYO — The COVID rule-breaking was obvious at Friday's opening ceremony, when athletes were clearly visible on TV with masks below their noses, but an athlete tells Axios that the rule-breaking has been going on well before that.

  • It's been happening at least since athletes arrived in the Olympic Village, where masks were dropped below noses and different teams were forced to share buses.
2 hours ago - Sports

Axios AM Deep Dive: The Covid Olympics

Illustration: Annelise Capossela/Axios

Welcome to our Axios AM Deep Dive behind the scenes of the Tokyo Olympics detailing the impact of the COVID pandemic, led by Ina Fried, who's on the ground in Tokyo, plus Kendall Baker, who's covering the Games every day in his Axios Sports newsletter.