Investing in AI: Interview with Angel Investor Ronja Koepke6 min read

We discuss AI from an investor’s point of view with Ronja Koepke, a Swedish angel investor interested in HealthTech, AI, and FinTech. Ronja is a member of Keiretsu Forum Nordics and podcaster at Investpodden.

 

– How competitive is Sweden in the AI race?

R: Sweden with its booming startup ecosystem is at the forefront of innovation and is competitive for sure. Sweden’s diverse and creative developer community is able to produce novel AI solutions. But, of course, Silicon Valley and China are ahead of us in this race.

 

– You have invested in Competencer, an online coaching platform for health. What do you think is the main challenge in the application of medical AI?

R: Today, many companies from HealthTech utilize AI to efficiently diagnose patients before they have an appointment with a doctor.

One of the challenges here is that a comprehensive regulation of AI is still lacking. AI vendors must make sure that AI takes ethical decisions. Every company that develops AI needs to have a moral aspect to it. More regulatory effort is needed so that the law keeps up with the technology and adequately protects the consumer. For instance, if AI has diagnosed a patient and the system knows, with high probability, that she will probably have a heart attack in two years, we need to make sure that such a patient will not be less prioritized by the system for a scheduled treatment than a person with a longer predicted lifespan. I expect a common regulatory effort at an international level, leading to more ethical alignment and standardization in this area.

 

– Is it important for an AI investor to understand how the AI works?

R: Some investors do not fully understand all the intricacies of the technology. For me, it is the most important to see the team and their solution, whether they can provide what they say and whether they know what they are doing. A solution prototype is like an iPhone: it must “just work”. I don’t believe that every company can deliver on their promises. That’s why I want to see proof of concept. It can be a beta product, and better yet, show me that you’ve got costumers lined up. And be clear on who’s your customer and be ready to explain what the sales process looks like. It’s a big difference creating an AI B2C product that people will buy for fun, versus something for say, hospitals.

 

– How often do AI startups approach you as an investor?

R: 2017 was a year of AI. Almost every company tried to feature the word “AI” in presentations, even though in some cases no AI was used. AI is still a hype, even bigger than FinTech, and everybody wants to invest in it. There was one company that I had to explain to that their “AI” is, in fact, IoT. So my advice is don’t use the term AI unless it’s really artificial intelligence capable of making decisions. Investors will be interested in your company even if it isn’t AI. I promise.

 

– How often do AI startups seek legal advice from the outset? Or, like with any other novel technology, “make first, think of consequences later”?

R: In general, startups have a tendency to miss out on important legal aspects. For example, so many startups have not even considered the GDPR [General Data Protection Regulation, applicable from 25 May 2018 – our note]. Mostly I think it’s because there is such an incredible learning curve and there is so much to take in and adjust to in a short amount of time.  That’s one of the reasons why startups should choose investors wisely, investors have done this before, so they can help with advice on legal among other things, and of course remember to make sure you secured your info from knowledgeable lawyers. Startups are aware of that the law does not always keep up with the technology. That’s why it is important for law firms today to show that they are constantly up-to-date on what’s going on, at the forefront of innovation, and have understanding of how their clients’ solutions work.

 

– What are investors usually looking for in an AI startup?

R: Proof of concept. Originality. Is the solution useful? Is there a market? Just like with all the other types of companies there needs to be something special for investors to be interested. On top of all these standard questions, I ask whether the solution will still be legal in the future, and how we deal with the regulatory uncertainty of the AI. For an AI startup it’s important to bring value, not be harmful in any way, and have a clear agenda. I also always ask what can go wrong and what is the disaster recovery plan.

Moral and ethical aspects of the solution should also be considered. For example, when I invested in a GPS company that tracks children for their parents, we discussed moral and ethics for months. The conclusion was that a tiny GPS tracker is more secure to a child than a smartphone which can be stolen, and GPS can show the parents via an app where the child is and that she is safe. The technical security side of the solution was thoroughly considered too, of course.

In addition, an AI startup should be able to scale, globally.

 

– What about investing in “crazy new ideas”?

R: I am not an early adopter, and I am not the first person to buy the latest TV when it’s been released. Although if something is “crazy new”, I am open to such novel ideas as long as the team can explain to me how to make this work. Still, I usually invest in things that contribute to a better world and can deliver tangible value. Sometimes new technology is so futuristic that you need lots of cash just to test it. Not everybody can risk with their money like Elon Musk does. I have a more pragmatic and moderate approach.

 

– Are market validation and hype equally important?

R: I’m trying to look past the hype and focus on the value. Is the solution useful? Will it be a potential business? Investing in pure hype is short-term thinking. I am looking for companies that will be able to provide helpful solutions. E.g. VR that allows disabled people to move and have full experience in a virtual world.

 

– On a final note, what makes you special as an investor?

R: I’m a 29-year-old millennial. I might have different values. Investors like myself are focusing more on ethics, morals, environment, diversity, and other related aspects, not only making money. Social media is my everyday world, and I understand social media and online marketing. I grew up with the Internet. To me, diversity in expertise is very important. It’s regardless of your background, your age, or your gender. Also, while most investors come from the world of finance and law, I have background in journalism and acting. I know how to ask questions. I understand marketing and storytelling, how to “package” a company and make it understandable and relatable. In addition, since I’m also much younger than most of my peers in the room, I may ask different questions. Together with other investors we make a very good team. Diversity makes the investment world more approachable.

Sergii Shcherbak

Lawyer, Software Developer (AI) @ Synch