In other words, they acquired small businesses. You’ve done your research, stayed ahead of competing offers, and carefully threaded the needle to close the deal.
Now the real work of adding value to the acquisition begins.
At the recent MIT Entrepreneurship Through Acquisition Summit, a panel of successful entrepreneurs and investors shared how they are growing their companies and portfolios with the help of artificial intelligence. Let’s take a closer look at his three takeaways from the panelists.
When vetting AI tools, think like a hedge fund manager, not a VC
As a former venture capitalist, Mark Valdez knows the lure of a new technology buzz or a software company’s stock price skyrocketing. But as the current CEO of Ease Bridge Holdings, which buys and technologically enables traditional non-technical businesses, he is careful not to take on too many risks. That’s why he recommends taking the approach of a hedge fund manager, rather than that of a venture capitalist, when vetting the AI tools used by acquired companies.
A good first step in this method is to assess the health of the company providing the AI tool.
“Understand what can go wrong, because even big companies that raise a lot of money, get a lot of press, and do all the right things go out of business,” Valdez said. said. “We need to be cautious about new companies that are coming up.”
He also advised talking to existing customers and asking tough questions during sales calls with potential vendors. “Understand how much capital the company has raised, who their investors are, what their business model is, what they think about the market, and what their roadmap is. ” Valdez said.
Once you decide which tool to use, consider trying it out in small ways where the results don’t put your entire company at risk.
Choose the right work for AI augmentation
Scott Barstow, technology and software operating partner at Pacific Lake Partners, said he considers four areas when thinking about which operations can be improved with AI:
- operational and functional areas of the business; Functional leaders in companies tend to be responsible for researching and suggesting interesting ways to use AI technology to solve problems.
- How to drive additional customer value through AI-enhanced products and services. This work uses AI to make incremental improvements. For example, Barstow works with a company that manages job descriptions for large organizations. Last year, the company integrated His OpenAI’s technology to allow customers to power job description generation based on other job descriptions that Her OpenAI collects and uses to train models.
- Novel products, often based on proprietary data that a company already has. Using the same job description example, the next step would be to leverage the company’s descriptive database and create a new product using proprietary information that existing or new customers might use. may be included.
- An AI-first company. Barstow said this is a challenge in the entrepreneurship-to-acquisition space, as the ETA model tends to revolve around acquiring 10- to 15-year-old companies rather than young startups with AI at their core. He said it was not typical.
Start small and include employee input
You may be ready to go all-in on creating value with AI, but don’t make the mistake of taking an all-or-nothing approach, says Linda Drabik, board advisor and founder of Marencik Solutions. says. Instead, AI and machine learning consultants suggest leaders start with a few well-defined use cases.
“Deploying proofs of concept and pilots helps leadership teams focus on making better use of data, rapidly tracking products and features to improve customer experiences and internal processes, and clearly measuring value. , which will save time and money in the long run. It will drive downstream technology investment decisions,” Dravik said.
She also advises entrepreneurs to avoid jumping on the hype or getting swayed by the recommended tool of the week, a view echoed by Valdez. “You don’t have to be the first hire, but you also don’t want to be the last one,” he said. “Finding the timing that works for you is really worth it.”
Dravik said it’s important for leaders to openly discuss technology’s role in the company’s evolution, as employees often fear that their roles will be replaced by AI. Highlight how working with AI can improve your team’s skills while leveraging the expertise of your team members. This can improve employee satisfaction and post-acquisition retention.
Drabik also recommended considering opportunities to quickly integrate AI into existing systems and workflows using foundational models. And don’t forget that data governance and data quality are essential to AI success, and can be addressed by performing a comprehensive data audit, she said.
“In addition to providing a view of existing data assets, audits can reveal opportunities to capture or transform more actionable data and insights, helping new CEOs responsibly apply AI. and how they can improve their organization,” says Drabik.
Choose use cases that deliver unique value to your company
Intelligence At process automation company Beecker, engineers use AI to audit software code.
Felipe Corcuera, MBA ’18, director and co-CEO of Beecker, says that when a small business has a coding problem, everyone can gather around the computer and solve the problem together. But that’s not possible at his 250-employee company, which spans the United States, Colombia and Mexico. Instead, Beecker uses his ChatGPT as his digital co-worker to answer questions about, for example, why a script fails or why an error message keeps appearing on the screen.
“It’s like having a big brother next to you saying, ‘Hey, you should look at this or that, or make sure this variable is clearly defined in this other piece.’ said Corcuera.
This also helps employees triage issues, Corcuera said. Instead of coding him with an error and going to the chief technology officer, a junior employee can first run the code through her ChatGPT and escalate the issue if the problem persists.
One of the first ways editing and proofreading service Scribendi used AI was to take customer orders.
“We have strong fundamentals in this business; [that] AI can create further opportunities,” said Enrico Magnani, founding partner of private equity firm Magnum Capital Partners, which acquired Scrivendi in 2015. “I like to think of AI as a bicycle for the mind. Your brain used to walk, but then you hop on the bike and a whole new world of opportunities opens up.”
A few years after acquiring Scribendi, the company has developed a trained grammar correction tool to support scientific editors, another tool to help clients choose the right products, and a way to ensure orders are fulfilled on time. We have added a third tool to ensure that The company was eventually acquired by Japanese editorial and research company Edans in 2023.
