Venture capital, the fetish of artificial intelligence, and the contradictions of making intangible assets

Abstract

This paper examines the venture capital-driven process of making intangible assets in platform start-up firms. By examining the case study of the rise and fall of a venture capital-backed ‘unicorn’ firm developing a digital health platform, this paper argues that the process of real valorization of capital invested in platform start-up firms involves the making of algorithmic systems and data as intangible assets as well as the experimentation with strategies of exploitation and appropriation, which are inherently linked to the future-oriented financial valorization process of equity shares since unprofitable start-up firms continuously require outside capital to expand operations. While the fetish of ‘artificial intelligence’ posing the firm’s chatbot for self-diagnosis as an intelligent ‘doctor in your pocket’ plays an important role in financial valorization, it is the failed real valorization process in making profits that ultimately leads to the platform start-up’s financial collapse. The conceptual contribution of the paper centres on the contradictory nature of assetization processes which sheds light on how class domination operates in and through venture capital-driven accumulation.

Keywords:

• venture capital
• asset making
• Babylon Health
• artificial intelligence chatbot
• fetishism of technology

Acknowledgements

The author would like to thank Cecilia Rikap, David Pinzur, Carrie Friese, Judy Wajcman, Tim White, Afshin Mehrpouya, Babak Amini, Eva Spiekermann, Sandy Hager, and the participants of the London Political Economy Network PhD workshop at City, University of London in May 2022, as well as the editors of this special section, the editors of Economy and Society, and three anonymous reviewers for their insightful suggestions and encouraging feedback.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 A venture capital fund is an investment fund type in which a subset of institutional investors act as limited partners (LPs) transferring capital to venture capital firms’ partners acting as general partners to manage LPs’ money by investing in start-up firms to generate investment returns for LPs typically within 10 years (and charge management fees of typically 2–3 per cent and the ‘carried interest’ of around 20 per cent).

2 Participant 25, an academic working on machine learning in healthcare who published a review of Babylon’s symptom checker in an academic journal, told the author that the firm’s claims ‘were just a lie, basically!’. Interview 26, conducted over Skype, March 2019.

3 This issue was highlighted in several interviews with doctors, civil servants working at NHSX at the time, and academics.

4 Interview 14, conducted in person in Babylon’s office in London, December 2019. PIF declined the interview request.

5 Interview 22, conducted in person at Babylon’s London office, February 2020, and Interview 26, conducted over Skype, March 2019.

6 Interview 64, conducted over Zoom, January 2022.

7 Interview 14, conducted in person in Babylon’s office in London, December 2019.

8 This does of course not imply that investors cannot make significant capital gains by selling equity stakes in still unprofitable start-up firms through exit transactions as the recent exit wave in 2021–2022 demonstrated.

Additional information

Notes on contributors

David Kampmann

David Kampmann is a Career Development Fellow in the School of Geography and the Environment (SoGE) at the University of Oxford and Affiliated Research Associate at the Alan Turing Institute, the UK’s national institute for data science and artificial intelligence. He received his PhD in Sociology from the London School of Economics and Political Science with a doctoral thesis on the political economy of venture capital titled ‘Venture capital as power bloc: A critique of artificial intelligence and platform corporations’.