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Why VCs should use data to enhance investment decisions

Peter Stojanovic

Data has infiltrated every tech vertical, but investors themselves have been slow to uptake, an ironic turn of events despite the opportunities that data could provide for them.

It’s time investors kept up with data innovation.

For a number of years the incremental improvements to algorithms, big data sequencing and serviceable platforms has allowed many startups, and industries, to explore new territories,. products and markets.

As the pace quickened, so did the new tech that both enterprise and consumer markets became exposed to.

Big data analytics migrating to the Cloud, more predictive analytics, deep learning and in-memory analytics are some of the trends that are emerging within data tech.

One area, ironically, remained stubbornly slow to uptake data though: investment.

Dominic Jacquesson, venture development director at Index Ventures knows this all too well, but is now noticing an uptake as people begin to use data to make investment decisions.

“Data is at the heart of the startups we’re seeing, but it took VCs longer to grasp this.”

It’s difficult to understand why.

Investors have to be able to keep up to speed, not only with the tech verticals they operate in, but to be able to make smart decisions from number crunching that only new data tech can operate.

As Jacquesson points out “…great investment is at least as much art as it is science; spotting the really great teams and market gaps and opportunities to disrupt means getting that blend right.”

Which is why the trend which will see VCs use data to make investment decisions is something Jacquesson is predicting will gather pace, but it first needs to curate the right talent teams that can utilize data properly.

“Geting a culture that’s both receptive and data driven, but at the same time creative and tangential is very difficult and the cultural aspect of a VC firm is marrying them together.”

Some areas are better at using data to better investment than others.

“[Data tech] is changing over time – faster in Silicon Valley – and the portfolio support teams require building up sustainably…you have to do a lot more now to actively support your company and its investments.”