Private equity and venture capital investors are increasingly turning to alternative data and external data to better sort out investment opportunities, a group of investors told attendees of Thinknum's first annual EXDC, our external data conference.
It's a nascent field within a crowded investment field, and speakers on Thinknum's 'How Venture Capital and Private Equity Firms Use External Data' panel on November 5 say that while they're able to improve their deal-flow processes through alternative data, the challenge is that they are still doing the heavy lifting themselves.
“You’re going to have to do a lot more manual work to make sure you’re doing this right," said Amit Bhatti, who is principal with 500 Startups. “There are VCs that think they’re above that."
Private equity and venture capital investors alike on EXDC's investor panel note that - while there is limited technology to bolster private investing analytics - many of today's top investors are working at a time when their business is in a transitional stage.
“Full automation is hard," Rebecca Yu, Healthcare Investor at BelHealth Investment Partners, told panel moderator and Coindesk editor John Biggs.
Being able to track factors like product pricing, job listings, hiring - even analyzing when senior executives begin to quit a company after an M&A deal - are creating insights on a new level previously unavailable to venture investors, even recently.
“Just looking at product reviews is really insightful," Bhatti said, offering yet another example.
Alessio Fanelli, Director Of Engineering at 645 Ventures, agrees.
“There are certain signals that are a pretty good indicator” of a company’s health, he said at EXDC. Still, he added, "a lot of it is still gut-driven.”
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales and app ratings - and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.
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