#84 Differentiate w/ Data in VC

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“Knowing where you came from is no less important than knowing where you are going.” -Neil Degrasse Tyson

"If Everyone Has the Same Data, How Can You Even Differentiate?"

This is the question that Andre Retterath (Data-driven VC) asked in his most recent post. It’s a topic that is on the minds of a lot of LPs and GPs in venture capital in 2023, when data and technology tools to leverage it are becoming more available. Even if you’re using them, are you using them better than your competition?

Andre talks about how venture capital is changing with data. “Information is the currency of venture capital investors. Being the first to know about a new stealth founder or a traction inflection point of a growing startup on your watchlist can be the headstart you need to get into their next funding round. Historically, there was only one way to get such information: Deep-rooted networks and quid pro quo.”

“Data-driven approaches allow us to gain a significantly more scalable edge in this information-centric industry. But how can it actually create an edge if everyone accesses the same information?”

What Makes a Great VC Data Stack - Differentiation w/ Unique Data

We’ve written before about Emerging VC Fund Tech Stacks and the VC CFO Data & Efficiency Stack. But Andre got us thinking more - what makes a great VC data stack? It starts with publicly available data from sources such as LinkedIn, Pitchbook, Crunchbase, and other sources. But how do you take this publicly available data and make it great, aka uniquely insightful to your fund and your strategy?

The key is combining it with your unique internal data. Sometimes this data is qualitative - firms should do what they can to quantify it or pull out key data points and insights. Examples of this include portfolio company metrics, data rooms, metrics from calls/meetings, etc. Do you have a data scientist, engineer, or other talented teammates working together to gain key insights from all this? Should you?

Examples of VCs Using Data

When we think about VCs using data and sharing it publicly, one of our favorite examples is Tomasz Tunguz at Theory, who shared the following:

“The Decade of Data: We are living in a decade of data. Every company leverages insight from data for competitive advantage. Data movement, transformation, analysis, & observability software will underpin data applications used by every part of modern organizations.”

“The 2010s were the decade of software and SaaS, the era when Salesforce become the first SaaS company to sail past the $100B market cap mark. The 2020s will be the era of data companies boosting massive markets. Database startups, data movement startups, data quality startups, data lineage startups, machine learning startups will be the zeitgeist of the decade as they shape the next wave of massive innovation.”

More VC Insights on Data

Who else in the VC world is using data in a unique and differentiated way? We know a number of firms that are doing so and will continue to share their insights. In the meantime, please call out any if your favorites in the comments or with a quick reply!

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