By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
SmartData Collective
  • Analytics
    AnalyticsShow More
    data science anayst
    Growing Demand for Data Science & Data Analyst Roles
    6 Min Read
    predictive analytics in dropshipping
    Predictive Analytics Helps New Dropshipping Businesses Thrive
    12 Min Read
    data-driven approach in healthcare
    The Importance of Data-Driven Approaches to Improving Healthcare in Rural Areas
    6 Min Read
    analytics for tax compliance
    Analytics Changes the Calculus of Business Tax Compliance
    8 Min Read
    big data analytics in gaming
    The Role of Big Data Analytics in Gaming
    10 Min Read
  • Big Data
  • BI
  • Exclusive
  • IT
  • Marketing
  • Software
Search
© 2008-23 SmartData Collective. All Rights Reserved.
Reading: Sharp Venture Capitalists Make Remarkable Inroads With Alternative Data
Share
Notification Show More
Latest News
ai in automotive industry
AI Is Changing the Automotive Industry Forever
Artificial Intelligence
SMEs Use AI-Driven Financial Software for Greater Efficiency
Artificial Intelligence
data security in big data age
6 Reasons to Boost Data Security Plan in the Age of Big Data
Big Data
data science anayst
Growing Demand for Data Science & Data Analyst Roles
Data Science
ai software development
Key Strategies to Develop AI Software Cost-Effectively
Artificial Intelligence
Aa
SmartData Collective
Aa
Search
  • About
  • Help
  • Privacy
Follow US
© 2008-23 SmartData Collective. All Rights Reserved.
SmartData Collective > Data Management > Sharp Venture Capitalists Make Remarkable Inroads With Alternative Data
Data Management

Sharp Venture Capitalists Make Remarkable Inroads With Alternative Data

Alternative data is not utilized nearly enough in data capital management. It can help you increase your returns in powerful ways.

Ryan Kh
Last updated: 2020/10/12 at 6:39 PM
Ryan Kh
6 Min Read
alternative data
Shutterstock Licensed Photo - Photon photo | stock photo ID: 462925309
SHARE

The University of Hawaii reports that big data is shaking up the venture capital industry in unbelievable ways. Venture capitalists are finding new ways to leverage alternative data effectively for much higher yields.

Contents
What Are the Benefits of Alternative Data in VC?Data Capital ManagementChallenges behind signal data acquisition and forecasting with alternative dataLight at the end of the tunnelAlternative Data Can Be a Booming Field for VCs in the Future

Big data plays a role in shifting the risk-reward calculus in the favor of venture capitalists. Venture capital is a high risk, high reward game. To put it into perspective, 90% of new startups fail, which means that investors can lose a lot of money while hunting the potential “unicorns.” Historically, venture capital has been regarded more as an art form than a science.

Investors were known for following their intuitions, impressions, and carefully cultivated personal networks rather than relying on cold algorithms. This has changed in the era of big data, which is why investing apps that use data analytics have really taken off. Data capital management could be a huge thing in the future.

What Are the Benefits of Alternative Data in VC?

For investors, the main questions to answer is what are the most promising companies and are they actually worth the investment. And today more than ever, venture capital firms are harnessing the power of alternative data to find those answers. 

Modern investors use machine learning and AI models to gather and produce signal information that generate insights on worthy startups. The exciting thing is that the sharpest minds in the game have realized the one secret behind gaining an even stronger informational advantage. That’s alternative data. 

Data Capital Management

Tapping the increasing amounts of publicly available information can offer deeper insights to support investment decisions. As Greenwich Associates study reports, 72% of investment firms see clear evidence that the alternative data enhances their signal. Good examples of these data points are market trends, significant shifts in the industry, and talent information, obtained from alternative sources. 

To fully capitalize on big data, investors are increasingly relying on automated methods of information collection and screening. For venture capitalists worldwide, such as 645 Ventures, Ardian, Connetic Ventures, and Georgian Partners, the new status quo means depending on the intelligence provided by machine learning and artificial intelligence for their investment decisions.

Challenges behind signal data acquisition and forecasting with alternative data

The perfect data for signal generation are the insights on founders and their previous business experience, key employees and their movement within the company, the growth of separate departments, hiring trends, customer satisfaction, and social media discussions, among other data points. Sadly, these are unobtainable even from the most comprehensive monthly reports. On the other hand, the public web is a goldmine for this sort of alternative information.

The only thing stopping from digging it deeper are the challenges following the acquisition of reliable public data at scale. In fact, a large volume of high quality, trustworthy, and organized public web data is notoriously difficult to extract. This process requires not only strong technical knowledge and experience in the field of web scraping, but also an extensive and robust information extraction infrastructure. 

Another problem is that the data needs to be consistent, complete and continuously updated to maintain its relevance for insight extraction. All in all, few companies in the world can achieve consistent success in dealing with the aforementioned struggles and it’s nearly impossible to do as an in-house operation.

Light at the end of the tunnel

As a response to these challenges, venture capitalists resort to readily available alternative data offered by modern data brokers. These accessible datasets allow investors to identify business profiles that signal risky patterns or future success trends. 

Most well-known outlets supporting data-driven decisions are sites such as LinkedIn, Crunchbase or Owler. In fact, companies like Coresignal extract, aggregate and update raw data from numerous publicly available sources, making it immediately available for analytics.

“Considering the risks behind the venture capital model, obtaining more public alternative data nearly always equals better informed decisions. And taking into account the complexities of extracting heavy information loads, Coresignal effectively helps investors skip this cumbersome step. Ready to use, fresh datasets are available to streamline the pre-investment analysis”.  – Jeremy Ward, CMO at Coresignal.

Alternative Data Can Be a Booming Field for VCs in the Future

As the demand for big data and AI is increasing in the venture capital scene, the market is responding with progressively better tech solutions. A number of startups are developing software, AI and machine learning systems aimed at automating the identification of the most promising investment opportunities. Integrated new technologies will continue to evolve scoring systems and identify new investment-worthy sectors.

Sure, venture capital is unlikely to lose the human element in the selection process. However, the trend of using data-driven solutions is forecasted to continue in the future to fuel generation of reliable signals which support smarter investment decisions.

TAGGED: alternative data, data capital, data capital management, venture capitalist
Ryan Kh October 8, 2020
Share this Article
Facebook Twitter Pinterest LinkedIn
Share
By Ryan Kh
Follow:
Ryan Kh is an experienced blogger, digital content & social marketer. Founder of Catalyst For Business and contributor to search giants like Yahoo Finance, MSN. He is passionate about covering topics like big data, business intelligence, startups & entrepreneurship. Email: ryankh14@icloud.com

Follow us on Facebook

Latest News

ai in automotive industry
AI Is Changing the Automotive Industry Forever
Artificial Intelligence
SMEs Use AI-Driven Financial Software for Greater Efficiency
Artificial Intelligence
data security in big data age
6 Reasons to Boost Data Security Plan in the Age of Big Data
Big Data
data science anayst
Growing Demand for Data Science & Data Analyst Roles
Data Science

Stay Connected

1.2k Followers Like
33.7k Followers Follow
222 Followers Pin

SmartData Collective is one of the largest & trusted community covering technical content about Big Data, BI, Cloud, Analytics, Artificial Intelligence, IoT & more.

giveaway chatbots
How To Get An Award Winning Giveaway Bot
Big Data Chatbots Exclusive
ai in ecommerce
Artificial Intelligence for eCommerce: A Closer Look
Artificial Intelligence

Quick Link

  • About
  • Contact
  • Privacy
Follow US

© 2008-23 SmartData Collective. All Rights Reserved.

Removed from reading list

Undo
Go to mobile version
Welcome Back!

Sign in to your account

Lost your password?