[PreMoney SF 2016] "VC Moneyball" | Summary and Q&A

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July 14, 2016
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500 Global
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[PreMoney SF 2016] "VC Moneyball"

TL;DR

Data-driven investing is becoming increasingly important in venture capital, with firms using software tools and proprietary data to evaluate companies and make better investment decisions.

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Key Insights

  • ❓ Venture capitalists are increasingly interested in using data platforms and proprietary data to improve their investment decisions.
  • 😒 The use of data has led to more efficiency in the evaluation process, with firms hiring more associates to focus on analyzing data.
  • 🥺 Data-driven investing can benefit both venture capitalists and limited partners by improving decision-making and leading to better investment outcomes.
  • 😒 In addition to analyzing company data, venture capitalists are also exploring the use of psychometric data to evaluate founders.
  • 👨‍🔬 The market for data research in venture capital is currently small, but there is potential for growth as firms recognize the value of data in making investment decisions.
  • 👀 Venture capitalists are building in-house tools to integrate and analyze data, but also look for reliable external data sources globally.
  • 😫 The venture capital industry is a complex and idiosyncratic data set, making it challenging to derive true signal from the data. However, focusing on shorter-term data questions and cohort analysis can help to make more informed decisions.

Questions & Answers

Q: How are venture capital firms using data to improve their investment decisions?

Venture capital firms are using data platforms and proprietary data to evaluate companies and make better investment decisions. By analyzing data on founders, company traction, and market size, firms can predict the potential success of a company.

Q: What types of data are venture capitalists looking for?

Venture capitalists are interested in both public and proprietary data. Public data, such as consumer buying patterns, can be combined with proprietary data from companies in certain industries, like construction, to gain insights into market growth and potential.

Q: How do venture capitalists integrate data into their decision-making process?

Venture capitalists need to have a clear and repeatable process for collecting and analyzing data. They also need to establish clear success metrics and regularly evaluate their decision-making based on data feedback.

Q: How can limited partners (LPS) benefit from data-driven investing?

LPS can use data to evaluate emerging managers and make more informed investment decisions. By looking at objective data and long-term portfolio performance, LPS can become more value-added and reinforce the long-term picture.

Summary & Key Takeaways

  • Venture capital firms are increasingly interested in using data to improve their investment decisions.

  • Firms like Greylock and Google Ventures have led the way in using data platforms and have sparked curiosity among other firms.

  • The use of data has led to more efficiency in the evaluation process, with firms hiring more associates to focus on analyzing data.

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