At Lighter Capital, the data counts. It is the primary method that we are using to make financing decisions. Therefore, data is critical for venture capitalists (VCs).
Yet it is the main instrument used by VCs to make investment decisions? Yes, according to research conducted by PitchBook focused on a survey. You can get directed here to get more information about revenue-based financing.
I was interested as a data-oriented person in the statistics behind how VCs use data today (I would have been more interested in the study were focused on real data rather than a survey).
Reading the study motivated me to focus on some of the similarities and differences in how Lighter Capital uses data and how it is used by VCs.
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How venture capital investors use data to evaluate investments?
A couple of VC survey numbers jumped out. Just 37 percent of venture capital investors said data is extremely important for investment evaluation (47 percent said it was somewhat significant).
Less than 25 percent said data alone is most relevant for all forms of VCs. In comparison, to more than 68 percent of VCs, both intuition and data are relevant.
It is not shocking that 59 percent of VCs cite their personal networks as their most important tool for sourcing deals. I was a little shocked by those numbers.
Opportunities that go heavy on data are currently hot inside the start-up ecosystem. Many are excited about companies inside the industry that tackle problems using data science, machine learning and AI.
I would have thought the survey findings indicated a higher percentage of venture capital investors who used data as their primary decision-making method when assessing investments.
Intuition is just as important for most VCs as data when determining investments, but who you know matters more.