3 Data Sources Every Investor Should Track
DDVC #31: Where venture capital and data intersect. Every week.
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There are hundreds and thousands of data sources out there in the web, and most of them are useless for investors.
Investors into private companies seek clear signals for early company formation (identification) or inflection points along a company’s journey (enrichment). While company traces are spread across the web and almost every website provides at least some relevant records, digital footprints of companies tend to follow an 80/20 Pareto distribution. 80% of traces are recorded by 20% of the sources, whereas 20% of the traces are recorded by 80% of the sources.
Finding the few data sources with the highest signal-to-noise ratio is the primary challenge for investors who want to become more data-driven.
I’ve been professionally chasing digital startup footprints for more than 5 years now, and in that time, I’ve evaluated hundreds of data sources. Most of them fall into the 80% of sources that cover 20% of the traces. The noise.
Not the following three, they are different.
LinkedIn, Public Registers and Website Traffic - they are the truffles we’ve been looking for.
The 20% that cover 80% of the companies.
The high signal-to-noise sources.
Sounds obvious, but tracking them in the right way, you will see your coverage and alertness jump to the next level.
Why LinkedIn, Public Registers and Website Traffic are so useful for investors
“What do all companies have in common?” This simple question helps us to find the common denominator, the few data sources that cover the majority of digital footprints.
The answer? Well, every company has human founders (at least pre ChatGPT x Plugins :-P), gets registered at some point and, if things go well, will attract attention.
“What” leads to “where”, and here we find LinkedIn, Public Registers and Website Traffic providing all relevant data at scale. So let’s dive into each source in detail, and see how they can be leveraged across sourcing (=identification, see every company as early as possible) and screening (=enrichment, track companies over time to recognize and inflection point and be in front of the founders at the right point in time).
How to unlock the power of LinkedIn
Two relevant entity types exist within LinkedIn: People and companies. Investors eventually seek to track both, yet the identification order doesn’t matter too much. We might spot a founder first and follow her traces to find the company or vice versa.
Identification:
People: Title or job changes to “Founder of XYZ”, “Stealth”, “Starting something new” etc. There are two options, 1) either track changes for a pre-defined list of “watchlist people” or 2) track catch-all companies like “Stealth Startup” (currently 11.5k employees ;)) and compute the diff of its employees on a regular basis to spot the new-born founders
Companies: Repeat search with fixed criteria (like geo or industry focus) and compute the diff of the samples to identify new-born companies
Enrichment:
People: Most obvious, number of followers as a proxy for attention. If you’re well connected yourself, you can also check for mutual connections and see if investor interest increases (this works better for Twitter btw). Screen founder content for relevant events (new hires, milestones, partnerships, etc.),sentiment, quality and quantity of interactions.
Companies: Followers, content, headcount and number of job postings split across departments
LinkedIn is a true goldmine for investors and several businesses have evolved around this value proposition. I will provide a comprehensive list of tools in the upcoming “Data-driven VC Landscape 2023”, make sure to sign up and be the first to receive it!