"If Everyone Has the Same Data, How Can You Even Differentiate?" Here is how.
DDVC #46: Where venture capital and data intersect. Every week.
👋 Hi, I’m Andre and welcome to my weekly newsletter, Data-driven VC. Every Thursday I cover hands-on insights into data-driven innovation in venture capital and connect the dots between the latest research, reviews of novel tools and datasets, deep dives into various VC tech stacks, interviews with experts, and the implications for all stakeholders. Follow along to understand how data-driven approaches change the game, why it matters, and what it means for you.
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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. While from the outside it seems that the socializing “vine and dine” culture of VC is a nice side product of the job, it’s actually an important process component to procure sensitive information in a world where companies and their investors are private by nature.
However, once the word is on the street, be sure you’re not the only one chasing this hot company: Time is of the essence. Thankfully, 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? Read on.
What’s the difference between information and data?
Let’s start with some important terminology. The terms "data" and "information" are often used interchangeably, but they have distinct meanings. Data refers to individual, raw facts or observations, while information represents the processed, structured, and interpreted collection of those facts. To draw an analogy, if information is the final puzzle, then data represents the individual pieces.
In a world where information is the currency and time is of the essence, proprietary access to relevant data becomes an unfair advantage. It allows you to gradually assemble the puzzle and draw conclusions at any point, even before you see the full picture. There is no reason to wait for information from your network if you collect the underlying data and put one and one together. Yet, the majority of VC firms still heavily rely on their human networks and are only about to start their data-driven initiatives.
