The Yellow Pages Problem of Private Markets
Product Data for the Win
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Today’s episode is a thought-provoking guest contribution from Léopold Gasteen, CEO and Co-Founder of DeckMatch, on why startup databases are broken and why investors lack the most critical datapoint to fully comprehend a company’s positioning, their competitive landscape, and potential differentiators.
Read on to learn more!
In 1994, a young Jerry Yang created "Jerry and David's Guide to the World Wide Web" - a directory of websites organized by categories. Within a year, it would become Yahoo!, and soon after, Google would revolutionize how we find information by focusing on intent rather than categories. Yet thirty years later, our understanding of private markets remains stuck in the directory era.
The absurdity of this hit me when a prominent VC recently attempted to find companies using AI to assist nurses in decision-making. Despite access to every major database, they couldn’t search by intent. Instead, they were forced to wade through rigid industry categories and filters, hoping to stumble on relevant firms.
This is the Yellow Pages Problem of private markets: we've built increasingly sophisticated databases that tell us everything about a company except what it actually does. We know their headcount fluctuations, funding history, and the schools their founders attended. We can track their job postings, their office locations, and their tech stack. Yet, when it comes to understanding the actual products and services these companies offer, there’s a lot left to be desired.
The irony is particularly stark in 2024. We've mapped the human genome, can predict protein folding, and have AI systems that can engage in sophisticated reasoning. Yet we haven’t mapped what companies are actually building. Instead, we rely on company descriptions that read like Twitter bios - vague, aspirational, and often deliberately opaque. Point in case, Microsoft’s company description in Crunchbase:
What's missing isn't more company data - we're drowning in that. What's missing is the ability to understand and map the actual products and services these companies create.
Product Data and Lack Thereof
The crux of the issue lies in our misplaced focus. Private markets treat companies as the fundamental unit of analysis, but I argue that this is short sighted. Companies, whilst important, are merely vessels—legal and organizational constructs. The true atomic unit of market value is the products and services they create. Customers don't pay for your cap table or your headcount growth; they pay for what you've built.
Consider Stripe. The company description: "The economic infrastructure of the internet." provides little insight as to what products they sell. Try searching for similar companies within YC with that description and you'll get equally abstract results about "infrastructure for X."
But Stripe isn't one thing - it's a constellation of products. Indeed, when you delve into the individual products e.g. Stripe Billing—a product designed to manage recurring payments, automate invoices, and handle tax calculations—the image sharpens considerably. So it’s no surprise that through a product-centric lens the lookalikes are also far more relevant.