Day three of the Neudata Summer Summit was all about PE and VC firms and the datasets that are best suited to help them source and diligence deals, as well as create value within their portfolio companies.
First, John Elton, partner at Greycroft, provided an overview of alternative data within private markets and provided some predictions on how private market investors will continue to use alternative data moving forward.
Using alt data sources is increasingly imperative to his diligencing process, he said, noting that he finds it hard to get comfortable with an investment without tapping into the data for enhanced intelligence. He also added that alternative data is being integrated into every aspect of the venture capital business, including in idea generation and deal sourcing (especially within industries or companies that are experiencing explosive growth), as well as in due diligence and then the actual management of the portfolio company.
Next, Greg Winterton from AlphaWeek led a discussion on how firms could use alternative data as a competitive advantage when raising capital. He was joined by Kevin Monserrat of Consilience Ventures and Jonathan Hollis of Mountside Ventures.
They discussed how VC general partners (GPs) are using data to predict areas where limited partners (LPs) would want to next invest, while also using it to figure out where the LPs for their own fund will come from. The panellists also agreed that target companies that have a data monetisation plan are a more attractive investment than firms that don’t.
Orla Browne, head of content at Dealroom.co, outlined ways that VC investors could use alternative data to suss out investment opportunities in private markets. She noted that the start-up investment environment over the past several years has expanded, with much more participation from private equity and corporates, as well as crossover funds. She noted that VCs are having to find companies earlier and earlier to keep up with the competition, and that data can help identify interesting research coming out of college campuses and unfamiliar cities.
Neudata’s Ian Webster shared his research on how private equity investors could best utilise alternative data, informed by his conversations with leading PE funds globally. He explained that alternative data could be useful in the sourcing, diligence and value creation process.
Webster also addressed several misconceptions about alternative data within the PE world, including that datasets aren’t mapped to private companies, concerns around high prices and vendor preferences for annual subscriptions, and that the inability to tap into a big in-house data science team should act as a barrier for alt data adoption. He explained that vendors are increasingly mapping their data to private companies and many are available for bespoke projects, that they are starting to realise the access and pricing differences between hedge funds and PEs, and that many vendors offer reports or structured data products to teams that don’t have the ability to consume raw data.
After a short networking break, participants heard a case study from Andy McBride at HG Insights, who spoke on analysing B2B technology vendor adoption trends to understand the total addressable market and deal sizes.
Tiago Caruso, director of investment data science at Goodwater Capital, then shared a venture capitalist perspective on data adoption. He explained that venture capital data requirements differ from hedge funds and private equity firms, explaining that VCs need a “shallow ocean” worth of data. He offered several use cases where data could be valuable (if it existed), including in identifying early start-ups that firms could reach out to, automated estimations of a portfolio company’s total addressable market and potential competitors, an overall global picture of transactional data spending and more.
In the final two sessions of the day, we heard from data vendors that provide insight into what happens behind the scenes at companies around the world. Ben Zweig of RevelioLabs first presented on workforce data and how it could be used to understand companies. In the final session of the day, Andrew Chamberlain of Glassdoor spoke about why company culture matters in the overall evaluation of a company’s performance.