How Venture Capital Firms Can Simplify their Decision-Making Processes with Quality Data

SARAH CHEESEMAN, 09 June 2023

Learning how to find eligible companies to invest in takes time. A huge amount of knowledge, experience and insight goes into the process—not forgetting personality and preference. While some Venture Capital firms (VCs) will prefer to work within a particular industry, others will look more broadly, potentially seeking bigger risks for greater returns.

But whichever industries and businesses you go with, the fact remains: knowing how to make the right investment decisions is the key driver of success in this field. So, how can you do this reliably with as little financial risk as possible? The answer is all in the data.

How can data help with investment decisions?

Without wanting to sound too cliche, when it comes to investments, knowledge is power. The more you can find out about a company, the more you can quantify how effective your investment in them could be, and the less you need to rely on estimations and guesswork.

That’s why quality data is priceless for venture capital firms. It enables them to not only identify new and exciting businesses to invest in, but also to structure deals and manage existing portfolios.

Some of the most pivotal areas that you may want to look into include:

Team and company background

While the company and its business model are of huge importance to whether an investment is viable or not, there is also a huge amount resting on the founders themselves. They are a huge factor in whether a VC chooses to pursue a deal, so conducting research on the people who own the company and their previous experience and backgrounds is absolutely vital. It’s also worth understanding who else has been brought into the company in key roles, for example their CFO and CMO. By having a complete and detailed knowledge of their history, you put yourself on the front foot when it comes to understanding the vision they have for their company, as well as the likelihood of if they can achieve this.

Funding

Another important metric to stay abreast of is the company’s funding history. Being able to see both announced and unannounced funding rounds will give you an idea not just of their ability to grow, thrive and succeed, but also how they have managed their finances thus far. If they’ve received a large amount of funding but have nothing real to show for it, this might require further investigation.

Financial information

Similarly to the above, the more you can uncover about a company’s financial situation, the better placed you will be to decide whether they represent a viable business opportunity for you. Take a look at their banking reports and company earning statements to give yourself a complete picture of their position.

Company and industry comparisons

Data can be incredibly helpful when it comes to understanding similarities and differences between different companies, opportunities and deals. While you may have had successes with one company within a particular industry, this doesn’t mean it will be the same for all of them.

As every potential deal opportunity starts with due diligence, having up-to-date data is essential. Some interesting areas that you may wish to analyse during your due diligence process may include:

Being smart with your data

With so much on the line financially and reputationally, being smart with the data you source and use in your decision making processes is key. While many VCs rely on networking, events and their personal networks to find business opportunities, outsourcing your data from a reputable high-quality provider can be a more reliable way to ensure the information you’re receiving and using is up to date.

How Beauhurst can help

As you may be able to imagine, collating and analysing all of this data is a huge task. While many VCs choose to compile their own databases of company information, at Beauhurst we’ve gone a few steps further.

Our BeauhurstInvest platform brings together data on over 5m UK companies in one searchable format. Our clients can filter, segment and search over this information, revealing fundraisings (announced and unannounced), MBOs, grants, spinoffs and even tech stacks. You can also set up alerts, meaning that if there’s a change in a company you’ve got your eye on, then you’ll be notified. So you’ll always be on top of what’s happening within your portfolio. Thanks to our 60+ data experts and machine learning models, this data is constantly being updated. You can find out more about how VCs use the BeauhurstInvest platform to find and vet potential investment opportunities here.

If you’re interested in hearing more about our platform, please get in touch today, or book a demo to see how BeauhurstInvest could work for your business.

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