The world is producing massive amounts of data every day. Already back in 2010 Eric Schmidt famously proclaimed that “every two days we create as much information as we did from the dawn of civilization up until 2003”. That’s something like five exabytes of data, he clarified. Well guess what? In 2019, nine years later, we’re reaching the point when we’re creating that amount of data each and every day!
The data explosion can be attributed to several different technological advances. Increasing computing power and the Internet of Things (IoT) are often mentioned as reasons, but there have also been many innovations and developments in software for unstructured data. It’s good to remember that a big chunk of all new data created is still unstructured, such as social media posts, video, audio, and pictures.
Data is important in many ways, and if used properly – meaning that privacy and regulations are being honored – it can make all the difference. For example, by driving better decision making on a number of different levels, ranging from individuals to businesses (even societies), data can help us in succeeding and thriving in an ever-changing competitive world. Data is also the fuel that makes machine learning tick.
OpenOcean’s mission is to invest in data-intensive and delicious software companies. In particular we look for relentless entrepreneurs who build revolutionary products that have a significant impact on how we conduct business or lead our lives in the future. If you’re curious about what we mean by delicious software, please have a look at our Investment Thesis in a Nutshell. The data-intensive part is a bit more self explanatory and in essence it means that data is being aggregated and used in a smart way when building the product and developing the business, or that the product itself is data-analytics software.
At OpenOcean we look and evaluate the data-intensivity of software companies already at early stages in our investment process. We think it’s unwise to leave the data evaluation to later stages of the process, e.g. to the confirmatory due diligence stage. Here are some of the elements we try to understand when looking at a company from a data perspective:
Maturity of current data sets: This means evaluating the volume and structure of the data that is used. We also look at data clean-up processes. In essence we try to understand if the company is collecting and using the right data.
Maturity of KPIs: We investigate what KPIs have been put in place to manage and improve the company’s operations.
Maturity of the system: This means evaluating the data collection processes, the infrastructure, the flexibility of the data collection, and what tools are being used.
Maturity of data strategy: We look at the company’s goals, process, and roadmap for gathering relevant future data.
Because we speak so much about data-intensivity, we often get the following (very reasonable) question: how data-intensive are you yourselves as venture capital investors?
At OpenOcean we’ve done a lot of thinking around data and how it can be used for better decision making and automation. One outcome of this is our proprietary Haystack Deal-Flow Software, which enables us to efficiently gather and look at a large amount of relevant venture deals with automated qualification (scoring) done by algorithms. We’ve been using Haystack in production use since September 2018 and the results have so far been very promising.
To summarize, there is no doubt in our minds that smart aggregation and deep usage of data are essential building blocks for fast-growing successful software companies. That’s why we pay special attention to the data perspective when evaluating deals. It’s also safe to assume that data will be increasingly important for any company that wants to succeed in the future and that’s why we’ve started to develop our own investment operations into a more data-driven direction.
They say data drives our world today. We say data will drive humanity tomorrow!
This blog post was originally published on blog.openocean.vc