According to DOMO in 2018, “Over 2.5 quintillion bytes of data are created every single day. By 2020, it’s estimated that 1.7MB of data will be created every second for every person on earth.” It’s no wonder, then, that the Economist recently proclaimed that “the world’s most valuable resource is no longer oil, but data.”
The reality, however, is that not all data has value; not all data is an asset.
In order to help determine what companies have valuable data assets, we typically consider several factors:
- Uniqueness (Who, if anyone, has the same or similar data?)
- Substitutability (Could different data provide the same functionality?)
- Quality (How clean, consistent, and accurate is the data?)
- Collectability (How difficult is it to gather and aggregate this data?)
- Economic Utility (Can this data drive revenue expansion or expense reduction?)
None of these factors by itself makes data valuable or not – we have seen companies generate immense value by applying complex techniques to public data, and we have seen companies generate little value by selling truly unique data that served too small of a market.
However, a talented management team and a data asset that hits enough of the above factors make for a powerful combination – one that meaningfully increases the probability of a significant positive investment outcome. In fact, it’s often the data itself that guides the company to other, non-obvious products and verticals for expansion.
Using this concept as a guideline, our Partners work closely with management teams to define their company’s data strategy. This typically involves identifying the relative value of their data assets compared to competitors’ and exploring how those data assets can be leveraged to create a broader platform strategy, with the ultimate goal of unseating an incumbent technology vendor or create a new market altogether.
Using data as a cornerstone of a broader platform strategy is a key aspect the VSV “playbook”. It enables companies to create more defensibility, differentiated messaging to customers, a roadmap to new product development, and an attractive story for late stage investors and potential acquirers.