The Deal About Data

The most common question I’ve received throughout my career as a venture capitalist is “What types of deals are you seeing in the marketplace these days?” And my answer has changed over the years. Remember when everything was a platform, mobile first, social, and viral? Every couple of years, there are important and significant technology trends that bring with them substantial new business opportunities. These technology trends are the lifeblood of the venture-backed technology ecosystem.

My answer to that question recently is data. Everything is data, along with the terms machine learning, and Artificial Intelligence. It’s a rare exception that an entrepreneur doesn’t use one or all of those terms in the first two minutes of any discussion about a new business.

Of course, not all new technology businesses are actually leveraging data, but we believe that most of the value created in new technology companies will be taking advantage of the new computing platforms that allow for the previously impossible use of data to lead or improve their business. The question we wrestle with at Revolution is how to determine which opportunities are really leveraging data and machine learning capabilities in a way to create competitive advantages (like our newest investment in Uptake). And which of these companies have just mastered the use of catch phrases to attract attention from investors?

Here are a few of the things we consider when looking at data-driven businesses to try to separate the wheat from the chaff:

• What is the fundamental customer or enterprise problem that the new data-driven business is solving? And, is it a big enough problem?
• Are the data sets used in the modeling unique or proprietary?
• Does the company use structured (highly organized) or unstructured data in its models?
• What is the composition of the technical team? Do they have real data scientists on staff?
• Does the team have the experience and technology chops to collect, process, and analyze a massive amount of data in real-time?
• Can the company show that the result of their software/models matters and, importantly, gets more valuable over time with more data?

As investors, we are excited about this new wave of companies taking advantage of massive real-time data sources and expect to continue to aggressively invest in this trend over the next several years