Venture Capital: Data Driven vs Traditional StrategiesSubscribe
The top venture capitalist of this age gets paid the big bucks because they claim they have a special eye for the billion dollar companies. They claim that they are able to identify early the best companies based on markets, team, product, trend or whatever it might be. This is that "gut" feeling. But that's the exact reason that traditional venture capitalists have failed to return good returns and that Venture capital as an asset class generally does not fare well against the market.
But what happen if we take a data-driven?
So far I can think of a few firms that do this. Correlation VC, 500 Startups, Google ventures. Correlation VC actually takes historical data and invests based off of that. PAVS invests along the same lines. 500 startups involves both a quant and traditional approach in that they make smaller bets based off of gut instinct at the earliest stages.
Dave McClure of 500 startups had argued that due to low cost of startups these days, it's now possible to try to aim for larger number of base hit companies rather than that home run company. Steve Blank also argued that following a more data driven approach will statistically result in the success rate of raising capital and succeeding.
With the wealth of venture capital firms out there today, what strategy will represent the future of Venture Capital? Would love to hear some thoughts from VC industry people here.