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Crunching the numbers, PitchBook survey finds greater role of data in VC decision making

Venture investors around the globe continue to rely on personal networks, rather than data, to source deals, but signs of a shift are underway.

Fifty-nine percent of investors say personal networks are their most important resource for finding and evaluating deals, according to a survey from PitchBook.

But almost half said they plan on increasing their use of, or starting their use of, machine learning to inform investment decisions, the survey found.

The study offers an interesting, and yet contrasting, snapshot on data use in the venture capital business. It gathered data from 391 investors involved in angel to late-stage deal making, with 45 percent from the United States, 23 percent from Europe and 18 percent from Asia.

What it found is an industry still cautious on the role of data in this deeply intuitive business. Only 19 percent said they presently leverage data to source investments. An almost similar number reported using data to refine an investment thesis and perform financial modeling, however.

Eleven percent said they still don’t use data for any use case, the PitchBook work discovered.

And yet, data seems to be rising in importance. Almost 48 percent said they use data to source some investments and nearly 38 percent said they use data to source all investments. Asian VCs appear to be the most active users of data.

What’s noteworthy, as well, is that late-stage VCs and corporate investors were more likely to rely on data in their decision making than angel and early-stage investors. Half of the late-stage VCs reported that data is extremely important in deal sourcing.

And yet, data does appear to have a hard ceiling. Eighty-five percent of survey respondents said some element of intuition will always play a role in investment decisions.