Individual investors who are interested in equity securities tend to base their decisions on input provided by market analysts. Institutional investors, on the other hand, cannot get by on analyst recommendations alone; they have to delve into reports filed with the Securities and Exchange Commission, which are freely available to the public.
For someone like billionaire investor Warren Buffett, a man who is known to spend hours reading reports on a daily basis, the only way to ensure that an investment could be sustainable is to thoroughly evaluate all aspects of commercial operations.
With regard to Buffett, you probably know that startup companies are not very high on his list of prospective investments; he generally prefers companies with established track records, but he made an exception in 2018 when he chose to invest in Paytm, an Indian financial technology startup dedicated to digital payments. The amount of reading and evaluating that Buffett conducted before investing in Paytm unfolded over several months, and it involved analysis from trusted associates.
Venture capital investors have to follow a style of research that is similar to what Buffett does, but they also have to pay closer attention to market conditions and forecasts. There is far more speculation involved with venture capital investing, but the last thing investors want to do would be to forego due diligence.
Startup companies operate in the private realm, which means that prospective investors must get their information from reliable sources. Thankfully, venture capital firms now have the convenience of information gathering firms dedicated to compiling actionable data on private companies that may present investment opportunities.
Let’s take a look at some of these data providers serving the venture capital industry these days, and let’s keep in mind that all of them were startup companies that received VC injections not long ago:
When you need an in-depth company profile, this is one of the best places you can turn to. The data-gathering process utilized by PitchBook includes web crawling, artificial intelligence, human verification, and professional analysis. This data source is considered to be one of the most valuable, and its subscription price is thought to be worth every penny.
While PitchBook has been around longer than CB Insights, the latter has quickly become the darling of the VC industry. This favorable view of CB Insights has a lot to do with the market intelligence and commentary that subscribers have access to. Even the free content posted on the CB Insights website can tell you a lot about trends developing within the VC and startup world. Subscriptions to CB Insights are quite pricey and billed on an annual basis.
Approximately half of the information you can find on CrunchBase is provided by company principals, and this can be a double-edged sword because some startup entrepreneurs tend to be hyperbolic with their assessments and projections. CrunchBase is great for scouting at the earliest levels, and it can also be a good resource to establish connections between key players and companies.