Value of data in acquired company? - Searchfunder

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by a searcher from Johns Hopkins University
in Melbourne VIC, Australia

1yr ago

Value of data in acquired company?

'Data ins the new oil', not a new saying but highlights that many companies we're looking to acquire across the community could be sitting on mountains of very valuable data.

How have you modelled data value into your investment thesis?

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reply by a searcher 1yr ago
from DePaul University in Chicago, IL, USA

I've built many software and data products, including several data platforms from scratch over the last several years. In my view, the #1 thing to be mindful of is the fact that because data is typically a big mess at large companies, the odds that data will be a big mess at a small or medium size company is high. When I say "big mess", I mean frequent disorganization leading to their not knowing their own data. Data can be extremely valuable, but it can take much time and expense to derive insights from it when a given business doesn't already possess data-savvy stakeholders who have made the effort to make sense of all of it. Before setting a value on data that will come bundled with an acquisition, I would be sure to perform some level of assessment to determine the state of that data. It's prudent not to make any assumptions as to what data is already being stored, and it's also prudent not to make any assumptions as to whether the data you would like to have available to you will be readily consumable for you.

reply by a professional 1yr ago
from INSEAD in Perth WA, Australia

Echoing similar themes to those above.

We work with startups and SMEs to get ROI from their data, and the most common archetype is one where management have high opinions of scope, accuracy, or potential of data, but it isn't supported by the reality on the ground. While I'm a dreamer about data being a part of an investment thesis/post-acquisition business model, you have to be able to execute from the starting point of the business, and the VAST majority of businesses are in a shitty state. Given these I would:
- value the data at zero and consider it only as upside to the investment case
- if DD access allows, try to talk to hands on operators to get a sense of how they make decisions
- become a customer of the business, see what information is captured in your interactions with it - look out for quality checks on ingestion (e.g., phone number validation, duplicate account detection)
Anecdotal ground level inputs will give you a better sense of relative maturity internally than any statement from the owners, a cultural value or similar top-down assessment

We've worked on both the data commercialisation angle for businesses and with data brokers who purchase this type of info so should be able to give you a decent lay of the land if you have more questions--drop me a connect on LinkedIn.

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