The impact of big data has been felt across all financial industries. Business managers, financial analytics, and investors all had to take into account the change of business conditions brought on by data analytics. Certainly, the same goes for the industry of venture capital, which was always all about recognizing new forces in the play and acting accordingly. Big data is the main driving force forming venture capital trends for today and the near future. Let us look at how it does it.
Investing in the 21st century
Financial industries have experienced many transformations fuelled by technological advancements. The increasing rate at which these advancements occur in the 21st century means that investors must always be on the lookout for what is coming.
Today, investing is more diversified than ever in at least a couple of senses. Firstly, more people get involved in financing start-ups and investing in stocks. This is driven by, on the one hand, such new methods as crowdfunding, and on the other, by the proliferation of convenient means for investing, like mobile apps. Secondly, more investors create more opportunities for a variety of projects and industries to be funded.
But faster rates at which new technologies are being developed also mean more investment opportunities that interest venture capitalists. With other industries now mostly funded by various new forms of investing, venture capital investors remain concentrated on high-tech start-ups.
As technological solutions are now being invented and offered for more or less every market sector, venture investors have to track more developments than ever before. This immediately points to the necessity of data analytics for investment intelligence. Such necessity has now become the main feature of venture capital investing in the 21st century.
Venture capital trends and the power of alternative data
Big data analytics affect venture capital trends in many ways. But the most powerful and recognizable of these is certainly the very proliferation of the kinds of data.
Alternative data are now being used to enhance decisions and increase efficiency in most departments of business and finance. Venture capitalists use such alternative types of data as social media data, community and repository data, and many more to generate insights into investment opportunities.
Back in the 20th century, it was already clear that with venture capital timing is everything. This means that venture capitalists are looking for technologies that are new enough not to be recognized by competition. But also, they cannot be at their earliest stages, where their utility and market needs are hard to predict.
Naturally, to hit the target right in the middle, investors need a lot of reliable information and they need it fast. Thus, computer algorithms and other big data analysis tools are constantly being introduced and improved to ensure fast and usable results.
This leads to another trend that is sure to have its influence on venture capital for a while – automation of analysis. More data and a diversified set of industries that may use high-tech and thus attract venture capitalists mean that it is necessary to automate data collection and analysis as much as possible. Investors and financial analysts already have enough on their hands with the final stage of decision-making, thus the more in preparation can be done by machines, the better.
To add to the point about various industries look for technological solutions more than ever before, we can single out the currently especially important industry of health and biotechnology. In light of recent events, it is very likely that investments into technology to prevent and combat health crises will be among venture capital trends. Effectively forecasting disease outbreaks, of course, require high-quality data collected in real-time.
Thus, the importance of big data is encountered at every corner of the map of venture capital trends for the near future.
Fintech and venture capital
An important connection between big data and venture capital is financial technologies or fintech, for short. Fintech refers to the adoption of technological solutions for various financial services.
As mentioned, alternative data is the key driving force behind the most important venture capital trends today. And fintech is all about utilizing data and high-tech for financial analysis. As the need for data analysis technology for investment is only going to grow, investments in fintech will be among the venture capital trends for a foreseeable future.
Interestingly, this basically means that venture capitalists will be investing in themselves. Investment into fintech will help to develop technologies for financial data collection and analysis. This technology will later be used to inform the further decisions of venture capitalists.
Venture capital trends have been driven by big data analysis pretty much throughout the 21st century. This is unlikely to change any time soon, given the growing number of types of alternative data used for investment decisions. This means continuous investments in data technology as well as technological solutions for a growing number of market sectors.