Why Quality Data is Crucial for Making Good Investment Decisions
Sarah Cheeseman, 27 July 2023
Whether you’re an angel investor, venture capital firm, private equity firm or interested in corporate venture, your decision-making processes are pivotal to seeing good results from the investments you make. And everyone approaches this process differently—from basing decisions solely on connections, to partnering with similar companies that you’ve seen success with before.
Whatever your tactics, the fact remains the same: good decisions have to be based on good due diligence. And good due diligence starts with understanding the data.
What role does data play in investments?
Having high quality, reliable data is crucial at every stage of the investment journey.
Whether that’s to help teams to understand a company that they potentially want to work with, or offering accurate starting points for valuation discussions. Some of the key areas that data can help with include:
Good quality company data provide accurate, reliable insight into financial markets, companies, industries and economic conditions that may inform your investment processes. This is essential for understanding the true performance of a potential investment and allows you to make better quality decisions.
Investment inherently carries a fair amount of risk. While this may be a given, access to reliable, accurate data gives you the opportunity to assess and manage risk more effectively. It can provide essential insight into the volatility, historical performance and potential risks associated with an investment and enable you to create better risk management strategies off the back of this information.
Reliable data can give a more comprehensive view of the market and individual assets, arming you with information that leads to more informed and rational decision-making. This reduces impulsive choices that could lead to a loss or less successful investment in the future.
Identifying new opportunities
For many investors, especially those that are just starting out, high-quality data gives them vital information to spot opportunities that may have otherwise been overlooked. By analysing trends and patterns, investors are able to identify undervalued assets or emerging industries that have potential for significant growth and get involved before any of their competitors.
Diversification of your portfolio is a fundamental principle of risk management for any investor. With access to quality data, investors are able to assess the correlation between different assets and ensure that their portfolio is appropriately diversified, lowering their exposure to any undue risks.
One thing that many investors undervalue is the benefit of having access to real-time information. With such fast-paced financial markets, real-time insights can help investors to capitalise on market movements and react swiftly to changing environments that could positively or negatively impact their investments.
Low-quality or biassed data will almost always lead to flawed decision-making, however the better the quality of your data, the more reliable it will be, meaning it’s less likely that bias will enter into your processes.
Confidence and trust
When investors know they are basing their decisions on reliable information, they’re more likely to have faith in their investment strategies and stick to them during challenging market conditions.
Where can you source high-quality data?
Where you actually source this data from can vary depending on your requirements and goals, and there are a variety of reputable options available publicly, or to purchase.
Companies that are listed on the stock exchange are required to file regular reports with regulatory bodies such as the Financial Conduct Authority, or the equivalent in their own country. These filings are usually completed annually and will often contain detailed financial information about the company.
Data platforms can be the ideal source for finding detailed information about a particular industry, company or person. Our BeauhurstInvest platform has been specifically developed for investors to find the next generation of industry-leading businesses as soon as they show growth potential. This includes tracking their portfolio in real-time and being alerted to any interesting changes within their chosen field of interest. Find out more about the BeauhurstInvest platform.
Investment research reports can be a goldmine of information, especially those produced by reputable financial institutions and analysts. These reports can provide valuable insights and data on specific companies and industries, with detail that you may struggle to find elsewhere.
While this may not be considered a primary source for information, professional networking sites like LinkedIn can provide up-to-date knowledge on particular companies or markets that you may not see elsewhere. This can include new companies that are being started by influential entrepreneurs, or new ventures within niche industries. It’s useful to build up a varied list of connections so that you can keep up-to-date with what’s happening in your area of interest.
Similarly, it’s also worth keeping up to date with news and media aggregates. While not everything will be published in the news, it can be helpful to stay in the loop on what’s going on within your target market and if there are any potential opportunities on the horizon.
How Beauhurst can help
Here at Beauhurst, we’ve built the ultimate private company data source. The BeauhurstInvest platform is the ideal resource for investors looking for their next opportunity. We collate data on every UK private company, with a particular focus on the most innovative, exciting startups, tracking investment, scaleups, spinouts, high-growth lists, patents, and other indicators, all in one place. Thanks to our 60+ data experts, artificial intelligence and machine learning models, our data is accurate and up-to-date.
BeauhurstInvest gives you access to transformational data that can’t be sourced elsewhere, enabling you to create personalised lists of potential opportunities. You can also set up tailored alerts, advising you of any new prospects or changes within your market of interest. As Henri Songeur from Puma Private Equity says, “It’s like Google Alerts, but specifically for what we do.”
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