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How to Win on the Internet: Data

February 23, 2011

vcmike

There is alot of hype swirling around these days about the big platform shifts: social, local, mobile, cloud, it’s all transforming the web as we know it, we hear just about every day now.

I buy into alot of the hype. Each of these is a bid deal in its own right, and the four together feel more like a tsunami than a wave.

But one trend that I don’t hear nearly as much about is at least as important as those four: the rise of data as the killer differentiator for Internet businesses.  Sure, social/viral customer aggregation is changing the rules, and yes every web business needs a mobile strategy, and of course everything is moving to the cloud. But, if you ask me, the line between the winners and also rans of this generation’s startups is going to be drawn according to who really and truly understands data, and uses it to their own and their customers’ advantage, versus those who only give data lip service in fundraising pitches.

Most entrepreneurs we meet with these days are at least smart enough to pay homage to data being a key longterm asset. But I am not convinced many of them really are capable of executing on this.  I’ve been fortunate to have a front row seat from which to appreciate both the challenge and power of leveraging data.  For three of my current portfolio companies, data is the single most important strategic asset contributing to their success.  And in each instance, major investments in infrastructure from the outset, a near maniacal passion for analyzing data, and some pretty crazy math chops, are key aspects of the companies’ culture and strategy.

While you should certainly include that data slide in your fundraising pitch, first ask yourself whether you’ve really made it a priority>

6 Comments

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  1. February 23, 2011

    Agree completely! Optimization against data is life blood of a mature SaaS’s. The struggle for early stage companies is the perceived value of data is too low. The founder compares feature building to data mining and data looses. Once a company starts making decisions based on data the BI desire blossoms. Regardless too few tools lower the bar enough, though that is bound to change.

  2. February 23, 2011

    Yes – data is king. One of the most interesting stories to watch over the next 5 years is whether the current Kings of Content – the large media and information services firms – are able to successfully turn their captive data repositories in to the true value assets they can be. Semantic technologies, easy API access, embedding in to workflows and enabling innovative uses of the raw data through 3rd party apps are all required – and many large enterprises struggle with making these types of organizational shifts.

  3. February 26, 2011

    If early stage start-ups are thinking data, they are setting themselves up for disappointment. In order to make the data pitch viable and a meaningful strategy, the data sets have to be large. It is better to focus on getting users first and drive up those sign-ups. The question about data is really a later stage execution strategy. You need the data first before you can mold it into anything.

  4. February 28, 2011

    There’s an interesting webinar coming up about how LexisNexis uses semantic technologies and NLP to enrich the data in the 5 billion documents! http://bit.ly/gS97Uc

  5. March 28, 2011

    I couldn’t agree more. And it’s not just that utilization of data is so important – it’s that we are standing at a critical point in the availability of data. Previously intractable problems are finally submitting to analysis because we have sufficient views on the customer to really figure out their pain points, to reveal their true demand function, and more.

    Jagmohan Raju recently shared a study showing that just by using customer data to revise pricing policy, a manager had a better chance of increasing the value of her company than by basically any other means. And that’s cool. But it’s even cooler when you think about the increased ability to look at the 360 impact: downstream, word of mouth, interaction with other demand drivers, and so on. Those that really use their data have a tremendous advantage over those that don’t.

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