Given the billions of dollars of growth stage, buyout, and merger deals that are done in the software, IT, and technology-enabled services sectors, it’s no surprise that investment teams at venture capital firms, private equity firms, and corporate development organizations take deal evaluation and analysis quite seriously.
Investors consider a number of factors about each deal when deciding whether to invest or buy – quality of management, company growth and profitability, potential of the target market, and the strength of the business model are just a few of the many areas for analysis. Another important area, especially in the technology sector, is to understand how a company’s products are perceived by participants in its target market.
I recently spoke with Ravi Belani, a Silicon Valley angel investor, formerly with Draper Fisher Jurvetson and Bridgewater Associates. According to Belani, one of the key areas of due diligence is to understand how a company stacks up when it goes head-to-head against its competition. To understand this question, most investors and M&A professionals utilize experts within their networks, which are of course limited, and customer references, which are likely biased. Belani feels that “a scalable way still does not exist to get data-driven market intelligence.”
Guhan Swaminathan from Virgo Capital agreed, noting “Whenever we look at a deal, I speak to whoever I can in the sector but still have a lot of trouble finding unbiased and relevant opinions that are more detailed than what I can find in general industry reports.”
Of course, investors and acquirers will continue to do what it takes to ensure they are making the right decisions when they deploy capital, but there is a clear need to confidentially source market intelligence quickly and cost-effectively.
Arun Prakash, Vice President of Marketing at Thinkspeed