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Four Qualitative Measures Corporations Can Use to Value Startups

There are at least four ways that qualitative analysis can help investors and corporations obtain a more comprehensive picture of a startup.

 

Back in 2013, ‘Big Data’ was a buzzword. Today, combined with other advances in statistical techniques, Big Data reached the point, almost, of being а kind of religion. We changed our views on what is possible, started seeing patterns in what used to look like chaos, and some corporations are now even hiring “Vice-Presidents of Big Data”.

It became something we learned to greatly rely on – from optimizing business processes and targeting customers, to improving sports performance. And of course, corporations and other investors, among others, started giving Big Data analytics a prominent role in the venture capital arena.

 

With New Benefits Come New Challenges

While the benefits that Big Data brings to corporations and other investors are endless and can not be argued, just like all new possibilities, we shouldn’t forget to mind the challenges and boundaries that come along with them. In “Antifragile”, a book Nassim Taleb published back at a time when ‘Big Data’ was more of a buzzword than everyday reality, he argued that we have to be aware of the fact that – while this new era brings more information, it also means bigger amounts of false information, and that ‘the needle now comes in an increasingly larger haystack’.

This is especially important for those organizations that became so confident in the power of numbers, that they even started forgetting on the significance of human judgment. More and more corporations, when making investment decisions, are starting to question the importance, or even necessity, of qualitative analysis. But it’s exactly with the use of in-depth interviews and additional qualitative analysis that they can truly understand the unique perspective and experience of a startup.

 

To Have Real Impact, Numbers Need Stories

The more data we deal with, and the more we continue to measure our insight in terabytes – the more we seem to forget that what is measurable isn’t always the same as what is valuable. To have an impact and deliver real insight – numbers need stories and vice versa. It’s by remembering the importance of qualitative analysis that we can now bring back the human element to what became a data-driven world. And it’s only by coupling qualitative analysis and traditional quantitative assessment that corporations can get a detailed and enriched picture of a startup.

Apart from its important stand-alone role in obtaining deep consumer insight, qualitative research can greatly aid corporations when making investment decisions, through revealing the Why’s behind certain data trends. It’s precisely human-centered research that brings context, meaning, and stories on the table, something that, for now, we can not count on Big Data for.

 

Four Qualitative Measures All Investment Opportunities can Benefit From

A qualitative understanding of a startup can bring significant color to the underlying strength of quantitative metrics. And while these metrics will vary based on the industry and specifics of the company itself, there are few measures that are universally relevant to most investment opportunities:

Understanding market needsThe most basic reason to launch a business is to offer a product or service that will answer to a specific market need. Do entrepreneurs truly understand this market need? Does the team understand both the quantitative and qualitative aspects of their audience’s needs? Can they argue and provide evidence supporting the fact that this is a real pain in the market? Will their product or service create real value for their customers?

Understanding the quality of the solutionOnce you’re positive the company understands the market need and their audience, the next logical issue to tackle is – how well are they going to deliver the product/service that will answer to this need? Will their product or service ‘work’ for the specific target audience? Will it be a ‘quality solution’ to them?

Understanding the team, their experience, and background: A company’s team plays an incredibly important role in its development and success. Their knowledge, experience, values, and dynamics are crucial, even though subjective and difficult to judge. This is one aspect where you’ll have to combine what the quantitative metrics say and what your gut tells you.

Understanding the company’s current networks and partnerships: Just like the quality of the team, the power of an organization’s network and its currently existing partnerships shouldn’t be underrated. This doesn’t only depend on the team, but also on the already existing investors (if any) and the value they bring to the company with their networks, relationships, and industry expertise.

 

 

One response to “Four Qualitative Measures Corporations Can Use to Value Startups”

  1. […] Big data uses data points from a set of raw data and identifies relationships to gain new insights and make predictions about the future. The raw set of data is used to build models, run simulations and alter data points to see how each alteration impacts the resulting information/insight and prediction. This has been adopted by organizations to aid with smart and more informed decisions. […]

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