How often do VC firms develop their own tech to drive research? Just curious what the split might be between firms that follow the lead of others vs firms that due their own research.
I would love to know this, but also how often VC firms build their own tech to improve their daily processes and workflow, as well as develop their community of founders.
I built one of the first in-house VC research platforms at Index Ventures back in 2012 (+am now starting a new early-stage VC firm in Europe where we're building our own tech to aide sourcing/workflow).
Since 2012 most of the top VCs (or at least those with the management fees to afford it) have evaluated/experimented going down this route to some extent with varying degrees of success.
Some like Social Capital have been relatively open about it (at least in parts) but generally most have kept a low profile to avoid giving away techniques they use to get a competitive edge.
Why? I think the real issue is that historically small VCs don’t make enough in management fees to support engineers, no one wants to sell part of the GP to invest in growth and scale, and large VCs make so much money from management fee and carry that they don’t care about the complexity. I’d be surprised if a16z didn’t have a few engineers in staff, but I know several of the big firms definetly don’t. It’s going to take a new commer stealing away their LPs to get them to change.
Could you enlighten me on your thoughts on what the engineers at a16z would do if not for focusing on getting better insight to vet deals?
Agreed on what you said, change doesn't come unless there's a burning bridge. If the firms have a current process that gets them to where they are today, they will just keep doing what they are already doing.
Perhaps a business opportunity to target the small VCs to help give them an edge.
