Some investors like to be ‘founder friendly’. Others like to host the best parties. And an increasing number like to say that they’re ‘data driven’ — especially in the age of ChatGPT.
Converts will say VC firms that make smart use of data are more efficient, see more deals, screen startups more effectively and make better and less biased investment decisions.
Critics will say it’s just another marketing buzzword.
Regardless of your stance, the movement is shaping how investors find and do deals. A new report published today from Data-Driven VC surveyed 300+ investors globally and found that 35% said their data tools are responsible for sourcing at least half of their deals.
It also found 190 ‘data-driven’ VC firms — all of which have at least one engineer on their team, and have developed at least one piece of internal tooling.
The findings
It’s a fast-moving picture: 66% of respondents say they’re using large language models (LLMs)— for various purposes, but primarily for screening, due diligence and sourcing. That’s swiftly replacing the work of some analysts and associates; 31% of respondents think teams will become smaller as a result of data-driven tools.
“The VC job is a lot about finding the needle in the haystack which means that investors spend the majority of their time collecting and processing data of all kinds to make great decisions,” says Andre Retterath, partner at Earlybird VC and author of the Data-Driven VC newsletter. “Everyone aims to benefit from information asymmetry, knowing something that your competitors don’t. With LLMs, the majority of this can be automated.”
On average, data-driven VCs have one engineer for every five investors on their team. 80% use both internally and externally developed tooling — and 73% said they plan to increase their tech stack budget.
There are still plenty of parts of the VC role that data isn’t being used for: 59% of respondents said they don’t use data-driven tools for LP management, sourcing or fundraising.
So, which are the most data-driven VCs in Europe?
UK-based Atomico and Germany-based Earlybird top the charts for the number of engineers employed — with eight each, closely followed by London-based QuantumLight, with six.
Notably, QuantumLight – the VC fund set up by Revolut founder Nik Storonsky — has a team entirely composed of engineers and investors. Atomico and Earlybird, meanwhile, each have dozens of employees who are neither engineers nor investors, working in platform roles like talent, comms and events.
London-based Moonfire is the only firm on this list with more engineers (4) than investors (2). Its founder, Mattias Ljungman, was a cofounder of Atomico. He told Sifted last year that heavily relying on AI for “grunt” work enables the humans on the team to focus on what they’re good at: “Doing meetings, building relationships, providing insights and knowledge to our founders, allowing them to scale and be more successful along their journey.”
