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Video: Is venture investing an art or a science?

Entrepreneur LogoThe following story was a guest column by Kauffman Fellows CEO Jeff Harbach in VCJ.

For too long, venture capital investment decisions have been purely subjective, with investors relying on only gut instinct and pattern recognition to select which startups to fund. Just as often, the people who are funded tend to look a whole lot like one another.

But today, a new generation of investors is stepping to the forefront and changing how the game is played. They increasingly are using data to help evaluate the merits of a company and blend those results along the way, turning venture investing from an art to a science.

Venture capitalist Collin West illustrates in the accompanying video from Kauffman Fellows, in partnership with VCJ, that the change is a big step forward for investors and entrepreneurs. (See video above.)

Unbundling subjective bias from venture decisions ensures projects are evaluated more fairly, with the same criteria, and that the ones with the most merit win, argues West, a venture partner at Kauffman Fellows and co-chair of NextGen Partners. He previously was a principal at Correlation Ventures.

How you look, how you smile, how you present means a lot less than the story that the numbers tell, he adds.

Investors need to get more comfortable analyzing data and then using that data to ask tough questions and expect real answers as a form of diligence. As we learn to supplement our gut and intuition with data, over time we will create a more just process for all entrepreneurs seeking funding.


Jeff Harbach

Jeff Harbach is president and chief executive of Kauffman Fellows. https://www.kauffmanfellows.org/jeff-harbach/. He tweets at @jeffharbach.