PS#049: Tracking Financings – How to Create Your Own Venture Database
The beauty of venture capital is that you can do a lot of the job without actually having a full-time (or even part-time) role at a venture capital firm.
You can collect your own insights, build your own networks, and develop your own theses.
It just often takes time and work.
Today, I’m going to talk about another way to start doing the work – how to create your own venture database by tracking venture financing rounds.
This method doesn’t require any paid subscriptions or access to any sort of private databases (e.g., Crunchbase, Pitchbook, etc.). All it takes is time and effort.
We’ll walk through…
Where to find VC financings / investments
How to build your own database
How to use this information
Let’s dive in.
Where can you find venture financing rounds?
Just to make sure we are on the same page, a venture financing round is simply a venture capital investment in a startup. It could be a Pre-seed, Seed, Series A, Series B, etc. investment. A financing round is just another way of describing the investment.
Thanks to the industrialization of the venture capital world, we’re lucky to have most of these investments/financings covered in the public sphere.
Where exactly?
Deal newsletters.
There is a whole genre of newsletters that will aggregate the financings from the day, week, or month. The newsletter might be more of a generalist (e.g., Axios Pro Rata), vertical specific (e.g., Work Bench’s Enterprise Weekly), or geographically focused (e.g., Mason Rathe’s Texas Deal Highlights). Most major industries, geographies, technologies, etc. are being covered by deal newsletters in one form or another.
My recommendation would be to start subscribing to a broad set of deal newsletters, unless you’ve already figured out your specific investment niche. This way you can start to familiarize yourself with the companies, investors, round dynamics, etc. before committing more time and effort into building out your expertise (and database) in a given area.
What data should you be tracking?
Great question.
For your venture database, you should be tracking the following information about a startup and its financing rounds…
Name
Website
Financing
Size of round
Total capital raised
Investors participating
Not all of this is straightforward (or always available), so let’s chat about these items in a bit more detail…
The first two are relatively self-explanatory – make sure you have the startup’s name and website (if they have one at this stage). As an aside, in the early days, you can actually learn quite a lot about a startup and their market positioning by how their website develops.
The next four items revolve around the startup’s current and historical financings.
For the financing, we are looking for the stage or name of the round (i.e., Series A, B, C, etc.). This will help us directionally understand the stage of the startup’s development.
For the size of the round, we’d like to understand the total amount of capital raised. This can be a bit tricky as sometimes startups’ will announce debt or secondaries as a part of a fundraise. If you can find out how much primary equity capital was raised, that’s the best information. If not, the headline number works just fine for your database purposes.
For the total capital raised and investors participating, this will depend on what is shared in the announcement. You might be able to get more information from your network or a paid database (e.g., Pitchbook, Crunchbase, etc.), but it will depend on what’s been reported. The announcements will typically include the largest investors in the round, which is enough for these purposes. The total amount the company has raised will really depend on how the startup wants to position itself in the market from a PR standpoint.
From here, take the information outlined above (for your investment theses or focus areas), organize it in your preferred medium (e.g., Excel, Google Sheets, Airtable, etc.), and start tracking it over time.
That last part is the most important. This will take time. It will take consistency. But, if you stick with it, you’ll have a valuable data set for investors and those in the ecosystem.
How should you use this information?
As I mentioned above, if you do this for long enough and focus on a specific space, you’re going to develop an incredibly valuable database through this process.
This information can be used for…
Informing theses
Building market maps
Identifying active investors
More importantly, this is going give you another competitive advantage in the interview process. This level of fundraising detail combined with a well-thought out investment thesis and some in-depth market maps will highlight your ability to develop deal domain expertise.
Just as an example, with enough of a database, you will be able to provide intel including…
how much capital has been invested in a specific area (with supporting evidence),
stage of startups being financed & round dynamics (identifying best entry point),
what investors are most active in a space (potential co-investors), and
when startups may raise again based on the round (future deals).
And, guess what?
This is all work that you would be doing as an investor. If you start doing it now and share it with investors in the space, you’ll show them that you’re capable of doing the job.
In the next issue, I’m going to take some time to break down an example of a deal newsletter and all the incredible information that is provided. I think the information (and opportunities) in these newsletters often gets overlooked and taken for granted. While I’ll go through a little bit of the above, I’m also going to point out how to identify active investors, spot hiring opportunities, and build out your path to liquidity for potential investments.
