Over the last eight years, we have built and constantly refined the PitchBook research process, and it might (finally) be time for it to step into the spotlight.
Currently, our research team consists of 150+ people and a staggering number of technical web tools focused on gathering, matching, sorting, classifying and cross-validating all relevant information relating to venture capital, private equity, fund performance, M&A and all the advisors across the lifecycle. Our data sources include every bit of publicly available information (Crunchbase and AngelList are a tiny fraction) and an extensive primary research operation that follows, collecting non-public information directly from companies, advisors, investors and limited partners.
Despite our meticulous research process, perfection will always be elusive as long as the private markets stay private.
An excellent post and discussion by Renee DiResta on her blog, No Upside, highlighted one such challenge—the challenge of classification—and called for there to be a universal taxonomy definition for private market transactions. While we would welcome this solution, we also understand the difficulty given the dynamism and messiness of the private markets. In an effort to provide more transparency, we will be publishing a detailed breakdown of our taxonomy over the next few weeks.
Venture rounds are rarely black and white. Below, you’ll see an overview of the steps we take just to establish the type of round for a venture deal.
- Use the framing in the company’s PR: Do they call it a seed or something else?
- If there is no clear answer from PR, then use context around the deal from news stories and financial docs considering the following
- Amount (is it below or around $2 million?)
- Period (is this the first round? does it fall in a series of small rounds? is it within two years of company founding?)
- Structure of funding (is it convertible debt? equity? have tranches?)
- Adjust based on feedback as we talk with the company post round and the funders quarterly
- Update as new information becomes available; restructure early rounds based on later rounds
If the round is still indeterminate after these steps, it’s followed by another level of research though, ultimately, there are some cases where our team is forced to exercise their best judgement.
As an example of the classification challenge, here is a company (import.io) that recently raised a second seed round from VCs, angels and an incubator using Seed 1 Series stock at a post valuation of £6.8 million ($11.1 million).
Per our methodology, we classified this as a seed round while others might say this is really a Series A or something else. See the challenge?
There are many ways to understand early stage funding in the PitchBook Platform — you could look at companies that have just raised their first round of funding (convertible debt or equity), or companies raising fundings at less than a $5 million valuation, or using seed series stock to raise their funding, or deals with only angels and seed stage investors.
In reality, regardless of whether you are investing, advising or active in the private markets, it’s important to use highly accurate, granular data to build your analysis according to your own definitions and classifications. This is no different from the public markets, and it’s why the Bloomberg Terminal is universally prevalent.
Over the past eight years, we’ve learned the complexities of the private markets and the equally complex needs of our clients. Throughout this, we’ve found that the best way to serve private market professionals is by providing the data, tools and support they need to make the most informed decisions.
We love to show people what we are building—to take a look, just Request a Demo.
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