Investing in the 21st century is all about data. Not that data was not used for recognizing investment opportunities before. But after the rise of big data and improved technological capabilities to collect and share information, the data that investors use has become extremely varied. One broad category of information used in investing today is company data. This type of data is composed of a few subtypes of alternative data.
The Types of Company Data
Company data is usually taken to refer to four types of information about a company. The first of these subtypes is internal company-customer relation data. This is the information from the company’s internal customer relationship management (CRM) system. This type of information describes the company’s internal characteristics as they relate to managing the customers.
The other three types of information that makeup company data are external, meaning that this is the data that external parties have collected about the company. Firmographic data is one of such kinds of data. It is statistical information about the company that helps to compare it with other firms. It includes such data as age and size of the company, industry it is in, annual revenue and other similar types of general information.
Next is technographic data which is similar to firmographics but concerned specifically with the company’s technological stack. Thus, technographics refer to all data about the hardware and software that the company is using, the way they implement updates and similar information.
Finally, company data is completed by B2B intent data. Generally, this type of data describes recent activities of the company that may signal their current needs and therefore buying intent. It includes such information as recent purchases, formed partnerships or discontinued services. Such information shows what the company is up to at the moment, thus may reveal the best time to approach it for a possible deal.
5 Ways To Use It For Investing
The variety of company data makes it clear that it can be used in many fields of business and finance. Let us look at 5 ways that investors utilize this broad kind of data.
1) Machine learning. The ability of algorithms to get better at solving problems the more data they analyze and without additional programming has been very beneficial in investing for quite some time. Company data is great for training algorithms as it describes companies from various perspectives. Thus, this type of data increases the predicting and insight-generating power of algorithms.
2) Market segmentation. Firmographic and technographic data can be used to segment the market by relevant features of the firms. This allows investors to paint a clearer picture of particular industries or the whole markets and compare firms against each other. Then firms with a particular set of features or specific industries can be targeted.
3) Recognizing investment opportunities. The activity described by business intent data is interesting not only to B2B companies but to investors as well. Various business activities, like new purchases or partnerships, may signal the growth of the company. This might help to identify the perfect time to invest in it.
4) Tracking company growth. Company data is a set of data types that describe various aspects of a particular firm. This makes it perfect for growth tracking as rising or diminishing potential of the firm is sure to show up in such data as firmographics or CRM data. By analyzing such types of company data investors are able to keep track of promising start-ups and decide if they are ready for the next funding round.
5) Model building. When building investment models investors rely on data to ensure the quality of their strategies. Company data should certainly be added to the set of information used in model building, as it helps to generate insights about what makes some firms better investment opportunities than others. Models that utilize company data will be able to make better relevant predictions and thus bring back higher returns.
Getting High-Quality Data
Whatever the particular purpose an investment firm needs company data for, what matters most is to put data quality first. Low-quality data may be harmful when training algorithms, building models, or generally making data-driven decisions.
Thus, investment firms should run consistent data management policies that clean company data before using it for such tasks. When acquiring data from third-party sources, it is important to make sure that all alternative data sources are utilized and high-quality of the datasets ensured.
Additionally, it is important to take notice of how the provided data is structured. Convenient formats will make data more readily usable thus ensuring efficiency of the process. Badly structured data, on the other hand, will delay and diminish the actual value of the acquired data.
Thus, company data is very useful for investors when the quality of it is ensured.