TLDR:
- Private equity and venture capital firms are utilizing external data sources, known as “alternative data,” to identify investment opportunities and add value post-investment.
- AI is becoming a disruptive force, but its effectiveness relies on the quality of data sources.
Article Summary:
In the world of private equity and venture capital, firms have been making investments in external data sources, commonly referred to as “alternative data.” This term encompasses various information derived from sources outside a company’s internal systems, such as social media chatter, news feeds, government reports, industry databases, anonymized credit card transactions, and satellite imagery. Potential applications of this combination of external data and AI include identifying investment opportunities, conducting due diligence, and enhancing value post-investment. The effective utilization of AI and machine-learning tools is highly dependent on having a sound data strategy to support them, as the quality of data sources underpinning the AI revolution plays a crucial role in its success.
The collaboration between external data sources and AI presents significant opportunities for investors looking to stay at the forefront of their industry. While these approaches have been particularly refined by investors in the financial sector, they also offer valuable insights for companies across various industries on how to leverage alternative data effectively. As AI continues to emerge as a disruptive force, companies need to recognize the importance of harnessing the full potential of data sources to maximize the benefits of AI and machine learning tools.
The authors, Adam D. Nahari and Dimitris Bertsimas, who are experts in technology, data science, and investing, emphasize the crucial role that external data and AI play in shaping investment strategies and decision-making processes. Their research and insights highlight the transformative power of combining alternative data sources and AI technologies in the realm of finance and beyond.
