Growth in Alt Data Usage Among PE/VC Firms Eclipsed Hedge Funds in 2023

In the race to stay ahead of the curve, in 2023 more private equity and venture capital firms decidedly charted new territory by diving into the world of alternative data. According to Lowenstein Sandler’s annual 2023 Alternative Data Report cited by Integrity Research Associates, usage of alternative data rose 31% in 2023. While growth stalled among hedge funds who have been the biggest alt data users historically, “78% of Venture Capital Investors say they use alternative data (up from 11% in 2022), while 63% of Private Equity firms also use alt data (up from 29% in 2022)”.The surge in the popularity of alternative data has become a pivotal force, reshaping how intelligence is consumed to drive strategy. Here we delve into the business needs and chief concerns in the PE/VC space like sourcing, diligence, and portfolio monitoring, and explore how alternative data providers like Consumer Edge data are trusted to deliver invaluable insights.

Tackling Key Concerns: Quality, Value, and Security

For private equity and venture capital funds evaluating alternative data, the biggest concerns as cited in the Lowenstein Sandler report are most notable data security and breach issues, with the ability to easily derive actionable insights and trusting the quality of the data rounding out other top considerations.

  1. Data Quality: Oftentimes, the phrase “data quality” is tossed around haphazardly in the alternative data space. Meticulously curated datasets that undergo rigorous validation processes ensure decision-makers can trust the accuracy and reliability of the information at their disposal. With CE data, the quality is real: panels are refined, datasets are optimized, and the end result is reliable insights.
  2. Ease of Deriving Value and Actionable Insights: The sheer volume of data available can be overwhelming. Layer in an abundance of dashboard views and file delivery options, and extracting meaningful insights can easily become a challenge not worth pursuing. Consumer Edge data is designed for usability, making the most popular use cases of sourcing, diligence, and portfolio monitoring a breeze. The platform provides intuitive tools that empower users who don’t have teams of data scientists at their disposal to derive actionable insights effortlessly. Plus, with access to our expert Insights team, it’s simple to turn raw data into valuable intelligence.
  3. Data Security: In an era where data breaches make headlines, security is non-negotiable. Consumer Edge’s three-prong proprietary data privacy framework creates synthetic data within our partners’ environment, ensuring anonymization before it hits your systems. Confidently navigate the platform, knowing your data is shielded from unauthorized access or breaches.

Unlocking the Benefits: Why Alternative Data is the Right Move

The adoption of alternative data among private equity and venture capital firms signals an industry acceptance of these types of data providers, begging the question, “Is it still alternative data, or just ‘data’ now?” Multidimensional data providers like Consumer Edge offer a holistic view comprised of diverse datasets spanning credit & debit card transaction data, ecommerce email receipt data, scanner data, web data, clickstream analytics, and more.

  1. Rich Market Intelligence: Access to a diverse range of alternative data sources translates into unparalleled market intelligence. With Consumer Edge’s coverage of over 12K public and private brands, PE/VC firms can gain insights into consumer trends, market dynamics, and competitive landscapes, empowering them to make well-informed investment decisions across their portfolio.
  2. Proactive Risk Management: Identifying and mitigating risks is a core aspect of successful investment strategies, from detecting inflection points in industry trends to identifying emerging competitive threats. Consumer Edge data equips PE/VC players with the tools to proactively assess risks, enabling them to navigate uncertain market conditions with confidence.
  3. Enhanced Due Diligence: Thorough due diligence is the bedrock of successful investments. Consumer Edge data streamlines the due diligence process by providing comprehensive data with industry-leading accuracy, enabling faster, more accurate investment assessments.

Embracing the Future of Alt Data

As the speed of intelligence and menu of data options continues to accelerate, embracing alternative data is no longer an option but a strategic imperative. The surge in popularity of alternative data in 2023 signals a paradigm shift in the industry’s approach to information and decision-making.

Consumer Edge data emerges as a beacon in this transformative journey, addressing key pain points of data quality, ease of deriving value, and data security. By unlocking unparalleled market intelligence, facilitating proactive risk management, and enhancing due diligence processes, the case for adopting alternative data becomes a no-brainer.

Leveraging Consumer Edge data, a $50B private equity fund worked closely with their portfolio companies to adjust marketing strategies and promotional campaigns​, evaluate cross-shopping trends for new partnerships​​, and assess real estate investment opportunities in new geos​ based on demographic and geographic trends.

Alternative data use cases vary greatly depending on the size of the PE/VC firm and even by user. For instance, Cross-Shop data in the CE platform can reveal interesting insights when a firm is helping the strategy team at one of their portfolio companies explore new partnership opportunities.

CE Vision: Cross-Shop dashboard showing how a home furnishing brand might analyze how Williams-Sonoma customers shopping behavior overlaps with other brands like IKEA, Wayfair, Crate & Barrel, and HomeGoods.

Other popular dashboards offer insights into brand and industry comparisons, subscription retention and shopper loyalty, and demographic and geographic breakdowns.

In conclusion, the future of private equity and venture capital lies in the hands of those who can harness the power of alternative data. It’s not just about staying ahead of the curve – it’s about defining the curve itself. Consumer Edge data paves the way for a new era of strategic decision-making, helping clients turn insights into power moves.

Consumer Edge is a leader in data-driven insights focused on the global consumer, with decades of experience providing the biggest hedge funds and investors in the world with alternative data. With data spanning credit and debit card transaction data, scanner data, and email receipt data, we boast deep coverage on hundreds of industries, subindustries, tickers, and symbols year-round. Reach out if you’d like to benefit from using CE Transact, CE Vision, or our other products to see how you can benefit from CE’s unrivaled consumer intelligence.