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Aaron Rinberg  |  February 12, 2019
“Anecdata” – What’s Really Driving VC Investment Decisions

If you’re a venture investor, you do a lot of diligence work to ferret out promising companies. No doubt you look at lots of data to judge these potential investments—but are probably also considering anecdotal evidence of a company’s strengths or weaknesses, like reports from friends or chatter on the Internet.

But maybe you should also think about a new category of information in these situations: what I call “anecdata.”

Indeed, I’ve found that when you collect enough anecdotal evidence about a company’s technology, you have something more solid and helpful than isolated stories: anecdata. Anecdata is the aggregation of all these anecdotal experiences and stories, which you can then use to identify larger trends and draw general conclusions about the opportunity at hand. While you shouldn’t make an investment decision solely on the basis of anecdata, the idea does talk to reality: individuals that work on the investment team at venture firms are human beings and are as susceptible to cognitive biases as anyone else.

While loads of granular spreadsheets with tons of usage/cohort/financial data is great when evaluating investments, investors are also swayed by the firsthand impressions of trusted sources within their network. Many entrepreneurs overlook this fact and pitch their companies solely by relying on the story the data is telling, instead of also emphasizing the individual stories their customers are telling.

I remember evaluating a consumer fin-tech business that threw off tons of data showing loads of reasons why we shouldn’t participate in the financing round (e.g. negative unit economics and unclear revenue-growth trajectory). But when I downloaded the company’s app, I had such a delightful experience that I bullied people in my network to use the service and give me feedback. I also collected stories from users I met in passing at various meetings and events. Ultimately this anecdata presented an extremely compelling argument that led us to invest in the company.

While I wasn’t part of this particular deal, there might have been a similar dynamic at VC firm Lightspeed when investor Barry Eggers first discovered the Snapchat app because his teenage daughter and her friends were so absorbed with it.

I think this all offers some real lessons for entrepreneurs. To ensure that a potential investor gets the right impression of your company—and is not just relying on data to evaluate it—I would recommend that you:

— Line up customers that will be happy to talk to investors and give their story as to why they picked your product and how they use it;

— Be proactive and offer to talk to people in the investor’s network and pitch your product;

— Once an investor introduces you to someone in their network, follow up quickly and make sure they have a delightful experience with your team / platform.

You never know—all these interactions could produce enough anecdotes to create some very valuable anecdata, and lead to an investment in your company.


Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor makes its services available to the public or other advisory clients. For more information about Battery Ventures’ potential financing capabilities for prospective portfolio companies, please refer to our website.

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