How CB Insights uses data to illuminate the future

Anand Sanwal is Co-Founder and CEO at CB Insights. He shares his expertise telling stories with data and building a great company culture. Follow his reading list on Quibb.

Anand started CB Insights with his co-founder, Jon Sherry, after they managed American Express’ $50 million fund for innovation and recognized a need for information and data about private companies. CB Insights collects and tracks this data around private companies, their investors, acquisitions, and the industries they are in with the goal of helping illuminate the future for clients.

Pundits versus data

CB Insights’ focus on data-driven decision making contrasts with the type of decision making that runs rampant in the tech and business world. Often, decisions are made by “who yells the loudest in a board meeting,” according to Anand. CB Insights aims to find the balance between these two extremes:

“There’s a spectrum along which decisions are made, and so at one extreme it’s pure gut instinct or ‘decibel-driven,’ we call it. And then at the other spectrum is pure data-driven decision making. Both extremes are unhealthy. What we see, though, is that our clients make very big, massive decisions a little too reliant on the pundit decibel-driven kind of thing.

It’s who’s the loudest in the board meeting, or who has the most influence, or who knows somebody at the company and they say that the founder’s great. If you’re a corporation, these are massive strategic decisions around who you should acquire or what market to get into, and a lot of times they’re bet-the-farm type of decisions. Making them in a completely semi sort of ad hoc way just seems very inadequate.”

Decision making is something that is at the core of any and all companies. Yet a process for decision making is rarely codified inside any organization. It’s also uncommon to hear people evaluating or adjusting their decision making process over time, based on what they’ve learned from the outcomes of previous decisions. Instead, as Anand notes, many use unfounded tactics simply because they’re convenient and accepted:

“We joke with our clients that too often these big strategic decisions rely on the three G’s — which is Google searches, Guys with MBAs, and Gut instinct.”

CB Insights wants to change that by providing companies with the data they need to look into the future, predict trends, and make decisions based on reality rather than on instinct. Their approach has proven successful. The company is doing well, with thousands of happy customers paying a pricey subscription fee every month to access the data and analysis CB Insights provides. Anand cares deeply about his customers, and wants to ensure that they’re well-equipped to run their businesses with as much information as possible.

“We want to be the folks out ahead of these trends and make sure that people know about it… It’s all very rooted in the data, and we see trends, or we see media mentions popping in a particular category, and then that alerts us the fact that, hey, we should pay attention to this area.”

There are, of course, many smart people making great points about their industries, and they have credibility. The goal of CB Insights is not to dismiss them, but to use data as an equalizer to help inform these opinions. By looking deep into the data, CB Insights is able to find nuggets of truth that are hard to find seemingly never-ending rumbling of tech punditry.

Accommodating and mitigating the risk of user-submitted data

Historically, CB Insights collected data with ‘The Cruncher,’ their automated data collection tool, out of necessity. When the company began, no one knew who they were, so, unsurprisingly, no one wanted to give them their private data. But over time as their reputation grew and their reports appeared in publications like The New York Times, companies and firms started offering up their private data. “The beauty of it for us is that we now get a lot of proprietary data,” Anand says, “so we get deals that aren’t disclosed, and we get metrics data that isn’t disclosed.”

They built another product — ‘The Editor’ — to streamline the process of adding this type of user-submitted data. As a result, their ratio of auto-collected to user-submitted data is shifting to about 70% programmatic and 30% user-submitted. Anand expects this shift to continue, becoming about 50/50 by the end of 2016.

However, when adding this type of non-algorithmically generated content, and especially when letting individuals outside the organization do so, there are some risks that Anand and his team carefully evaluated:

“With this, the key thing was, are people going to submit bad data to us? It’s not maliciously that they’re submitting bad data to us. It’s just that they’re trying to look good… We have a verification layer before the data goes into CB Insights, so you have to put a source, and we review it.”

Anand brought up the recent example of GM’s acquisition of Cruise, a self-driving car startup that had raised $18.8M. While Cruise had many investors, the exact details were not part of public record. After the acquisition, people started submitting information to CB Insights, claiming they were investors and wanted to be added to the company’s profile. “There’s only been two instances where I’ve seen this,” Anand says. “Cruise and Uber. Everybody wants to be an angel in Uber somehow. I understand why, but we just have to say, ‘Listen, you need to prove it, and so we need some sort of filing, something with the company saying that you were an early investor. Because if you bought it in some secondary market transaction, then you’re not really an angel investor in it.’”

While Cruise and Uber are extreme examples, they highlight the way that CB Insights looks to protect their data. At this point, the company is well-respected (and of course every company wants to be in their reports). It’s one of the reasons why they are able to gather a lot of proprietary information, and continue to offer such a high-quality product to their customers.

Following digital breadcrumbs to a vision of the future

Through The Cruncher and The Editor, CB Insights has access to a sea of juicy data. From there, the goal is to try to find trends in that sea, to pick out the nuggets, and see if they can follow them to a conclusion about where an industry is headed.

That’s all easier said than done, and it’s where the company is able to create value.

“Can we follow those digital breadcrumbs, find this first interesting nugget, and then track the evolution of that type of trend? Can we find the nuggets of information early that would have helped predict these trends much earlier?”

Is a research paper the seminal work on a budding industry that’s set to explode? Or, like most, will it lead to nothing? Predicting the future is a tough job, and there’s tremendous value in identifying why something matters, and connecting it to other trends and points that matter.

“It’s finding that first nugget and then seeing there’s other things happening around it, like looking at patents, or looking at other research, or looking at VC investment, or looking at product launches. How do you piece all these disparate signals together and say, ‘Okay, there’s actually something there,’ or ‘It was an interesting idea which hasn’t gained any traction?’”

That is the question that CB Insights works on every day: how do you piece these signals together and make sense of them? Strangely enough, it’s something that hasn’t really been done before, not from this data-driven angle. People aren’t used to applying data to their decision making process as one of the key inputs, but that’s changing now with the tools that CB Insights shares with their customers:

“Separating that out and then alerting people to it I think is something that it hasn’t been done before. It tends to happen very late in the cycle. We’re trying to get to it much earlier. There’s all sorts of interesting signals, some that we’re mining, some that we’ve yet to mine that we think will help us identify these sort of emerging tech trends.”