Connections Still Important For Investment Decisions

Date 28th August 2015

Connections Still Important For Investment Decisions

Insight and foresight have a vital role to play in making the best investment decisions despite the growth of big data, a meeting hosted by the New Zealand Private Equity & Venture Capital Association (NZVCA) at the Auckland offices of Chapman Tripp heard this week (25th August).

Colin McKinnon, NZVCA Executive Director says: `This workshop aimed to look at how businesses can gain market intelligence and read between the lines for better investment decisions. Sophisticated investors are using new tools for data analysis and scenario simulation to develop insight for private capital investment origination and due diligence. Demographic changes can diminish the value of historic data for predicting future outcomes. But armed with an understanding of the cognitive decision process of individuals along with an ability to “crunch” a big amount of data, investors can provide foresight on customer behaviour across many products and services. But it was fascinating to hear that old fashioned personal connection still has its place. PE managers are still looking for on-the-ground, in-market expertise and want to speak with the right person.’

The meeting heard that resources such as the Gerson Lehrman Group (GLG) expert network provide relevant personal connections that give investors introductions to people whose experience and expertise are important references to making the best business decisions.

Charlie Ross of GLG says its network includes 450,000 experts worldwide and although conversations are personal and direct there is anonymity for the enquirer.

Matthew Houtman of Pioneer Capital, explains that GLG had introduced relevant experts to help a portfolio company validate a critical strategy by providing access to experts in the field and close to potential customers.

Michelle and Don Perugini, Analytics & Enterprise Intelligence, EY, add that big data and cloud computing are used to build simulation models to predict consumer behaviour, and that the psychology of the consumer was at the heart of the modelling. They point out that the Simulait model is based on the concept that cognitive decision process of individuals is unchanged and that human behaviour is driven by changing content and external influences.

They note that by integrating access to huge data resources and a model of consumer decision-making, it is possible to make accurate predictions about future consumer behaviour. These tools can help design products and marketing strategies for significant revenue gain or cost saving.

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