How can investors be smart with no data?
Innovation should be a good investment.
This should be one of the best times in history to start new companies – and to invest in them. New technologies are driving structural changes in many American industries, and thousands of new insurgent companies are launching credible challenges to market incumbents that seem ill-equipped to adapt. The most likely winners in the gold rush for new markets are either in early stages today, or are not yet formed. And entrepreneurs and their backers enjoy uniquely favorable company-formation conditions. The future is ready to arrive.
Investing in innovation has been perilous for most. Ten-year returns to venture capital funds have been negative. VCs expect high loss ratios, and for every portfolio company that goes to zero a founding team breaks up or starts over with nothing. In the absence of good data, founders and investors face dizzying choices for capital allocation and business management. How do you pick the winners? How do you find the winners? How do potential winners navigate to success? Today it feels like chance – and “lottery ticket” analogies abound.
Even in success cases, liquidity challenges to early-stage investors are daunting.
Companies scale faster than ever, and go public later than ever – if at all. The bridge between private and public markets, historically paved in the disclosure of an IPO, continues to grow longer and narrower. This leaves many large fund managers, who are responsible for generating returns on trillions of dollars, standing on the sidelines with little access to growth markets. When growth companies do on occasion go public, they tend to be poorly-understood, with volatility to match. And IPOs of late are often treated as an “exit” rather than a financing event.
This is terrible for U.S. innovation and early-stage capital formation.
An investor’s job is to price risk, and doing this requires data. Markets function when investors know what they are buying, but a diversity of unintended consequences – cultural, legal, financial, and regulatory – has obscured many of the key working parts in the growth sector.
We think liquidity can only follow from transparency.
Triton develops analytically-rigorous insights and information about companies in the innovation and disruption economies using primary and thousands of secondary sources. Our products are designed exclusively for institutional investors and acquirors to enhance data-driven decision-making. We think of what we do as fundamental analysis of the growth sector.