Why don’t VCs commission market research?

Whitney Hess, an independent user experience expert and consultant got a lot of attention couple of weeks ago with her piece titled: “If VCs Understood UX…” One sentence in particular grabbed my attention:

If VCs Understood UX they would commission research, not follow trends.

So why don’t venture capitalists and their funds run quick market research before deciding on an investment? On a superficial level it seems to make a lot of sense – instead of relying on a gut feel, pattern matching, and following the trends they’d have hard data to back up decisions costing them hundreds of thousands and millions of dollars.

After all, it doesn’t require super scientific qualitative research, months of planning or budgets in the tens of thousands of $£€ to find evidence supporting (or destroying) whatever vision the fund-seeking startup founders are pitching.

The VC view – Eileen Burbidge

I asked Eileen Burbidge of Passion Capital (they’ve invested in our startup) this exact question – why don’t VCs market research?

We’re backing founders and their passions/ideas and ability to execute. We shouldn’t get market research but the founders maybe – depending on the stage of their business, reason and goal of the research.

In theory the reason is because we’re meant to be backing founders and models/propositions – what market, what tactics, what features should be up to the founder(s). This is not for us to really drive.

Any startup (that we invest in because of such early stages) is likely to pivot at least 2-3x before “working”. I think our doing market research would be a waste of time.

However, I could see that market research would make a lot of sense for an incubator or someone like Rocket Internet – anyone starting or building a business themselves.

I’ve actually talked to quite a few startups about if and how they research customers and markets they’re trying to win over but that deserves another post. Are you a startup? I’d love to hear about your experience with market research.

Ansr.io – set up surveys and forms on mobile.

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