Proprietary data sets as gold mines

Proprietary data sets as gold mines

If data is the new gold, then for some IoT startups building proprietary data sets could be the gold mine.

I’m a big proponent of open data but that’s for non-personal data held by government. Tax payers or rate payers fund the collection, storage and use of that data. It makes sense for governments to make that data available to the public for re-use.

Open data in private business contexts is also generally useful, especially where the value from that data can be maximised in a distributed or decentralised manner. For example, the recent story of orchard growers in Australia monitoring fruit fly populations as they pass through Goulburn Valley.

The value of the data set in this case is from aggregating information collected from other traps deployed at other properties and managed by other growers, giving all participants a township-wide view of the fruit fly problem.

Investing In IoT Startups

What got me thinking about proprietary data sets was Ken Briodagh’s interview with Lotan Levkowitz of Israeli venture capital company Grove Ventures (S2 E18 podcast).

Right at the end, Ken asks Lotan for advice about what IoT startups should focus on to get VC interest. The first part of the answer was expected- solve a big problem. That’s great advice, especially as most IoT startups tend to be device-centric. Solid but generic advice, applicable to all startups.

Proprietary Data Sets

The second part of the answer was more interesting. Lotan talked about how building proprietary data sets could be the source of unbeatable future competitive advantage. Exactly the type of stuff that gets VCs interested.

He gave an example of a startup they had recently invested in. The company uses acoustic sensors to collect the sound of various running machines from different suppliers. Presumably, over time they will be able to work out what normal sounds like for each. This proprietary data set will in the future be their gold mine to provide diagnostic insights, detecting abnormalities as part of a maintenance service, and so on. No one else will have that data set. It becomes their secret sauce.

Clearly proprietary data sets on their own can have limited value. It is the smart things that the startup can do with the data in the future that’s critical. And the fact that the data set is proprietary. That becomes an enabler of lasting revenue streams. Yet, just like a mine, it takes a whole lot of risk and investment upfront to get that ongoing benefit.

Still not convinced? Then think what Google’s and Facebook’s biggest asset is today.

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