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Reports on Indiana VC activity differ starkly

January 13, 2017

Around this time last year, PricewaterhouseCoopers published a report stating Hoosier companies landed $55 million in venture capital on 16 deals in 2015. The figures came from its quarterly MoneyTree report, which, at the time, was based on data from Thomson Reuters.

For its newest report out this week, PwC pulled data from its newest research partner, CB Insights. And this report noted that there were 27 Indiana deals worth $157 million in 2015.

That's a $102 million difference.

IBJ couldn't determine which deals CB Insights tallied that Thomson Reuters hadn't, as CB Insights declined to disclose its list of 2015 Indiana deals. But this news organization has written about a few deals that weren't included in Thomson Reuters' initial count, and, at least until recently, the MoneyTree report had been earning a reputation for missing deal activity.

"The MoneyTree report has historically underreported venture capital activity, from my experience," said TechPoint CEO Mike Langellier. "[The new] report seems to be more representative and accurate, which I’m glad to see."

While definitions may vary, venture capital is generally defined as money investors use to buy equity stakes in private, high-growth companies in order to fuel that growth. The investments are considerably risky but the returns can be tremendous.

It's not uncommon for Thomson Reuters to make retroactive updates, and in an email Thursday a spokesman for the firm said its latest data showed $74 million in venture investments in Indiana in 2015. That's still $83 million less than the figure from CB Insights, but a smaller gap nonetheless.

He said two factors are at play. First, its industry peers may have broader definitions of venture capital, including "acquisitions for expansion" or "private investment in public equities" in their counts. While Thomson Reuters excludes such deals, he said, "some of our competitors, however, do include these deal types, especially when VC firms participate."

The spokesman also said data providers do not have identical networks of data contributors, and "it is common for some VC firms to provide investment reports to only their preferred data provider, eschewing the others."

Some of the deals Thomson Reuters didn't include in its 2015 report include software firm MOBI's $35 million equity-capital raise to fund an expansion, as well as High Alpha's $35 million infusion from well-known venture firms across the country to create and grow enterprise-software companies.

To be fair, a sizable chunk of High Alpha's investment went into a war chest that is being used to fund other companies—so Thomson Reuters likely didn't deem it as venture capital under its methodology.

With respect to MOBI's investment, a PwC spokeswoman said in the fall of 2015 that the firm considered it more of "a minority buyout investment than venture capital investment." MOBI CEO Scott Kraege said at the time that the deal was a "minority investment" and felt it should have been included in the tally.

Those two investments aside, Thomson Reuters has missed other deals that were widely considered venture investments locally, including an $8.2 million haul by software firm HC1.com in October 2015, and a $25 million round by millennial-focused media outlet Odyssey last April.

No data provider is perfect, and some Indiana deals may slip through. But PwC seems to be betting that CB Insights has a better net.

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