Every day, almost every moment, we are making decisions. The decision-making process is extremely important in our life. Since as long as you made a decision, we will contribute most of our capital, time, focus and energy on the direction you selected. We believe that better decision can make life better. Different decision results come from, sometimes, different knowledge set or preferences people have. Before doing this project, we have reached a consensus that knowledge is power. And data mining can give us better knowledge to make better decision.
This project study will introduce the detail of our working, including data-preprocessing, exploratory data analysis, predictive model construction, result analysis. The report is designed to have 4 sections. Section 1 will be a brief project introduction. Section 2 is about data description and data preprocessing. The data mining methodologies we employed is detailed in Section 3. Section 4 shows the results of this data mining project.
Problem Description and Objective
Venture capital is financial capital provided to some young, high-potential, high risk companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT and software. In addition, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and are hardly qualified to secure a bank loan. The typical venture capital investment happens when venture capitalists show strong interests on the targeted start-ups and expect high returns at the time when they exit, which is usually with the company going IPO or being acquired.
The initial idea we have seems irrational at first. We supposed that we are the investment manager of a venture capital fund. We have 10 million in hand. Generally, if we do nothing with this money, our money keeps watered due to the inflation. In effect, the existence of a huge amount of historical data shows that data mining can provide a competitive advantage over human inspection of these data. Even though, economics theory named the Efficient Market Hypothesis suggests that the markets adapt so rapidly in terms of price adjustments that there is no space to gain profits in a consistent way. However, this theory does not always align with the reality in the financial market, which leaves the investors some space for speculation.
The general goal of venture capital is to maintain a portfolio of equities of some early-stage, and high-potential companies.