Information vs. Trust in Early-Stage Investing

Looking back at the last ten years of early-stage investing, and ahead to the next ten: what keeps changing is the form of the information an investor can get about a project. Ten years ago, whether the team even had a website was one angle to look at. A few years back, you’d watch their social media activity. These days, employee turnover patterns have become an important reference. You can see where this is going — structured, disclosed information about the private market is only going to multiply. Combine that with data tracking and AI, and you’ll have more angles than ever to look at any company from.

But one thing isn’t going to change: early-stage investing is a trust- and relationship-driven activity. An investor gets interested in a project and decides to engage — and only then does any of that information start to do its work.

So, the question: is trust the dominant factor only because information has historically been scarce? If the private market got as transparent as the public market, would trust stop being the deciding factor?

Probably not — because the private market, especially at the early stage, has a lot of inherently missing and uncertain information that has nothing to do with transparency. Even the founder doesn’t know whether their new drug will produce valid human-trial data, whether a fresh marketing approach will land, whether a particular new AI architecture will scale. Trust fills in for that irreducible uncertainty — or, put differently, it’s the willingness to bet. As a project matures and the missing pieces shrink, the trust required in a transparent environment naturally shrinks too.

Early-stage investing is a game of trust.