If data is the new oil, why don’t software companies value it?

It has become a cliché to say that data is the new oil. The analogy breaks down quickly long before the bottom of the barrel, but there is a more interesting angle: software start-ups and oil exploration companies.

I believe the hard hats have a lot to teach the hoodies about articulating the assets driving their valuations.

One would have thought they were about as opposite as skincare and defence, but I see striking parallels in the asset makeup of a pre-production oil explorer — call it OilCo — and a pre-revenue tech start-up — TechCo. OilCo’s key assets are ideas (where to drill), data (for example seismic), small teams of highly skilled people (engineers and geophysicists), and technical execution (mathematical models and well designs). That sounds a lot like TechCo to me — ideas (problem hypotheses and an MVP), data (on the problem and users), people (developers and PMs), and a technical path from A to B (code). And the many similarities don’t end there; for example, there’s the export route / go-to-market, and the network interactions of the surrounding ecosystems.

It is important to note that all of these assets are intangible — they have no physical existence. Indeed our friends in the accounts department don’t call these assets and they don’t appear on either balance sheet. Where they do appear, however, is in OilCo’s valuation and this is where the developers can learn from the drillers. OilCo shares asset-specific data in (non-GAAP) presentations in a way that investment analysts and potential acquirers plug straight into their valuation models. I know as I used to run these models in a past life — these assets are what investors and acquirers are buying after all.

TechCo communicates the narrative, strategy, and business model very well, but misses the assets that are the company’s foundational building blocks of everything — from the economic moat to the future revenue model.

Without articulating the foundations, the founders risk the narrative being interpreted as anything between vision and snake oil. And investors are not putting value on 90–100% of TechCo’s assets.

So why is this the case? I believe it is simply the industry maturity — oil’s journey here took more than a century, and software will value its assets similarly in time. Those start-ups doing it sooner will reap the benefits, including in fundraising and better exits. In a tougher capital environment with more fundamental investor expectations, this is all the more important.