The last few years have seen a huge amount of faith placed in the start-up world to fix all manner of woes. There have been corporate incubators, co-working spaces, university spin-outs and all manner of other projects aimed at both fostering entrepreneurship but also helping those start-ups to scale and become successful businesses.
Whilst television shows such as Dragons Den/Shark Tank may be entertaining, there are a number of slightly more respectable attempts at predicting which of these fledgling businesses will make that next step and ‘scale up’.
I wrote about one such project earlier this year. The project, called Test4startup, uses an algorithm that was developed in conjunction with a university professor to supposedly test the prospects of a startup idea.
How it works
Users describe their business in as much detail as possible, and the algorithm then creates a pool of keywords that reflect the genesis of the idea. This is used to define the market and establish the potential for that sector.
The system then cross references this with the trends it has identified for that sector by mining the news and various other sources to build up a picture of the health of a market, and indeed the kind of rivals you might face.
It then compares your data from these two steps to compile a list of recommendations for you and your startup. It might tell you, for instance, if you’re pricing your product too highly and that you need to reduce it by $x to properly compete with your competitors.
Early Metrics
Suffice to say, the viability of the system is very much in how successful it is at predicting the success of the start-ups. One venture with a track record is French company Early Metrics.
They’re a rating agency specifically tailored for start-ups. They aim to examine a number of key factors before providing a single measure to highlight their potential.
The team consists of a number of analysts that go over each start-up with a fine tooth comb, examining 50 different metrics, including the management of the start-up, its business plan and financial results. All of these are then put together to gauge both the value of the start-up and its growth potential.
Whilst investors are an obvious target market for the company, they also hope to prove valuable to the start-ups themselves, with the summary provided as part of the analysis freely available for pitch-decks, whilst the team hope the analysis might highlight some areas for improvement.
The venture, which has recently opened an office in London, has so far analyzed over 600 start-ups from 5 different countries, with a client list that includes financial heavyweights such as Visa and Santander.
“The choice to expand in the UK was quite logical. We had an increasing number of clients asking us to rate UK-based startups. With a large number of companies and a high concentration of investors in the country, there was a clear need for a transparent actor serving the investors on the one hand and the startups and SMEs on the other,” founder Antoine Baschiera said at the launch of the London office.
With the number of start-ups booming in recent years, platforms such as this will be increasingly valuable in sorting the wheat from the chaff. It’s a trend that’s well worth keeping an eye on.
