If the technology is as good as is stated in the TC article couldn't they pretty rapidly build up a listing of undervalued companies on Wall Street and buy into them?
But the technology, at least in my understanding at this point, is nothing more than running your standard regression on a proprietary dataset.
It sounds like technology, because cool-sounding mathematical prediction is the selling point... But it isn't that hard to do (though with data, and time, you can surely incrementally improve it). The story here is a community-known credential. Its value comes from other people relying on it as a baseline. Like any other credential, it doesn't guarantee you'll be any good - but it is a better-than-random predictor.
Because there isn't anything like this available already, and it would be a useful thing to have, they have a good chance. For it to be used as a reference point, it doesn't need to be great - it just needs to be betterer- enough -than random (and get adopted).
A "good predictor" just means "5% better than totally random". If you have a strong team, and good connections... your chances are surely better than if you had a weak team and no connections (though exceptions occur in both ways). If you can formalize a bunch of these factors, and find what they weigh... you have a baseline predictor that's better than totally random.
If I could predict the market, I would be investing like crazy! :)
But really I'd be skeptical about data in this first batch of tests. I'd bet that YouNoodle used these widely known startups as a training set for its algorithm, or at least as a test set...I imagine if one of their unit tests came back and said "Facebook is gonna be worthless", someone would tinker with the algorithms until it didn't say that anymore. Usually you deal with this problem by setting aside some data points until the very end for you to evaluate your accuracy, but without knowledge of where they got their training set, you can't really do this yourself
Mighty oaks begin as small acorns.
To make a counterpart for startups seems interesting, and worthy. With the growing market of successful startups, the industry that supplies them with services such as this one should become viable.
just like astrology
Looks like they got it covered.
Done! Here's the code:
<html><body><h1>NO!</h1></body></html>
But seriously, there are so many subjective factors (including luck) in judging the viability of a business that I doubt their ability to do so. If they produce a better-than-random track record, they can change my mind. Until then, I am highly skeptical.
The predictions from YouNoodle might be closer than simply picking a random number from 0-$1B, but I think a regression with a few regressors(founders previous startup success, current income, market size, etc) would be just as useful.
But most people don't understand statistics, and if you overestimate the valuations of new startups, that particular startup will likely link to YouNoodle. They could turn into a successful player in the TechCrunch/Valleywag space.
This is posed as being equivalent to making accurate predictions of the near future, but it's not.
If they did this, they should be open about the numbers. Hell, I'd be open about the data too, and make a challenge to make a better predictor. If the algorithms still run on their machines, they can only gain by being open.
But in order to be a reliable predictor, I think it would be necessary to predict the economy as well. The same startup that would be successful during the bubble would not be so successful after it popped. In other words, I don't think they have enough inputs to be reliable predictors.
On the other hand, perhaps they don't need to be reliable absolute predictors. The VC's question is basically which should be funded. This might be able to give a rough ordering, which is plenty valuable.
Still not so much as if their algorithm holds up to scrutiny over the next 3.
Sure, it could take in account information about past startup founders, but what if you asked it about Larry and Sergey in 1998? No past information. How are you going to predict how well they executed Google?
Quite a smart system, though. Kudos to the YouNoodle team.
(The name's awful, though. If the founders are here, don't be offended, it's nothing personal, but consider another name?)
found it http://edition.cnn.com/2008/WORLD/europe/03/07/spiritof.musi...
Sounds like a good idea to me; if they're able to do what what Moneyball did for baseball and what PER did (to a lesser extent) did for basketball all the power to them. What's the downside of having more accurate tools and indicators> Since the tool will be public and founders will know what to focus on.
However, I highly doubt too many VC's will take them seriously until they start producing verifiable results instead of form fitting historical data. Very few took sabermetrics and some of the other sports' quant stuff seriously to start either.
"It’s hype and nonsense, and it won’t work." ~MA
Powerset is worth whatever MSFT was willing to pay for it, not what the predictor says its worth.
That's my theory anyway.
"Definately."
Hmm.. should really repeat and average..
"Will my startup be worth megabucks in 3 years?"
"Yes."
Sweet - I like this one.
Historically successful entrepreneurial teams have exhibited drive, ambition, a great network and ruthless determination. What makes you say its going to change.
Hats off to these guys
The page would be interactive and users would drag bars or change data such as cost of infrastructure per user, cost of marketing per user, data about competition etc, and then the probability of success would change in real-time.
It says: "YouNoodle aims to make the prediction right before the first round of funding for a company."
What happens if a company can't or doesn't raise capital? If there were a tool on the site like the just launched http://webequity.com.com.au http://bit.ly/3lZTZa, these startups could still launch whereby the team is paid with equity in the startup instead of cash.
Also, with the valuations in place, tools could be provided to raise money by way of small payments from investors who would also use the site. Alternatively, tools may exist to simply locate such investors with the financial exchange to take place off-site. Such investors may co-invest alongside a high-profile investor who leads the round and who takes an active role in monitoring and working with the company. In this way, a company can uphold its valuation by enabling many diversely sourced investors to access a round who are prepared to pay a premium to access such an investment that they would otherwise not be able to find or participate in, and are likewise also willing to forgoe any board seat claim.
It looks as if its mainly basing the predicted investments off the founders and what they have worked on in the past, but is that good enough? We all know startups can fail no matter who is behind them - Cuil, its founders had first hand experience with the leader of search, Google, but has still pretty much failed so far.
Plus, apart from a bit of fun, who would use it? I doubt investors would use it over their years of experience in the industry, and it seems like they are in fact the target audience!
I look forward to giving it a go.
I used YouNoodle and I felt all this prediction thing is spoof - The real crux - This IS going to be a startup directory (crunchbase + social aspect.)
Imagine a niche area for linkedin to concentrate on - high powered entrepreneurs all connected and talking about their ventures even stealth startups.
Perhaps it was too much conflict of interest to their core reporting/news business model, or too much work?
Still it is interesting to observe the shifts from reactive to proactive process in that space.
TechCrunch tested predictions of success - but what of failure? (maybe it says they all succeed...?)
Anyone care to enter a past learning-experience startup, to test this out?
YouNoodle may or may not be an accurate predictor, but I bet they're good at predicting which teams/startups are likely to get funding from investors/VCs.
