VCJ Report: Predicting Success in VC


Every venture capitalist wants to know what sector is ripe for innovation and when to invest.

Firms often ask young associates to do the leg work, by attending conferences and meeting with cash-hungry startups that are under the radar. Or firms compile data from independent sources, such as from Gartner and other market research firms, to come up with an overview of a particular sector.

Then, they go look for companies that have potential to dominate the market.

But imagine plugging data into a computer, such as hiring trends and past rounds of funding for thousands of companies in a sector, and then having software that crunches the numbers and predicts what areas are untapped by startups and ripe for investment opportunities. That way, when a gung-ho entrepreneur walks in a firm’s door with a startup idea that goes after the market sector predicted by the algorithm, a VC knows whether to listen to the pitch, or play on the iPad while the entrepreneur talks.

If you had the insight to choose which promising ideas would succeed, then you could be the next Peter Thiel, who had the foresight to be the first outside investor in Facebook.

One San Francisco-based, VC-backed, startup already has the algorithm to help you get up to Thiel’s league. That company is Quid.

While Quid is funded by Thiel’s Founders Fund, Thiel has also personally invested in the company, which develops quantitative and visualization tools to map tech companies. The idea behind Quid is to discover innovative technologies, pinpoint the emerging trends and find out who is funding them.

As Sean Gourley, CTO and co-founder, describes it, Quid’s intelligence platform can detect disruptive tech companies, but the company also features in-house analysts who keep track of trends in sectors, including online gaming, cleantech and biotech.

For example, the company told Venture Capital Journal’s contributing writer Boonsri Dickinson that Internet-connected devices are taking off, thanks in part to more affordable sensors that can be attached to appliances, toys and other devices.

However, Ted Dintersmith, a partner at Charles River Ventures, is not so sure. “It would be awfully hard to make predictions” about a company’s performance, says Dintersmith, who has a background in math and statistics.

For late stage investors, it would be insightful to see which companies get traction. When there are one to three founders, Quid is not much value at all, he adds. The market is not defined when two or three people can articulate a vision, Dintersmith says. But in such circumstance, “at least you can rely on your gut,” he says.

Subscribers can read the full story about Quid by clicking here.

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And if you want to talk more about interesting ways VC firms are scouting for deals, send an email to VCJ Editor-in-Charge Alastair Goldfisher at [email protected].

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