A computer predicted the success of Etsy, Spotify, and other major startups 8 years ago — and it’s just generated a new list
- First, Goodson selected 50,000 private companies that had received venture capital or venture debt in the past three years.
- Simultaneously, Goodson generated a map of venture capital bets by looking at all investments by five of the top-performing VC firms in the world in the past two years.
- Goodson then whittled down the list, giving preference to companies with these characteristics: at least two rounds of funding; fewer days between rounds; fewer days since the last round; and founders who had worked together previously now bringing in a third outside partner.
- Since Bloomberg was looking for companies the public had not yet heard of, Goodson further refined the list so it included no company founded before 2011 (in fact, 12 were founded in 2015 or 2016).
- Goodson found important US innovation well beyond Silicon Valley too, from across the US, with companies headquartered in places such as Denver, Cincinnati, Seattle, Los Angeles, Missouri’s Kansas City, and Virginia’s Fairfax and Arlington.
Here’s a look at the trends and companies that are predicted to flourish.
@BinduW1: 20% of the companies chosen had reached billion-dollar valuations @eyeverify @Spotify #AI #cybersecurity @evernote
The domain of picking “start-up winners” was — and largely still is — dominated by a belief held by the venture capital (VC) industry that machines do not play a role in the identification of winners.
Nearly eight years later, the magazine revisited the list to see how “Goodson plus the machine” had performed. The results surprised even Goodson: Evernote, Spotify, Etsy, Zynga, Palantir, Cloudera, OPOWER – the list goes on.
The list featured not only names widely known to the public and leaders of industries, but also high performers such as Ibibo, which had eight employees in 2009 when selected and now has $2 billion annual sales as the top hotel booking site in India. 20% of the companies chosen had reached billion-dollar valuations.
The fund of funds was not named for compliance reasons, but its research showed that, had the 50 companies been a VC portfolio, it would have been the second-best-performing fund of all time. Only one fund has ever chosen better, which did most of its investments in the late 1990s and rode the dotcom bubble successfully. Of course, in this hypothetical portfolio, one could choose any company, whereas VCs often need to compete to invest.
Since Bloomberg was looking for companies the public had not yet heard of, Goodson further refined the list so it included no company founded before 2011 (in fact, 12 were founded in 2015 or 2016). The majority had raised relatively small amounts of VC funding, with 31 companies raising less than $10 million. Bloomberg also asked that Goodson exclude biotech.