Predicting The Success of Startups

Predicting The Success of Startups

When a few decades ago the Digital Revolution became something real and useful to business purposes, a limitless amount of possibilities just showed up for millions of entrepreneurs. New minor companies arose seeking business through -and out of- the digital world, from instant comms to streaming services capabilities. But just a few, back then, could see or predict the magnificent and life-changing the Digital would become nowadays.

For these new businesses, now called startups, especially complicated was the beginning. They struggled to get finance in low profitable (at least in the very start) ideas. They focused their business activity in developing new technologies as index search engine, streaming services, or internet based communications as instant messages, electronic e-mails, e-commerce, etc.

A hazard business

So far, venture capital became the first financing option the new startups had in the beginning. But behind this capital was another company, or government institution, who must lend the money. They risked their capital in new and revolutionary ideas that not always went that well. Nevertheless, today’s world is dominated by startups and new technology firms so it was, in overall, a good investment.

Even so picking the best company to invest money in is not an easy task, the stakes are high and the risk, even higher. That’s why many reports have shown up recently describing how good or bad investing in one company is.

For example, an experiment in 2009, Ira Sager of Businessweek magazine set a challenge for Quid AI’s CEO Bob Goodson: programme a computer to pick 50 unheard of companies that are set to rock the world.

Nearly eight years later, the magazine revisited the list to see how “Goodson plus the machine” had performed. The results were atonishing: 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. Twenty percent of the companies chosen had reached billion-dollar valuations.

Ibibo Group is worthy more than $6 billions in just 9 years life

How to predict a profitable idea

This experiment followed a complete method based on Venture Capital database in the US and the data on investment received, investors, location and founding year came from S&P Capital IQ and Crunchbase and was current up to September 2016.

Goodson then generated a network map to show where entrepreneurs had made investments, focusing on tech companies founded during the past 18 months.

Together these networks allowed the head of the experiment, Goodson, to distil the most promising areas for investment, featuring the next list:

  • Augmented reality will be far more significant than virtual reality because it will shape the way we look at and interact with the world around us.

  • Image recognition and mapping technologies will be deployed across the auto industry as traditional car manufacturers adapt to self-driving vehicles.

  • The problems associated with online security and fraud detection will continue to deepen, with major implications for government and enterprises, and mobile and e-commerce.

  • The digitization of education is happening via practical applications that integrate into the existing system, including teaching and training applications as well as gaming.

  • Drones are gaining adoption in commercial environments and companies at the forefront will be well placed to expand into consumer applications in the future.

  • The smart home is developing through a range of affordable consumer products including lightbulb speakers, smart lighting, flexible security sensors and garden sensors.

  • As computing becomes more closely integrated into the human experience, new applications of smart sensors are possible, including sweat analysis, earbuds, eye authentication and holograms.

  • There continue to be major market opportunities in e-commerce as fashion becomes increasingly mobile and social.

  • Artificial intelligence is supporting greater efficiency in knowledge work, which involves handling data or information, including bots and within sales and marketing.

  • Space technology continues to advance in areas such as space satellite propulsion and mining.

The New Startups

Following these fields of investment, the 50 major startups companies can be seen in Bloomberg. Most of them are based in US but new countries are starting to show themselves as UK, Spain or Germany have been able to put new companies in the list.

Also, the list provided some interesting details. For example, investors in EyeVerify include Sprint and Wells Fargo, who participated in a $6 million round, suggesting that eye authentication is now of real interest to both telcos and banks. Indeed, shortly after being picked by Goodson, EyeVerify was acquired for reportedly $100M in cash by Alibaba’s payments arm, Ant Financial, to increase user trust and safety in financial transactions.

BlueLine Grid – with $6 million raised – is backed by Motorola and In-Q-Tel, which suggests that their secure mobile solution is being adopted by US government agencies as In-Q-Tel only invests with a sponsoring agency partner.

There is no doubt at all that the present is written by the Digital World, and Startups are the best ally technology could have.