Predicting Start-up Success – YouNoodlePublished by Fred • February 18th, 2008 RSS News Feed
A young start-up company, YouNoodle, has decided to focus its efforts on predicting whether a start-up is going places in the future and worthy of early-stage funding. The company sounds interesting, it could yield a useful tool for investors to use during the decision-making process, but is this the future of the start-up process? Is relying on mechanical procedures — invented by the very same humans that the tool seeks to replace in the process — worth the effort?
Well, one expert thinks this is not a good route for venture capitalism to take.
Paul S. Kedrosky, a venture capitalist and the author of the Infectious Greed blog, said that his industry was indeed inefficient at picking winners; typically, 90 percent of venture investments are not home runs. But he does not particularly trust a company that professes to be able to do better than venture capitalists.
Kedrosky makes an excellent point about the value of such a start-up company to venture capital firms:
“If their tool did such a good job, they’d raise a fund themselves and beat the tar out of us,” Mr. Kedrosky said. “It’s hard to imagine what their mathematical combination of factors is.”
In essence, these young entrepreneurs are taking a risk that may only pay off for their start-up by sucking in investors that are intrigued with the idea of simplifying the start-up process. What’s the big deal anyway, millions are thrown away on useless companies.. if this one pans out it could investors billions in the future. The question is, can you put your faith and future in the hands of two young guns from the valley?
Bob Goodson, left, and Kirill Makharinsky Photography: NY Times / Peter DaSilva
They apparently have some big supporters backing them up.
YouNoodle’s financial backers include Paypal co-founders Max Levchin and Peter Thiel, and the Founders Fund, a venture capital firm.
In addition to the venture prediction tools, the company is working on a network for early-stage companies and will provide tools to create business plan competitions, business school classes and more. While these tools will be free, entrepreneurs exchange their private data to help refine the predictor algorithm. If you’re not sold on the idea, it’s ok, you can try out a watered down version of their software and pay the bucks after you’ve given it a try.
Now for the funny part: Can YouNoodle predict its own success?
“So far, we haven’t run ourselves through it,” Mr. Goodson said, adding that the results could prove baffling. “If it says we’ll fail, and it’s right, that’s something of a paradox.”
Considering that 90% of ventures tend to fail, I’m betting that the tool would give it little chance of hitting a home run, but hey.. I’m just human what do I know? I don’t plan on investing in young start-ups any time soon, but if you are, you may want to check them out. YouNoodle