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In an article a few months ago called entitled 'Venture capital Meets Moneyball', Venturebeat profiled an emerging trend amongst VC investors to use data and quantitative analysis to invest in startups. For those who may not have seen the movie or read the book, Moneyball was the story of how one small market, cash poor baseball team called the Oakland A's threw traditional metrics to analyze players out the window, and instead turned to relying heavily on a whole series of obscure statistics to unearth undiscovered - and inexpensive - talent that could help their team compete with much richer baseball franchises. This approach of using data and analytics is now widely employed by baseball team everywhere as at a minimum a supplementary tool for analyzing talent (and as a side note for any NBA basketball fans, the Boston Celtics just hired as their new coach a young college coach who was well known for using data analytics with his college team).

What's interesting and highly relevant for those interested in startups is that a firm called Mattermark just launched in June of this year. Mattermark's tagline is "Big Data Meets Venture Capital". Founded by serial entrepreneur Danielle Morrill, Mattermark uses a whole series of internet metrics to measure what they describe as "signals of growth that matter most" for startups .  

Mattermark has developed a software platform - which it sells for a subscription of $499/month - that allows VCs, angels and other private investors to access data from a variety of web sources including Twitter, outside news, SEC filings and other metrics, all of which it combines into a proprietary Index that allows VC's and angel investors and other subscribers to unearth the best opportunities in the tech startup universe.

The ultimate outcome of these metrics is to produce a weekly momentum score for each startup Mattermark covers, which is ultimately translated into a moving average they call their "MatterMark Score". 

Below is a more detailed list of the metrics Mattermark uses (via their website):

Rich Historical Data Sets, Updated Daily

    • ·         Web Traffic & Inbound Links
    • ·         Mobile App Store Rankings & Downloads
    • ·         Social Media Following & Engagement
    • ·         Employee Count & Open Jobs
    • ·         Funding History & Details
    • ·         Press & Blog Mentions
    • ·         Geographical Data
    • ·         VC & Angel Portfolio Overviews
    • ·         Accelerator Program Tracking

    A natural question is whether using what is essentially a Big Data platform such as Mattermark's to invest in startups makes sense? The answer in my opinion is that there is indeed a legitimate argument for using supplementing traditional metrics of VC investing which do involve a fair amount of subjectivity - such as the members of the founding team - but then bringing in a Big Data platform like Mattermark's for an alternative viewpoint. 

    With so much 'noise' and so many startups vying for attention, it is easy to see why even a top VC might not capture such metrics as inbound links or app downloads, especially given that these types of metrics would be rather time consuming to obtain for numerous startups on an individual basis.

    In sum, one can envision three main ways a VC might use a service such as Mattermark's:

    1) As a sort of 'sanity check' on a startup a VC might be well down the road in considering for their portfolio.

    2) As a way for a VC - especially smaller VC's or angels - to quickly unearth and invest in an unknown, diamond in the rough startup, one that may not be on Silicon valley's radar screens. For those who enjoy sports metaphors, think of these types of startups as the "undrafted free agents outside of major college football programs"!

    3) Finally, just at first glance, it also seems that a Mattermark score might assist enterprising investors discover international startup opportunities, particularly those from emerging market and developing regions such as Africa, SE Asia or Eastern Europe and Russia. Overlooked by many, the African continent has a number of very fast growing economies, and certain cities such as Nairobi, Kenya are emerging a mini tech hubs with small but vibrant startup ecosystems of their own.

    This application of Big Data to startup investing seems like it will continue to gradually emerge, and as a first mover in this space it's not difficult to imagine to imagine the Mattermark service gaining real traction amongst the VC and angel investing community.

    We have reached out to Mattermark to find out more about how their Big Data software actually works, and will come back with additional information once we find out more. 

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[Pingback] 5 years ago

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Feature Articles | Mattermark Aims to Revolutionize How VCs Invest in Startupshttp://www.itspecialist.com/Home/FeatureArticles/TabId/208/ArticleID/103/startups-investing.aspx



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