More Moneyball for tech startups
There has been some excellent discussion around my “Moneyball for tech startups” post since Friday night:
- The most common response was to point me to a firm called Correlation Ventures. They seem to be as close to a Moneyball VC firm as there is right now, using a huge database and a predictive model to help make investment decisions quickly. It doesn’t lead rounds and doesn’t take board seats, but has already invested alongside several big-name VC firms. (I’ve never heard of any of its portfolio companies, but that’s probably some of the point.)
- Startup investor (and ex-Wall Street guy) Roger Ehrenberg wrote a thoughtful response, highlighting the important difference between “security selection” — deciding which people, companies, and ideas to invest in, which databases probably won’t be as useful for; and “investment selection,” which refers more to the objective elements of an investment, where data is probably more useful.
- Fred Wilson linked and highlighted, and generated some great commentary.
- Fortune’s Dan Primack notes that Google Ventures “does traditional due diligence but also runs prospective investments through some sort of algorithm to help it make decisions. The team has always been vague about the specifics of how this works, but perhaps it would be more surprising if Google’s venture arm didn’t use some sort of proprietary data analysis…”
- Dave McClure wrote about this topic in 2010. The big idea: “invest early at low cost in people you think are smart and have built some promising products… Then IF you see the metrics improving & customer / business value increasing… then double-down.” (The initial investment is still pretty subjective, but future, bigger investments are more objective.)
- Yaron Galai posted two lessons from Moneyball in 2009: It’s helped him “look at the same game differently” and figure out which metrics actually matter for his business.
- YouNoodle’s data analysis project has actually spun off as Quid.
- Also some commentary in the Hacker News thread.
By the way, Moneyball the movie was fantastic — I highly recommend it, even if you don’t like baseball. You should also check out Moneyball the book, by Michael Lewis, and his 2009 Moneyball-for-basketball article for the New York Times.
Earlier: Moneyball for tech startups