Venture capital has long been heralded as an apprentice-style business where success only comes with ten years of experience and a gut that can predict the future. That was fine when it was a clubby industry making modest bets on companies within a 30 minute drive of Sand Hill Road. But as more money has flooded into the industry and tech has matured, finding the big home runs has become exponentially harder. Simply put: When you’re investing halfway around the world or trying to find the next Google amid a sea of me-too companies, let’s put the machismo aside and admit the industry needs some metrics, some methodology and some help. Check out the latest returns if you think I’m being too harsh.
This is why I thought YouNoodle’s Startup Predictor was a great idea pretty much the first second I heard about it. There was a lot of derision early on about the idea that a company could create an algorithm to predict how much a startup could be worth. (Ahem, not by me of course. YouNoodle predicted my book writing, blogging, column writing and TV show hosting mini-empire would be worth $21 million in three years. We’re still working on that.) But the algorithm takes the same variables that VCs weigh, like how long a team has worked together, what the goals for success are and metrics like Web traffic and buzz.
On Thursday, the company is releasing a new product called YouNoodle Scores that quantifies the buzz further. Unlike a vanity Twitter app that ranks the value of Tweets based on surface details like how many people follow you, there’s some serious methodology here, thanks to a partnership with Sean Gourley. Gourley is a Rhodes Scholar who’s studied how collective intelligence works, specifically how different cultural patterns, news reports and buzz lead up to break outs of terror attacks and wars. He found that you could predict the nature, size and timing of outbreaks by looking at all these factors. YouNoodle hired him to apply the same thing in the startup world: Analyzing traditional media, blog posts, Twitters, Alexa traffic patterns and other metrics over time to predict when and how a startup would, well, break out.
Conceptually, figuring out what all these patterns and metrics really mean will be even more important as we trudge deeper into this muck of a recession. Web 2.0 has become way too reliant on surface metrics with all of us thinking page views, unique visitors, Facebook friends and Twitter followers implies value in an age when we all know how to goose these metrics. If the algorithm works right, my guess is you see sites with fewer gaudy statistics actually scoring higher in meaningful buzz.
YouNoodle CEO Bob Goodson cites a company called Viikii.com, that jumped onto YouNoodle’s radar out of nowhere in October thanks to the algorithm. It was started by two Stanford kids, but I’d certainly never heard of it. Viikii makes subtitling software for Korean videos and despite its MIA status in the Valley echo chamber, the site has been taking off—it’s just been taking off in Korea. I can’t help but wonder what the scoring engine might have made of a site like Pownce that launched to wide hype and fanfare, but quickly tailed off in user activity and adoption.
It’s possible the new scoring engine may help YouNoodle inch towards a business model—the biggest area where I’ve had my doubts about the company. I don’t think VCs are a great market to buy any premium YouNoodle analytics, because there’s going to be natural skepticism that an algorithm can be any kind of substitute for their experience and judgment. But governments charged with investing in startups are a natural fit. After all, they are trying to act like VCs without the training or experience. Even if YouNoodle’s algorithm is right 30% of the time, it’d be a huge upgrade over funding companies in the dark. One of the company’s launch partners is the UK’s Department of Trade and Investment, which is currently charged with disbursing some one billion pounds into the London scene. (Full disclosure: CrunchBase is another launch partner.)
Of course for any of this to happen, the site has to work and, to be clear, I haven’t gotten a chance to play with it yet. (Yes, we all remember Cuil.) But as someone who’s covered this industry for ten years, I’m hoping that YouNoodle’s start up engine works well enough to give the venture capital industry just the kind of healthy kick in the pants it sorely needs. It’s only fair. Venture capitalists have certainly profited off of the Internet disrupting every one else’s businesses.
You can check out the TC score here: http://www.crun...pany/techcrunch.
Sarah, first off welcome to TechCrunch, I hope you enjoy your stay.
Secondly, for Twittering an hour before deadline that you were having trouble writing a post for TC, this was certainly an interesting one. I’d never heard of YouNoodle until now, and its an intriguing idea.
The analytical side of me wants to believe that there must be a way to quantify startup success, and in that regard I want to believe YouNoodle (what a name) will work…even at the 30% rate you say.
The entrepreneurial side of me says this will NEVER work, as you just can’t quantify startup success with an algorithm, its more, as Stephen Colbert might say, “from the gut”.
I’ll be very curious to see if this goes the way of being a “fake” metric no one really takes seriously…like Alexa, or a well sought off, proven ranking. Right now I seem to lean towards the Option #1, but we shall see.
Although you may be filling in for Michael, I sure would love to hear his take on this.
http://en.wikip.../wiki/Moneyball
It worked for baseball….
Its been traditionally incredibly hard to identify the startups breaking out. I think being the exclusive data provider on this is going to allow younoodle change the game.
Many have failed, younoodle will definitely win.
Brilliant stuff guys.
I hope that it becomes a benchmarks for web entrepreneurs, it’ll be much more helpful pitching to VC’s in when you have something other than your own calculations to show.
Keep it up YouNoodle
TechFilipino
I found version 2.0
http://www.theh...ennystocks.com/
I fail to see the purpose of YouNoodle. As I commented in the original TechCrunch coverage of the site, YouNoodle has no place in the real world of startups and VC. If a company is truly worthy of investment (especially in these times), it wont matter what YouNoodle says its worth. The only use for YouNoodle is to stroke the ego’s of inadequate founders. But hey, that is a large market.
Besides, do you really see Tom Perkins referencing this site before he slides a term sheet across the table? I mean come on.
nobody starts or takes a company with a name like younudel serious. something fishy going on? whats new from SF?
http://vator.tv...oodle-YouNoodle
YouLocator.com – find yourself
The fact that a company needs an algorithm to tell them how successful they are going to be speaks volumes about their ability to be successful. Don’t even know why this was worth covering.
Gaurav, Its the same as the web before compete and alexa. The scores aren’t exactly the same as the web traffic of these websites, but the data gives people some indication of how these sites are doing.
This is not to tell an entrepreneur how successful they are – just to enable startups to rise above the noise in a previously untransparent market.
I forsee lots of potential business models
- Custom reports
- Premium access to unlimited data
- Fantasy betting around startups
and of course the inevitable network effect as every industry publication and company participates in obtaining a younoodle score for curiosity
This looks seriously impressive. Many congrats.
I’ve been using YouNoodle for a while now, and I’m a big fan. Friends with a couple of noodler’s, and they are all great. Awesome!
If YouNoodle were right 30% of the time–even with a very generous definition of “right”–I’d think a lot more organizations than clueless governments would gladly pay for their services. If the 30% is a low bar, as you seem to imply, then quick math makes it look like Peter Thiel’s obviously forthcoming YouNoodle-based venture fund is going to quickly become the largest in the world.
Back in 1995 many couldn’t image that an intelligent search system could be implemented based on popularity ranks, yet Google and Page Rank have gone on to become ubiquitous. In the same vein, YouNoodle could be on to something big when it comes to ranking businesses and their likelihood of success. They are automating a process that many VCs are already doing manually, and that itself adds a lot of value. Reminds me of business intelligence systems that help CEO make business decisions…
I agree with you. As a matter of fact the principle of the problem has been solved a long time ago: it is the prediction of probabilities and inprobabilities, based on quantitative and the tricky qualitative data. Success, if it will come, should come with time as the only reliable proof they have for their precision is historical data. But two thumbs up for the idea…
Through YouNoodle we have landed interviews with several major VC’s here in the valley. It’s a great place to make connections, and one of our new goals is to surpass their predictions for us!
Not to mention that YouNoodle is basically the staple for all new business plan and startup company competitions (I know Duke and NCSU are using them to judge the competitions, probably many more).
i guess it is good idea to put more social networking features around younoodle….i see entrepreneurs hanging out there, who couldn’t raise money…may build good support system for all the wannabe entrepreneurs…just my two cents
Oh man, viikii was started by stanford kids? And here I thought it was Korean-run. Pretty cool.
looking good!
http://tr.im/gk8j
They will fail. Why? Obviously if YouNoodle does not find success, it fails. If it does find success, then startups will learn to goose its metrics just as they do Web 2.0 metrics. And then YouNoodle will fail. QED
This is the real crux of the argument. If YouNoodle has any real predictive power at all, it will simply become discounted by the startup/VC market immediately.
It’s mindblowing to see both the author’s and most commenters’ lack of business savvy here.
What makes a start-up successful are NOT:
- Publicity
- Traffic
what makes a start-up successful is solving a real customer need, creating true differentiation/competitive advantage, and turning a profit. YouNoodle measures none of these.
YouNoodle – you fail.
You need both a good product and good publicity. The Tech landscape is littered with superior products that didn’t go anywhere.
It’s hard to believe that in all the discussion of whether or not they’ll be successful, no one has pointed out that YouNoodle’s YouNoodle score is a 32 and trending up: http://younoodl...rtups/younoodle
Welcome Sarah. Would be nice to read through your articles on TC. Well, as far as younoodle is concerned, I feel more than the capability of their algorithm, what an entrepreneur should be worried about is disclosing your vital business details with younoodle. As a startup there are several strategies and data which should be confidential. Am sure Younoodle is aiming at having this powerful data rather than looking at being a reference check point for investors.
I do not think that YouNoodle will be taken seriously by any VC.
You clearly haven’t done any research. They have very influential investors: http://www.crun...mpany/younoodle
And that is just because of the name?
YouNoodle is very interesting.Looking to use it.
Great job to the YouNoodle team. This is an impressive implementation, and the fact that it’s already been applied to discover the mentioned undiscovered Korean startup is probably just the tip of the iceberg in terms of its potential. Looking forward to using this to keep track of us as well as our competition.
YouNoodle = Complete Nonsense!
It’s as good as astrology.
It is as good as astrology. However, you might have noticed that astrology and psychic hotlines etc are billion dollar businesses, so obviously it pays to spout nostradamian junk.
The thing that always strikes me as wierd (wierd in that no one questions them about this) is: if they can predict startup success, why would they not start their own VC fund rather than sell the software. The reason is obvious: its the same reason why psychics can pretend to tell you the winning lottery numbers for a fee, rather than buying lottery tickets themselves.
Those who can, do. (entrepreneurs)
Those who cant, invest.
Those who cant invest, advise.
Wanted to share an excerpt from a review of YouNoodle and its Startup Predictor that a reviewer on our platform recently did.
The full review entitled “I Predict YouNoodle is Worth Nothing” is here for those interested:
http://www.chub...le/reviews/amyz
Review excerpt below:
”
First and foremost, the business model is fatally flawed because the product, The Startup Predictor, is interesting but hopelessly inane.
* Valuation is an art – Financial models, no matter, how sophisticated and dressed up they may be are always wrong. We just need to look at our current financial/economic predicament to see where our financial models got us. They’re very good at predicting things when companies are growing or declining at steady/predictable rates and if you have some understanding of key business indicators, but no matter what, they are wrong. The valuation models are consistently wrong, often significantly, even when there are reams and reams of historical data as there is with public companies. Private companies where the data is much more spotty and where financials are non-existent are therefore even more difficult to model. While the goals of disintermediating the “old boys network” sounds interesting, evaluating startups is a mix of skill and luck and so diligence is required but so is a good gut instinct.
* Intangibles cannot be modeled – The idea that “the concept itself, the advisors and the team” can be considered, evaluated and modeled is appealing because it sounds tidy, but there is no way to credibly do this no matter how fancy the diagrams or logic YouNoodle shows look. Startups are inventing markets in many instances so how does the concept get evaluated in such instances? Using comparable companies and their data? What if there isn’t a real comp? Perhaps it’ll be a hybrid of existing companies? There is way too much room for error – very significant error. You can look at the connections & relationships between the founders, but beyond anecdotal evidence that this matters, there is little real proof. When we talk about advisors, I assume this means folks like the VCs and advisory board of the company. Problem #1 is that if the startup has any legitimate VCs, they’ll never have a need for this. And modeling advisors will be rudimentary at best in my view. Oooh, Kleiner Perkins is an investor so we’ll give your valuation a factor of 2x since they’re an A-list VC. Same with modeling the team. You’ve done well in a prior business so we’ll give your valuation a bump. Doesn’t sound too complex or fancy.
So beyond the fundamentally flawed product, what is wrong with the business model:
* Let’s be the Moody’s of startups – As the recent news makes clear, the rating agencies which Moody’s is one of are not very good at their jobs. And they get lots and lots of information from companies they rate. And they still aren’t very good at it. With startups, you’re inherently data-constrained making the idea that a quiz with user-submitted inputs is useful even more laughable.
* It makes sense to be biased to the upside – Even if the Startup Predictor generated credible valuations, the company is incentivized to ‘grade inflate’ if they want startups using it. As an entrepreneur, I’d only use the Startup Predictor if it told me an answer I like which is a high #. So the target for this product is for entrepreneurs too inexperienced to develop their own credible valuations. If I’m an investor seeing a YouNoodle valuation, I would be suspect of the upside bias and an entrepreneur bringing a YouNoodle valuation.
* Investors will pay for this? – If the price was insignificant, then yes, this might even be an interesting data point to a time-strapped investor. But, given that as an investor, you may be making a large bet with money given to you by your investors, are you really going to rely on a report vs your own expectations and model for an investment? I doubt it or at least I don’t think smart investors would do this. If it’s a $100 per report, sure why not? But if all investors seriously look at 500,000 companies per year and 10% of those evaluations get a YouNoodle report (this is a high market penetration rate), that is 50,000 reports per year in total (I’m not talking about the pitches they see but those they seriously evaluate). That is a $5 million opportunity. I’m not sure how much they raised, but that doesn’t seem like a big # given some of the brand name investors they have and the very organic, grassroots effort probably required to get these investors on board. According to the company’s CEO, he thinks “YouNoodle will be worth $96 million in 2010″ based on their own algorithm. Wow. (source: http://www.tech...ctor-is-coming/)
“
You are falling for their stated purpose as a service. With the info they are collecting, they will become quite a resource for investors (and it is not related to this “Startup Predictor” product. Of course, traction is required within the startup community (I wouldn’t go near it).
i just put my startup through their wringer, apparently it’ll be worth 500K in three years! shrug
Last November LEADSExplorer was over $10mio worth.
That would be great if true.
(We should do a recalculation to see if we increased our value)
once younoodle starts putting there own money up to back some of these startups that they predict to be worth millions, then it’ll be more believable. Put your money where your mouth is, or in younoodle’s case steal other venture capitalist’s money with a product claiming to be a get rich quick scheme. pass
I agree with your entrepreneurial side more than the analytical side. A lot of times, we’re caught up with trying to quantify things, measure productivity, etc when most of these things aren’t really all that measurable. Some of it boils down to the luck and timing of the market while it also see how determined you can be and how well you spot the opportunity and deliver what the customers really want. I believe targetting user experience and that is definitely not quantifiable. However, it is a very interesting idea and I won’t say it’s not useful entirely. It could be a good measure of comparison with the success stories.
funny name XD
DO you think the data accurate.?for me yet it gives me great predictions base for what happen in this finance downturn ,however ,as I visit and observe there site and see this thread ,I have to admit then that this service is worth trying rather then other website “money counter”from websiteoutlook.mywebsiteworth,or event technorati blog worth
There are some things that could be looked at that would provide some insight into a startups value. How about reviewing the social graphs of the team using LinkedIn? Business is connection-oriented. If they have connections to get funding and connections to get early sales, they have a MUCH better chance of success. If a startup has a reasonable technology that fills a need (determined by some human reviewers) — and has great connections — great chance of success. I’m pretty sure you could figure out exactly who to hire for a particular startup by analyzing LinkedIn’s social graph.
And oh by the way, as a disclosure, CrunchBase is one of the major distribution partners for YouNoodle
Considering that only about 0.04% of all the deals that VC’s see get funded by them, here’s something that works for the rest of us – the http://www.Busi...essCatapult.com and the http://www.ES2F.org.
No algorithms. Just common sense, some open source social networking tools, and a LOT of research and hard work.
Cheers,
Kevin
Is this an advertisement? How much did Younoodle pay for it?
I do not see any logic in your article. Somethings are NOT meant to be predictable. Fate of a startup company being one of them.
Can you predict about earthquakes? Can you predict about stock market?
TC quality is going down the tubes.