Measuring Startup & VC Performance – Everyday is Another Chance to Turn It All Around

Today I wrote about some potential methods for benchmarking startup investors, and on a call with a client this afternoon I was asked how I handle the inevitable pushback from investors who aren’t in the top 10 of the list. This the same question I regularly face regarding our approach to assigning scores to startups and the pushback I receive there is similar. My answer right now is simple: this is not predictive.

While this frustrating from a data science perspective, not to mention as an investor (who doesn’t want to predict the next Facebook or Twitter!?) it is heartening as a founder — because every day is another chance to turn it all around.

When we look at metrics, whether they’re “soft” KPIs like web traffic or hard ones like cash flow, it is a reflection of the past. It might be an indicator of the future but we don’t have enough data to backtest and prove that yet. It takes much less energy to make something in motion go faster than does to get it started moving in the first place, so I think a company that has momentum this week is more likely to have momentum next week. Still the most I think we could predict right now is which startups will be competitive for their next round of funding.

The future isn’t promised, in either the positive or negative sense. In financial advising and investing the phrase my Dad always reminded me of went like this: “past performance does not guarantee future results”. Nowhere is this more true than in startups. While we’re busy working on making our measurements, algorithms, and data collection a better reflection of each fund’s reality I hope investors are dropping notes to their companies with helpful value add to bring the bottom to the middle, the middle to the top, and the top to their ultimate outcomes.