An Algorithm to Pick Startup Winners - Technology Review
Matt Nunogawa stashed this in MiscTech
Seriously, this is new, smart, and unique:
To run its model, Correlation Ventures, which is based in San Diego and Palo Alto, California, asks startups to submit five basic planning, financial, and legal documents. It enters these into a program similar in function to credit rating software.
A top-ranked score leads to a 30-minute interview with both the startup CEO and the outside venture firm leading the investment, plus a quick legal review and background check. As a co-investor, Correlation Ventures always relies on some vetting by the primary investor.
And yes, it's Moneyballesque:
To explain his project, Coats cites Moneyball, the book and movie about how Oakland Athletics general manager Billy Beane rejected the conventional wisdom on evaluating baseball players and built a winning franchise by letting a computer tease out variables that others overlooked. He believes the averages will work out. "We're not claiming to have a magic crystal ball," he says. "We're tilting the odds a little in our favor with each investment."