Its a networking site where angels can meet entrepreneurs. But its core feature is a tool you can use to calculate the value of your startup in three years based on the characteristics of its team. You tell it when your business was founded, how much money its made, how many of your team members are working for the business full time, whether or not you’ve taken outside investment, how much money you’ve invested so far, what industry you are in and a bunch other data and it runs a statistical analysis comparing you to other firms. It then provides you with a valuation.
Is it accurate? Of course not . . . in the sense that no prediction is accurate. A startup is all about smart execution. It is about doing the right things at the right times. Exploiting your opportunities and making key decisions correctly over and over again will ultimately determine how successful you are.
That said, banks, venture captialists and savvy angel investors have used statistical models to predict a company’s success for decades. While details matter, some factors in a start up are overwhelmingly important.
If your business is in an industry that doesn’t serve as fertile ground for startups, if your team members have never run a business before, if your startup builds no protectable intellectual property . . . then your valuation in three years will be low compared to a startup with great intellectual property protection, in a startup friendly industry, founded by multiple partners with great track records.
Why should you bother to fill in YouNoodle’s form? Because you can figure out what factors will most improve your odds of a good valuation not just in terms of how investors see you, but in terms of how other companies perform statistically. For example, you may find that a media company does better than an entertainment company. You may find that adding a couple of partners with previous startup experience increases your anticipated three year valuation by a factor of ten. You may discover that having older (or younger) people on your team skews results up substantially.
Have a look at YouNoodle.com and try out their startup predictor tool. You’ll find it quite enlightening.