Early Metrics wants to be the Moody’s or Standard & Poor’s of the startup world.
The company claims to be the world’s first ratings agency for startups. But unlike the global players it aspires to be, Early Metrics does not rate the credit-worthiness of businesses but instead looks at its growth potential, rating the business out of 100.
CEO and cofounder Antoine Bascheira told Business Insider at Early Metric’s London office that it assess startups across 50 criteria centered around 3 key pillars: the founding team, the core technology, and the size of the market it’s addressing. The test criteria were drawn up with help from tech experts, psychologists, and investors.
Bascheira says: “If you are the startup side, it’s a free service, we spend 20 hours on your company and we give you free feedback on what are the areas you have overscored or underscored on in comparison to the wider industry.”
Early Metrics, founded 2 years ago, has rated over 700 startups across 16 industries are grades startups against their peers to give them an idea of where they rank.
Bascheira says: “You’ve got this kind of unbiased free feedback that is very, very valuable in an ecosystem where everyone is telling you you’re great — your family, your friends — or you’re crap — more the VC and investors. You’ve got most of the time very contrasting and biased feedback.
“For the entrepreneur, it’s more valuable to have feedback from someone who has no interest in your company, if you succeed or fail that is not our problem. 95% of companies use [the Early Metrics rating] as the second page of their investment deck for example or when they send a commercial proposal to a large corporate.”
But Early Metrics service is not really for entrepreneurs — it is for businesses.
The idea was sparked by the realisation that more and more big corporates were looking to either invest in or partner with innovative new startups to make sure they weren’t overtaken by the pace of change in the technology market.
Early Metrics works with big names including HSBC, Santander, Visa, Johnson and Johnson, Renault, and Airbus.
Bascheira says: “They come to us and say look we have discovered Company X, we are going to introduce you because we want you to rate Company X because we want to decide whether or not we move forward. It’s more or less due diligence.
“The second model is: HSBC tells us we are interested in, for example, blockchain companies, payment, asset management, insurtech — they give us their innovation criteria and every month we give them companies rated for them and that are relevant. In that instance, we are giving them very qualified deal flow.”
It’s a combination of hard skills but also soft skills [that makes a good startup].
Early Metrics charges upwards of £1,500 for the individual ratings services and upwards of £2.500 a month for its deal flow service. 90% of its more than 100 clients have both, Bascheira says.
So how does a startup do well on the Early Metrics test to impress the head of innovation at, say, HSBC or Visa? Baschiera says: “What has been odd is to find that it’s a combination of hard skills but also soft skills [that makes a good startup].
“Of course, technical background, previous experience, education are key points, but if you don’t have soft skills, such as a capacity to self-asses, capacity to convince, compatibility between the skills of the founders — all these elements that we call “weak signals” are key to the success of a team. This is where we had to work with not only with technical people but also psychologists and HR to say how do we assess the capacity to self-assess?
“An entrepreneur that thinks he is always right and thinks the market is just bad, this is a key bad point and I don’t know one VC who is ready to invest in an entrepreneur who will not change his value proposition.”
Early Metrics started in Paris (Baschiera and cofounder Sébastien Paillet are French) but expanded to London relatively quickly. The company recently opened an office in Israel to help source deal flow — corporate clients want an international overview, Baschiera says.
“If you want access to the Israeli ecosystem, you need to be there,” Baschiera says. “If you don’t have good connections, you can’t penetrate the market.”
Given that Early Metrics are surveying so much of the startup market in London, has Baschiera noticed any discernible impact from the Brexit vote so far?
“Brexit, it’s very much a macroevent,” he says. “Startups at the first stage of their life are generally operating in a microenvironment. I don’t see a strong impact in the short-term.
“The issues are one, the pound, which is very bad. [And] for some companies in fintech — all those in wealth management and asset management that rely on passporting — they can be hit if the UK loses financial passporting. Of course, they want to move to Paris, or Dublin, or wherever they can still do these types of activities. But it’s just for these types of companies I think.”
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