Capital markets are the lifeblood of the American economy. For everything our free markets can do to foster innovation across a broad swath of the population, without investment, that innovation can frequently wither on the vine. Allowing those with money to invest with thesort of people who need invested money is one of the most important processes to creating growth and expanding the scope of future job markets in a meaningful way.
That doesn’t mean there isn’t a lot of chaos, though. As important as these markets are, they also involve a buzzing hive of ideas to sort through, many of which don’t really warrant serious consideration or investment. So how can a wise investor cut through this mess? How can venture capital funds or angel investors actually identify those ideas that meet their portfolio’s goals as efficiently as possible?
It’s that chaotic blur of thousands of startups that led to the birth of Mattermark. Mattermark is a start-up committed to helping people better understand startups by gathering data, helping investors do research in a focused and targeted fashion, as well as better examining what factors tend to make the most difference for future success.
A Google for Startups
Mattermark is, at its core, a media service, essentially a Google (GOOG) for startups. Investors can do searches that will focus specifically on start-ups, helping them focus their research and find the news and other information that they need without having to cut through the rest of the noise they don't want.
“We were interested in creating a media company to cover startups, but we quickly discovered that that was a pretty difficult business,” says Danielle Morrill, Mattermark’s CEO and co-founder, in discussing the genesis of the company. “Our platform takes the data that we were using to write our stories and turns that into a product. People could subscribe and log in and access the data that we have on startups and that seemed to be something a lot of people needed as a lot of investors did not have great tools for sourcing fields during research.”
The result was Mattermark, a company that may have developed the key tool for overwhelmed investors trying to navigate the increasingly difficult private markets. Now, a single portal can place the information they need at their fingertips quickly, easily, and in a fashion organized enough to be navigated smoothly.
“We launched after building a pretty simple prototype, and very quickly we have very large adoption across the venture capital landscape,” says Morrill. “I think a lot of investors realized that they really weren’t doing enough diligence. They really weren’t digging deep enough into these companies, and as a result, they were having really crappy first meetings where they would waste time and feel like they really didn’t want to be there. They could tell in the first 10 minutes that it wasn’t a qualified opportunity, but yet they had to sit through torturous meetings that they weren’t interested in. So we were helping solve that problem.”
Data for Investors and Sales
Mattermark is more than simply an aggregator of useful research tools, though. The company has also created tools for analysis based on the data they were collecting.
“Then we discovered the same data we were using to help investors identify companies to invest in was also very helpful for sales people, marketing people, anyone doing partnerships or research,” says Morrill. “That brought us into a bigger market, where we were helping with sales and marketing intelligence.”
Mattermark started to track which factors appeared to be most important to start-ups, their valuations, and their ultimate success, combining them into a single algorithm that can then be customized by individual investors.
“We’re really focused on what metrics you try to move as a marketer to get mind share and then kind of take that bottom up approach,” Morrill continues. “Most marketers are focused on things like bringing more visitors, getting more people to engage with them on Twitter (TWTR) or Facebook (FB) or LinkedIn (LNKD), or getting them to download their iPhone application. We felt like we could figure out how successful the company was at making those things happen.”
Navigating Private Markets with Efficiency and Sophistication
The thing is, we may need Mattermark now more than ever. Where the transition to public markets via IPOs used to be more common and happen much earlier, the new norm appears to be to delay the IPO process until much deeper into a company’s lifecycle. From 1980-2000, there was an average of 311 IPOs a year with 165 of those qualifying as small-cap companies. From 2001-2009, that number plummeted to just 102 a year with just 30 being small caps.
Not only that, but the size of companies going public is increasing. Where reaching a $1 billion valuation while remaining privately held used to be an oddity, it’s now become a relatively common occurrence. Aileen Lee of Cowboy Ventures coined the term “unicorn” to describe these $1 billion-or-more start-ups, and they’re something that Danielle Morrill and Mattermark are clearly paying a lot of attention to.
“In the past, companies would reach that billion-dollar mark at their IPO or after their IPO,” says Morrill. “I think that’s why people are so interested in it because these are the companies that in the past would have been publicly traded. Now, they’re getting just as much attention as if they were public because they’re so big. They’re supposedly worth so much, so people are asking constantly ‘Are these companies really worth a billion dollars?’ That is kind of the underlying question.”
That debate over what an appropriate valuation should be is a tricky one. For a public company, the price of the stock on public markets meant that there was a tangible number to work with, something hundreds of analysts, fund managers, and investors could comb over and compare to publicly reported income statements and balance sheets.
With private markets, the process is similar, but not nearly as transparent. Which is precisely where Mattermark comes in. With fewer IPOs, and more and more investing happening on the private side of things, the ability to navigate private markets efficiently and with sophistication is likely more important today than it ever has been in the past, making a media service committed to collecting and sharing that necessary data a must for any VC firm or angel investor intending to get the most for their money.
The Key to Putting Your Money Behind Solid Companies
Start-ups represent a crucial piece of the American economy, driving the vast majority of the job growth and innovation that creates real prosperity. Buried in this jumble of new firms are the Googles or Amazons (AMZN) of tomorrow, and being able to identify them could mean huge returns for the right investors. Bringing a systematic approach to this sort of early investing, one that applies fully-formed principles guided by data and analysis, can be the key to putting your money behind a company with a solid future instead of the next flash in the pan.Clearly, there’s no easy path to identifying the strongest investments. If there were, we’d all be rich. But Mattermark does give its users the tools to make intelligent, informed decisions about which new firms deserve the longest looks and why.
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