How we attempted to measure startup success

Posted by: John Tozzi on December 29, 2008

Michael Arrington at Techcrunch raised an eyebrow today at our list of startups that have received the most venture capital over the last four quarters, saying that search engine Cuil doesn’t belong on any list of most successful start-ups. Fair enough to quibble. Let’s just be clear about how we reported this.

Our goal was to tap “the collective judgment of the venture capital community,” professional investors whose business is to bet on the companies the think have the best shot to succeed. It was the only empirical way we could think of to cull a list of successful startups. We got our data from the MoneyTree Report by the National Venture Capital Association and PricewaterhouseCoopers. As we explained, we looked at the seed- and early-stage companies that received the most venture capital investment over the last four quarters available (Q4 of 2007 through Q3 of 2008).

Cuil raised $33.25 million in that period, and whatever you think of the company or their product, the amount raised indicates that investors judged them worthy of significant backing, as some TechCrunch commenters noted. Obviously, that’s different from them getting traction or becoming profitable. But they made the list under the criteria we used, which we made clear from the start.

It’s worth noting that many of the companies on our list are developing drugs or cleantech products that are years away from going to market and by no means guaranteed commercial success. Cuil has a product on the market. If we excluded them, would we be criticized for leaving them off the list while including drug discovery and development startups?

As I said, we picked what we thought was the most empirical way of measuring startup success, and it’s fair to disagree. (Among other things, using VC investments as the bar excludes the many successful bootstrapped startups.) We even invited readers to take issue with how we selected the companies and offer their own measures of startup success. So quibble away.

Reader Comments

reader

December 29, 2008 7:43 PM

Great post. Thanks. Keep it up. Well done. Bravo.

Ray Scott

December 30, 2008 7:35 AM

So really all you are measuring is investor judgement?:

"investors judged them worthy of significant backing".

"...many of the companies on our list ... are years away from going to market and by no means guaranteed commercial success."

You're not really measuring startup success are you?

David Portnoy

December 30, 2008 12:37 PM

B"H

Is a truly successful startup the one who can tell a good story and raise funds from investors - regardless of the progress on the business front? Or is a truly successful startup more about developing a growing & profitable business - especially if done without diluting the early investors?

At uTIPu, www.utipu.com, we are providing our users with a valuable new video communication platform that is beginning to be adopted by Fortune 1000 type organizations.

Dave

December 30, 2008 7:11 PM

Paid advertising by Cuil's $33.25M?

Zeljko Dakic

December 30, 2008 9:18 PM

Instead of explaining, I think you should post correction and apology to your readers. As a subscriber I would like to have more confidence in what you write. Cuil is massive failure and this is the only list they can be included.

Thanks.

obrianw

January 8, 2009 6:19 PM

Raising money from VC Firms don’t translate into a successful startup but it doesn’t translate into a successful articulation of a business idea especially if you are raising money without a finished product or service. My company BidMyCleaning.com is in the process of raising capital from VC Firms/Angel Investors and I am sure we would consider our company somewhat of an access if we can raise what we need in this type of economy.

Post a comment

 

About

What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

BW Mall - Sponsored Links

Buy a link now!