Startups are strange beasts; they come in different shapes and sizes and it is notoriously hard to pick the winners from the losers (clue; the stats suggest the overwhelming majority will be losers – just sayin’).
But now Venture Capital & Angel investors as well as startup evangelists can take comfort from the fact that there is help arriving from overseas. A French company called Early Metrics which claims to be the first rating agency for startups and SMEs, has opened its first office in London.
Early Metrics was founded in 2014 by 2 French entrepreneurs, Antoine Baschiera and Sebastien Paillet, and to date it has analysed and rated more than 600 startups, across 5 countries, on behalf of more than 100 clients, including private and institutional investors and corporates like Visa, Santander, Orange and Accenture.
And the good news is that the service should not cost early stage entrepreneurs or their companies a penny.
Early Metrics say they concern themselves with growth potential rather than credit risk. The team, consisting of industry expert analysts, use a range of financial and non-financial metrics, 50 in total, for their evaluations, which include considerations such as ecosystem, management, financial forecasts, level of innovation and various other qualitative and quantitative criteria.
They do all of this to try to help investors and corporates make more informed decisions when it comes to funding early stage startups. Their rating system provides an analytical and rational due diligence which investors can use to assess a venture’s potential thoroughly before taking the plunge and backing it financially and more often than not, with free mentoring, office space and new contacts too.
Entrepreneurs, say the company, can use the completely free analysis to understand whether and where their company may need to pivot to achieve better results, and better define paths to growth, and of course they can use the certification as a “badge of honour” to attract the interest of new investors and business partners, particularly corporates, whose participation in the startup ecosystem is growing fast.
Early Metrics consists of 20 staff, 5 of whom will now be based in London, where they carry out analysis of young companies on behalf of clients including Renault, HSBC, VISA, and Airbus.
The founding team believe London’s startup ecosystem is simply too big and successful to ignore, and is also the right place to serve global clients, as well as to expand the international ambitions of some of its French clients.
“The choice to expand in the UK was quite logical”, says founder Baschiera; “We had an increasing number of clients asking us to rate UK based startups. With a large number of companies and a high concentration of investors in the country, there was a clear need for a transparent actor serving the investors on the one hand and the startups and SMEs on the other.”
London is currently the no. 1 hub for launching a startup in Europe. The city has pioneered trends such as FinTech, FashTech, devices like Raspberry Pi and raised a staggering $2.89bn of funding for its startups, more than anywhere else in Europe, including hipster hotspots like Berlin ($1.1bn raised).
London is currently riding out a slight downturn at the beginning of 2016 (part of a wider global reduction in overall VC spending as investors become more suspicious around the performance of so-called “unicorns” and inflated valuations in certain sectors), the city looks to be set fair for another successful year, with the promise of many startups beginning to transform themselves into “scale-ups”, (defined as “an enterprise with average annualised growth in employees or turnover greater than 20 per cent per annum over a three year period, and with more than 10 employees); the kinds of companies that can make a real difference to the nation’s economy.
Any agency that ranks an industry as diverse and unpredictable as the world of startups has to be brave and innovative itself, and there is always an element of personal choice around choosing whether to invest; “do we like the founder?” “Is it an industry that we know?” Doubtless all these considerations are part of Early Metrics algorithms and analysts notes.
It’s another valuable resource and layer of scrutiny and transparency that will doubtless keep founders on their toes, and reaching for the skies, as well as another reason to be thankful for a mutually supportive relationship with mainland Europe. Err, long may it continue?