Profile: YouNoodle

YouNoodle: The start-up valuation tool that claims to outguess gut instinct

By Richard Tyler, Enterprise Editor
Last Updated: 12:36am BST 07/08/2008

The
world’s first free business start-up valuation tool is launched today
by a San Francisco-based firm founded by two Oxford graduates.

Its
designers claim that their patented scientific prediction technology
will "revolutionise" the way that the next generation of Googles and
Facebooks are funded.

Bob Goodson, the British-born
co-founder of YouNoodle, a social network site that is behind the move,
said it was archaic that venture capitalists invested millions of
pounds each day in young businesses largely on a whim.

"Last year in the US alone there was $67bn [£39bn]
invested in start-ups. It’s a huge amount of capital and it’s high
risk," he said. "But there is no quantitative modelling being done to
help inform those decisions. Those decisions are being made by humans,
meeting each other and making a decision. No other industry of that
size operates in that way."

He pointed to the
insurance industry, which has used mathematical equations for years to
understand the risk profile of each customer. "We think it’s crazy that
until now humans are totally responsible for these decisions. Loads of
money has been wasted," he said.

YouNoodle, which
is backed by the co-founders of Paypal, the online payments system, has
trawled through thousands of past start-ups to examine patterns in
their personnel, advisers, funding and business concepts.

From
this data, it has developed what it calls a Startup Predictor, which
will assess these areas of a new business and calculate both a score
out of 1,000 and a cash valuation based on three years of trading.
Entrepreneurs will also be able to see how their valuation alters based
on adding different skills or mentors.

The firm has
four patents pending on its technology, which was developed by Kirill
Makharinsky, an Oxford applied mathematics graduate, and Rebeca Hwang,
an engineering graduate from Massachusetts Institute of Technology.

Investors
gave the Startup Predictor a cautious welcome. Deborah Meaden, the BBC
Dragons’ Den panellist, said it appeared a useful additional tool but
that a computer programme would never replace gut instinct when it came
to deciding whether to invest.

"I wish it were
true," she said. "We would not get all those people coming into the Den
saying ‘We are worth £5m’. We could say ‘No, it’s not’ at the press of
a button. Gut instinct is the bit of the human brain that says ‘I
understand this’. There’s something of the zeitgeist about this. And
you get that from years of experience."

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