Many startup companies seek venture capital as a way to finance their growth and development. But few ─ about 2 percent ─ are actually equity investable, according to Peter Adriaens, a University of Michigan professor of environmental engineering, finance and entrepreneurship and the co-founder and CEO of Corymbus Asset Management Inc., a Big Data investment-risk signaling company.
Leading up to the 2017 Michigan Growth Capital Symposium, on May 16 and 17, Adriaens and his team will provide presenting companies with a complimentary KeyStone Compact® analysis to create an investment-risk profile and to benchmark performance. The exercise is intended to help startup founders and CEOs understand the investment opportunities and risks their company poses for venture capital investors. The KeyStone Compact® suite of tools, developed by Adriaens and his associates, uses non-financial, or “unstructured,” data on the company, drawn from social media, to identify key investment-risk signals. It is like a “thermometer” for businesses.
“In this era of Big Data, there’s a lot more information available about your company and your background than you think, and that can be used to structure an investment-risk profile,” Adriaens explains. “At Corymbus, we organize social-media data relevant to a company, its business model and its management team and then feed that back to large institutional investors.” Combining Big Data analytics with financial information can assist investment banks and pension funds in making more-savvy decisions on investments in public and private companies.
“A KeyStone Compact® analysis is particularly well-suited for assessing the equity investability of startups and early-stage private companies, since no, or limited, traditional financial information is available,” Adriaens says. “It also provides an additional, forward-looking piece of information to help company founders and CEOs develop their business model and pitch to investors.”
At the MGCS, each presenting company will be mapped on a benchmark plot that gauges industry strength, market strength and management strength relative to a universe of companies in its space. Each also will receive a key indicator risk profile, based on eight metrics, such as dependencies in the value chain, connectivity of the team and advisers and capital efficiency. These results are used to determine the company’s risk profile and investment grade, ranging from traditional equity and patient capital or corporate venture capital to non-equity investment and bootstrap financing.
“Understanding where a company’s strengths and weaknesses are with respect to its investment grade is incredibly important,” Adriaens says. “This information will give presenting companies a lot more ammunition, not only to craft their pitches, but also to convince investors they have the road map in place to position themselves in their respective industries and the capacity to drive growth.”