Bet on the right tech companies and management teams with data, not opinion.
In 2015, we worked with The New York Times to predict 50 future unicorns (companies that would eventually be valued at $1B or more). To date, 30 of them have hit that mark (60%).
We tried again in 2019, and in just 2 years since, 52% of those have made it to unicorn status — an even better unicorn prediction pace.
In 2020, we partnered with Fast Company for our most recent round of 50 unicorn predictions.
In just over a year, 30 of the companies have hit unicorn status (60%).
If we were a venture capital firm, that kind of hit rate would make us legendary.
Our secret weapon has been Mosaic — a series of proprietary algorithms we’ve been developing for the better part of a decade with initial support from the National Science Foundation.
What is Mosaic?
In 2010, we approached the National Science Foundation with the idea that we could use publicly available information and non-traditional signals to assess the health and likelihood of future success of private tech companies.
After receiving 3 grants from the NSF, we worked toward a model dubbed Mosaic that would aggregate and synthesize information about these companies from disparate sources and make understanding and identifying the best tech startups less of a crapshoot. Think of Mosaic in part as a FICO score for private tech startups.
If we could do this with Mosaic, we could arm firms buying or investing in technology with superpowers for finding and predicting tech company success while their competitors hunted for the right companies in the dark.
So how does Mosaic work?
The 4 Ms of Mosaic
The Mosaic overall score comprises 4 individual models — what we call the 4 Ms.
- Momentum — how much traction does the company have?
- Market — how healthy is the industry the company is in?
- Money — what is the financial health of the company?
- Management — who are the leaders of the company?
Each M relies on different signals.
Below is a bit on each model (although all the signals utilized are not revealed, for obvious reasons).
We capture many volume and frequency signals including news/media, sentiment, partnership & customer momentum, and social media, among other signals.
We look at these on an absolute and relative basis vs. peers/industry comparables. The relative piece is critical as it ensures that, for example, enterprise software companies that may get less media attention or that spend less time on social media are not penalized vs. consumer-focused tech companies.
The quality of the market or industry a company competes in is critical. If you are part of an industry which is in favor, that serves as a tailwind to push you along. Conversely, being in an out-of-favor space means fewer investors, partners, media, and more.
Said another way — you don’t want to be a daily deals company today.
The market model looks at the number of companies in an industry, the financing and exit momentum in the space, and the overall quality and quantity of investors participating in that area.
The money model is all about assessing the financial health of a company, i.e., do we think it’s going to run out of money?
Our model here looks at things including burn rate, the quantity and quality of the investors and syndicate that may be part of the company, and its financing position relative to industry peers & competitors.
Our most recent Mosaic model centers around the founding and management team at private tech companies.
We find that, in selecting investments or partnerships, especially with early-stage tech companies, VCs and corporates place the greatest importance on the founding and management team.
In fact, a Journal of Financial Economics report found that 95% of VC firms cited the management team most frequently as an important factor in their deal evaluations.
And when asked why corporate pilots fail, 78% of corporate respondents cited the team, per a 2019 CB Insights customer survey.
Bottom line: Investors care about track record, or more specifically, the quality of management.
Using the wealth of People Data in our platform, our Management model looks at founding and management teams’ work accomplishments like previous exits, funding rounds, industry experience, as well as their education background and network.
Each of the 4 M models is scored on a scale of 0-1000 and drives the overall Mosaic score (also on a 1000 point scale, with 1000 being the best score).
How can my team unlock the power of Mosaic?
Enterprises and investors rely on Mosaic to shortlist and evaluate the right private tech companies.
Compare multiple partner, investment, or acquisition targets across a broader market
Define your universe — in the case below, health IT companies worth $20M+ — and use Mosaic as your guiding light to shortlist the tech companies you should have on your radar.
Screen individual private tech companies and their management teams
Through a recent customer survey, we found that 23% of teams are screening 1,000+ companies per year.
That’s a lot.
Running searches across 8 different resources to try and piece together a company’s financial health, founding team, partnerships, and more isn’t a great use of time.
Instead, upon landing on a private tech company profile with Mosaic scores, you can instantly glean important key performance indicators like valuation, stage, last raised, network, and more. These all funnel into that company’s Mosaic scores, as shown below for project management company Coda.
And when you don’t have a lot of signals coming from early-stage tech companies, you’ve got to bet on and trust the founding team to grow and lead the company to a positive outcome.
With auto-generated and interactive Key People visualizations, it’s easy to analyze founders and leaders at any stage, as shown below with serial entrepreneur Marc Willebeek-LeMair, founder and CEO of cybersecurity company Spyderbat.
What’s next for Mosaic?
We have 2 primary areas of focus for Mosaic going forward:
- Gathering more data from companies themselves — To battle the opacity challenge, we’ve launched free Analyst Briefing Surveys for tech companies to increase their exposure and paint the most complete picture of themselves for Mosaic. If you’d like to conduct a briefing with our analysts, please submit some basic information through this survey (<3 minutes). Our analysts will then review and reach out to relevant companies to begin the analyst briefing process.
- Extending to other industries — We believe there are other sectors, such as consumer goods & services and biotech/pharma, that Mosaic can be extended to. These industries provide unique signals that could feed into the models.
To see our 50 unicorn picks with Fast Company and the 60% we got right, download the full report here.