Overview of Hatcher’s comprehensive 24-month analysis of over 40,000 companies using publicly accessible data

Highlights

• The Hatcher+ Score, which includes an overall score and various component scores, is data-driven predictive metric set assessing a startup or earlier stage firm’s opportunity in the VC market.
• The scores are generated by a system built on 75+ models trained on 900K+ investment events.
• We took a snapshot and scored 40,000 companies in late 2022 and assessed their performance in the following 24 month period from public data. This process, of using data and models at the time prevents and inadvertent target leakage.
• Our 24-month analysis of over 40k companies shows higher scores align with more funding/exits in the observed period.
• We are continuing the observational study, and are tracking additional cohorts, in the years ahead while consistently refining our scoring systems to ensure they remain as robust and effective as possible

Overview

In 2016, Hatcher+ set out to create a proprietary scoring system that could generate predictive scores to evaluate a startup’s potential in the VC space, driven by a mission to bring data and science into venture capital decision-making. Initially developed to assess our own funds, the system was refined and expanded over the next eight years, evolving into the robust solution that Hatcher+ Score offers today.

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In 2022, we conducted a 24-month study to validate its accuracy, and the findings were clear and compelling.  

What is the Hatcher+ Score?  

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The Hatcher+ Score is a data-driven metric that evaluates a startup's potential in the VC market, with scores ranging from 350 to 900 and averaging around 650, similar to a US credit score. It is a composite of four critical predictive scores and four supporting informational scores that assess factors including: 

• Likelihood of a successful exit (e.g., acquisition or IPO)  
• Future funding potential  
• Industry relevance  
• Market scale opportunities  
• Return potential  
• CEO exit and fundraising capabilities

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This score provides investors with actionable insights to identify high-potential startups while offering founders insights into their position in the market and showcase their competitive edge.  

How Does It Work?  

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The Hatcher+ scoring engine leverages over 75 advanced AI models trained on more than 900,000 historical investment events. Developed over nine years by our expert data scientists, our system analyzes licensed and publicly available data —such as that from Crunchbase— to calculate a startup’s score using proprietary algorithms and component metrics.  

The 24-Month Validation Study  

Most of the earlier testing for our proprietary scoring system relied on back-testing. To ensure the quality of the AI however, in case of potential unseen data leakage, we engaged in this real-time observational study. 

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In November 2022, Hatcher+ scored 40,000 companies using its latest models and public data, analyzing variables like funding history, market conditions, and industry trends. By 2024, these predictions were revisited to compare against real-world outcomes, ensuring unbiased and reliable results. 

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Key metrics evaluated included:  

• Business status (active, acquired, etc.)  
• Follow-on funding or exits  

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Performance Insights:

• Overall Score: Companies in the top 10% (top decile) were 70% more likely to secure follow-on events compared to the lowest decile and 36% more likely than the remaining 90%.  
• Funding Potential: Top-decile companies demonstrated an 86% higher likelihood of receiving funding versus the lowest decile and a 48% higher likelihood compared to the lower 90%.  
• Exit Potential: The top-decile companies had a 159% higher likelihood of achieving exits, primarily acquisitions, compared to the lowest decile, and a 58% higher likelihood than the remaining 90%.  

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These results validate the Hatcher+ Score and component scores are reliable predictors of positive signals in the competitive VC market. 

The Hatcher+ Score Results in the H2 Fund

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In addition to the observational study of 40,000 companies, we also examined the correlations between the Hatcher+ Score and the same key metrics within the portfolio of the H2 Fund. This analysis took into account unique considerations, including the specific investment scope of the fund. The fund investment criteria were established before the Hatcher scoring system was generally available. While we scored each company at the time, the scores were not consistently used in the decision processes.

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The H2 Fund targets seed-stage startups, with initial investments ranging from $25,000 to $100,000 USD, and selectively provides follow-on funding based on each company’s performance and potential. While Hatcher+ AI scores are available to both Hatcher and its co-investors, they are used as supplementary insights rather than strict filters for investment decisions. These scores enhance the decision-making process by providing valuable data points, which are then integrated into broader due diligence efforts.

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Investment Outcomes

Over the past 30 months, 57% of H2 Fund investments remain at their initial valuation due to the early-stage nature of these companies. However, current analysis reveals that higher-scoring companies exhibit stronger valuation growth compared to lower-scoring ones.

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H2 Investment Analysis (As of July 2024):

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High Scores (900s): These investments show a significant valuation step-up, averaging 1.54x.

Moderate Scores (700s and 800s): Valuation step-ups range between 1.11x and 1.13x.

Low Scores (500s): A small number of companies with a valuation decline to roughly .3x.

These findings underscore the practical value of the Hatcher+ Score in identifying startups with greater potential for early valuation growth, reinforcing its role as a valuable tool for both investors and founders in navigating the competitive venture capital landscape. 

Higher Scores Equal Better Outcomes  

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The study confirmed a strong correlation between higher scores and the frequency of follow-on events. Companies in higher deciles consistently outperformed their lower-scoring counterparts.  

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For investors, the Hatcher+ Score serves as a powerful screening tool to prioritize opportunities. For founders, it quantifies their startup’s potential and strengthens their credibility during fundraising efforts.  

The Future of Predictive Analytics in VC  

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The Hatcher+ Score transforms venture capital by making smarter, data-backed decisions possible. By predicting a startup’s potential and position in the greater market, it enhances due diligence processes and empowers decision-makers.  

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Looking forward, we will continue tracking the progress of these companies annually, building a rich repository of longitudinal data to refine our models. With advancements in machine learning, we aim to keep our predictions accurate, reliable, and at the forefront of innovation.  

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In the dynamic, fast-paced VC landscape, tools like the Hatcher+ Score bring clarity and actionable insights. Our mission is to make venture capital smarter, more transparent, and driven by data.  

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