The Hatcher Score Explained

Highlights

• The Hatcher Score is a predictive metric designed to gauge a start-up’s potential success, typically ranging from 350 to around 900.
• It’s made up of eight individual component scores, all generated by Hatcher’s proprietary scoring engine.
• Similar to American credit scores, this range signals the relative opportunity (and risk) presented by a start-up.

What is the Hatcher Score?

Think of the Hatcher Score as a barometer for a start-up’s “opportunity.” It blends factors like:

• Likelihood of a successful exit
• Future funding potential
• Industry trendiness
• Valuation scale in the market

Ranging from 350 to 900, the score averages about 650. It isn’t a pass/fail grade; rather, it’s a comparative gauge that helps founders showcase their strengths and investors spot promising ventures. 

How Has the Hatcher Score Evolved?

The Hatcher Score has been in the works for over nine years and has undergone multiple updates to improve its accuracy and relevance. With each iteration, Hatcher+Score refines its scoring engine to stay current with market trends, data availability, and the venture landscape.

What Are the Component Scores?

Hatcher+Score’s research has identified eight important factors that make up the Hatcher Score. These eight scores are split into two categories: the key component scores and the supplementary informational scores. The key component scores have the most robust data behind them and are central to understanding a venture’s potential, while the supplementary scores provide extra context and insight. Below, they are listed in order of predictive strength. The first two — Return Potential and Exit Potential — are the most robust in terms of data-backed accuracy.

Key Component Scores

1. Exit Potential Score
   Forecasts the likelihood of a company being successfully acquired or going public (IPO).
2. Funding Potential Score
   Gauges the probability of attracting further investment, highly influenced by industry theme, geography, and stage.
3. Return Potential Score
   Predicts the potential valuation multiple of a firm if it continues to progress.
4. Venture Trend Score
   Evaluates whether a company’s theme or sector is on an upswing or may be losing steam among venture investors.

Supplementary Informational Scores

• Impact Readiness Score
  Assesses how well a company may draw interest from socially conscious investors (e.g., SDG, ESG).
• CEO Fundraising Score
  Estimates a CEO’s ability to raise capital based on their background and track record.
• CEO Exit Potential Score
  Predicts a CEO’s likelihood of selling or taking a company public, again influenced by experience and history.
• Geographic Potential Score
  Measures how well a startup’s location aligns with prevailing venture capital trends.

These component scores are displayed on a radar chart, giving you a quick, visual snapshot of where a start-up may stand out or need attention. Each metric captures a different angle of potential — ranging from how well-positioned a company is for an eventual exit, to its potential for attracting funding, to its fit within current industry trends — ultimately helping investors and founders alike gauge future prospects in the venture space.

What Is an Average Hatcher Score?

On average, companies tend to score around 650 on the Hatcher scale. A company that lands near this midpoint could:

• Possess typical opportunity indicators across multiple dimensions, or
• Lack sufficient information for the scoring engine to classify it as clearly above or below average.

Because the system will tend toward a baseline of 650 when there is insufficient data, it’s crucial to provide comprehensive details for a more accurate reflection of the company’s potential.

What Is the Range of the Hatcher Score?

While the theoretical scoring range extends from 350 to 900, most real-world scores fall between 400 and 850. This bracket acknowledges the more practical, predictable data points that go into the scoring. Much like American credit scores, it provides a straightforward scale for investors and founders to interpret risk vs. potential. 

What Does the Hatcher Score Indicate?

In simple terms, a higher Hatcher Score correlates to a stronger probability of success. In fact, in a recent 24-month, real-time study of scored companies, we found that those with higher Hatcher Scores consistently outperformed lower-scoring companies across every predicted dimension, such as funding success, market scale, and eventual exit potential.

However, it’s important to remember that the Hatcher Score itself isn’t an automatic “yes” or “no” on investment. Instead, it provides a data-driven snapshot of where a company stands on key factors like:

• Expected funding success
• Trending industries or business models
• Prospects for a profitable exit

This added layer of context can be invaluable, whether you’re an investor deciding where to direct your attention or a founder fine-tuning your pitch and strategy. If you’re curious to learn more about the study’s findings, you can learn more about it here.

What Is the Hatcher Score Commentary?

In addition to the numerical score, Hatcher+Score generates an Analysis Commentary that helps translate the data into practical insights. This commentary is:

• Machine Learning-Driven: Advanced models interpret the scores and highlight the most influential factors to give you the best insights available. 
• Geography Conscious: The system tailors the text based on where a company is headquartered so the insights provided are appropriately relevant to the region the company operates in.
• Lower Confidence Signal: When the models’ internal predictions have wider bands, the commentary may show a range, such as 775-840, rather than a single score. The presence of a range indicates the score is on the lower end of internal confidence (based on internal conformal prediction bands).

Together, the numerical Hatcher Score and the descriptive commentary provide a fuller picture for both investors and founders.

How Is the Hatcher Score Calculated?

The engine behind the Hatcher Score uses machine learning models that draw on a wide range of information, such as publicly available data, licensed databases, and company profiles on the Hatcher+ platform. The data is aggregated and normalized over a 20 year period and then used to train our prediction models.

By analyzing these data sources — focusing on trends, location, industry popularity, and more — the system employs best-practice regression and categorization methods to forecast a company’s potential performance relative to its peers.

How Should I Use the Hatcher Score as an Investor?

If you’re an investor:

• Triage your deal flow. Let the Hatcher Score help you quickly spot which companies deserve a closer look.
• Add another layer of insight. Combine the Score with your own market knowledge, risk tolerance, and instincts for a fuller picture of each opportunity.
• See how it aligns with your strategy. Check out the breakdown of sub-scores (like funding or exit potential) to gauge where a company’s strengths really lie.
• Navigate complex terrain. Use the Hatcher Score to validate your due diligence or get a better handle on a company’s risk profile — helping you invest with greater confidence.

How Can I Improve My Hatcher Score as a Founder?

The Hatcher Score is primarily for investors, but founders can use it to get a better understanding of their position in the market and refine their story based on the feedback they receive. Founders can take several steps to boost their scores:

1. Keep your profile updated. Provide accurate and current information about your market, product, and team.
2. Leverage the AI feedback you get. Use Hatcher+Score’s real-time AI tools to refine your pitch and description, ensuring you cover what investors care about most.
3. Remember there are other external factors at play. Accept that some elements, such as economic trends, industry popularity, and location, lie beyond your direct control. Stay strategic by understanding these dynamics and adjusting where you can.

By showcasing clarity and comprehensiveness in your company profile, you give potential investors and Hatcher+Score’s algorithm more reasons to rank your start-up favorably. If you want to learn more about how founders can best utilize the Hatcher+Score, you can read more about it here. 

In Summary

The Hatcher+Score is a powerful tool for both investors and founders. It helps investors to better focus their time and founders to help refine their pitch. While it’s not a definitive make-or-break indicator, it’s a valuable piece of the puzzle in the fast-paced world of venture investments.

If you’re looking for an extra edge, consider integrating the Hatcher+Score into your decision-making or fundraising strategy. Keep your company information fresh, pay attention to the analysis commentary, and harness the insights it provides to position yourself for success.