A San Diego-based venture capital firm is taking a numerical approach to deciding which fledgling biotech firms to back, Stat News reports.
Partners at Correlation Ventures assign numbers to different aspects of a startup firm they are evaluating — such as the CEO's CV — and then enter that into an algorithm they've developed, according to Stat News. Correlation has also amassed a database of 80,000 venture capital deals to which they've also assigned these numerical values. Based on this database, their algorithm then predicts which startups will do well and which will not. Stat News adds that only about 10 percent of startups are given the OK by the algorithm for investment.
"It's kind of like counting cards in blackjack," firm co-founder David Coats says. "You may lose any individual hand, but if you play enough hands, you should win. The odds are truly in your favor."
Stat News adds that others are skeptical of the approach and that it doesn't appear to be foolproof. For instance, it notes that Correlation backed Aldea Pharmaceuticals and Enlibrium, both of which went out of business. At the same time, it has seen successes with Flex Pharma and Mirna Therapeutics, Stat News says.