If you want your startup to succeed you have to have good connectionsChristian Fernsby ▼ | January 27, 2020
The future potential of early stage startups can be assessed by their existing professional relationships, research led by a team at Queen Mary University of London suggests.
Starting Results indicate the predictive link between rankings and long term success
They found that young startups who quickly acquire a central position within the network are more likely to show signs of long-term economic success.
The team then used this approach to develop success prediction algorithms, which were shown to be two to three times more accurate when predicting future economic performance than current labour-intensive screening methods adopted by venture capital firms.
The findings are published in Scientific Reports.
Startups were ranked based on their values of 'closeness centrality', which measures the average distance of one company from other firms within the network.
Results indicate the predictive link between rankings and long term success, with 30% of the top 20 firms each month achieving a positive economic outcome within seven years.
The researchers were able to validate their approach by reviewing the rankings of well-known successful companies such as Facebook, Uber and Airbnb over time. They discovered that these companies swiftly moved to high ranking positions soon after they were founded.
Data on funding rounds, acquisitions and initial public offerings were all used as measures of startup success. ■