Connie Loizos (@cookie)
A new index aims to help consumer-oriented startup founders understand the health of the venture capital fundraising environment; specifically, when is a good time to seek funding — and when isn’t.
How does it work?
Created by the early-stage venture firm Goodwater Capital, the index starts by analyzing a trove of publicly available information, from the aggregate dollars raised by U.S.-based consumer tech startups during the current month, to related monthly M&A activity, to the amount of money VCs have raised in the previous year, to the amount of money they’ve invested in startups over the previous quarter.
It also factors in the median price-to-earnings ratio of top public U.S. consumer tech companies during the current month.
Not each is weighted equally, says the firm’s lead data scientist, Jimmy Li. Instead, the firm factored in historical sentiment over the last 20 years, creating a regression analysis using those five buckets to understand which variables matter the most over time.
“It’s no one thing,”
“In fact, the thing that most people see — deal volume — is a lagging indicator, not a leading indicator.”