Economics/Class Relations

Startups set to hit it big

August 15, 2023
Hey there! Having a tattoo artist work at your wedding is the latest debate the internet is torn over.

Speaking of outside-the-box thinking, at least one VC firm is trying to leverage AI to help it suss out early-stage startups bound for success. More on that in today’s big story.

Plus, on Monday night, a Georgia grand jury indicted Donald Trump on charges related to his effort to overturn the 2020 election. He is now facing 91 criminal charges across four cases.


What’s on deck:

But first, let’s see what the model says.
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Predicting future tech unicorns

Photo illustration by Ben Bergman/Insider


Finding the next startup that will hit it big could be a calculation away.

TRAC, a San Francisco-based early-stage venture firm, developed an AI-powered model to predict the young startups likely to achieve a $1 billion valuation.

Dubbed by its cofounders as “Moneyball for venture capital,” Insider’s Ben Bergman got a peek at the model’s methodology along with 30 early-stage startups it identified as potential future unicorns.

TRAC says startups flagged by the model have a 20% chance of actually reaching unicorn status. And while that success rate might not seem high, only a tiny percentage of young startups end up sniffing that type of valuation.

As Ben notes, TRAC’s approach is a departure from how early-stage investors typically operate. Despite a proximity to high-end tech, VCs are usually less scientific when investing in young companies, relying on gut feeling, founder background, and personal relationships.

One of the most predictive factors for a startup’s future success, according to TRAC’s model, is who is backing it. That includes a group of 300 top angel investors and firms TRAC defines as “SuperForecasters.”

(TRAC declined to disclose the SuperForecasters, beyond OpenAI CEO Sam Altman, but did highlight characteristics most of the angel investors in the group share.)

To be sure, finding a startup is only half the battle. Being able to invest in it remains “a monumental hurdle,” TRAC cofounder Joseph Aaron told Ben.

Leveraging AI to help source deals is becoming increasingly popular in some circles. Swedish PE giant EQT started using AI-powered tools to make “cyborgs” out of its dealmakers.

Blending humans and machines is also popular in the world of trading. “Quantamental” investing strategies, or combining human-led fundamental analysis with quantitative models, have gained momentum over the years.

But finding the appropriate balance between the two sides, whether it be from a cultural or procedural perspective, is no easy task. And it might be a tough sell for VCs who pride themselves on sussing out young companies.

For example, what happens when the model indicates a startup that’s a favorite of a fund’s partner is actually a bad bet? Or vice versa?


3 things in markets

Before the opening bell: US stock futures fall early Tuesday as China’s surprise rate cut sparks concerns about the global economy.
Hank5/Getty Images
  1. The Bank of Russia raised interest rates by 350 basis points to 12% at an emergency meeting Tuesday. It’s trying to prop up the ruble, which plummeted to a 16-month low this week.
  2. Meet PayPal’s incoming CEO. The payment giant announced Intuit’s Alex Chriss will be the new CEO starting September 27. Chriss has spent nearly two decades at Intuit, most recently serving as EVP of the small business and self-employed group.
  3. “Girl Math” means never having to worry about purchases under $5. The latest viral personal finance trend pokes fun at justifying purchases by breaking them down into smaller units. But one expert says it’s rationalizing bad spending habits.
3 things in tech
Jasmin Merdan/Getty Images; Jenny Chang-Rodriguez/Insider
  1. Smartphones are bad for us. But we can’t escape them. People are starting to recognize the drawbacks of smartphones, especially their addictive nature. But the world around us is increasingly designed for smartphone usage (think QR code menus and digital-only event tickets).
  2. Tick tock: Apple Watch redesign is reportedly in the works. “Watch X” will likely coincide with the device’s 10-year anniversary, per Bloomberg. It’ll reportedly come with a thinner case, improved display, and other upgraded features.
  3. Arizona workers v. TSMC — an unlikely feud. The world’s leading chipmaker Taiwan Semiconductor Manufacturing Company says the US doesn’t have enough skilled workers to build its Arizona factory. But an Arizona union claims it’s a way to bring in “cheap labor” to replace American workers.
3 things in business
Bill Pugliano/Getty Images
  1. Ford CEO’s “reality check” after road tripping in the electric F-150 Lightning. Jim Farley found that charging the vehicle was challenging at times. At one point during the trip, he spent 40 minutes getting 40% of the battery’s charge at a low-speed charger.
  2. Shopify’s make-or-break moment. Some of its largest partners are considering going public. Meanwhile, smaller startups within Shopify’s ecosystem are having a harder time standing out among the competition.
  3. We tried TikTok’s new music streaming app. TikTok Music is currently only available in Australia, Brazil, Indonesia, Mexico, and Singapore. It also has a “For You” page (which fed more flops than bops), and unlike Spotify, it has an emphasis on social listening.

Trump, Maui, & more

  • Georgia grand jury indicts Trump, Giuliani, and others. The 98-page document, filed and unsealed Monday night, brings 13 charges against the former president over attempts to overturn the 2020 election results.
  • More than 800,000 student loan borrowers could have their debt wiped out. It’s part of a one-time adjustment for people on income-driven repayment plans.
  • NFL star Michael Oher alleges the Tuohy family never adopted him. “The Blind Side” inspiration claims the family “exploited” him for their own benefit.
  • A family vacationing in Maui shares their story of being trapped for five days during the fires. The generosity of others brought them to tears.
  • The favorite workout snacks of five pro athletes. Alex Morgan loves her oat bars, while Naomi Osaka drinks a nutrient-packed smoothie.
  • Most important investors in the Rocky Mountain region, according to other VCs. The area has been luring venture capitalists from hubs like Silicon Valley and New York.

Earnings, NFL, & birthdays

  • Earnings on deck today: The Home Depot, H&R Block, and other companies. See our calendar here.
  • “Madden NFL 24” Deluxe Edition from EA is released. The digital only football video game is available on the Xbox Series X & S, Xbox One, PlayStation 5, and PlayStation 4.
  • No Tomorrow, because today is Chief Keef’s birthday! Jennifer Lawrence, Joe Jonas, and Ben Affleck also have birthdays today.

Princess castle

Rob Morrison/Coldwell
Photos of a home designed to look like a princess castle. The five-bedroom, five-bathroom Illinois property is on sale for $1.9 million. It boasts medieval details and a modern interior.
The Insider Today team: Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York City.

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