Series A Crunch
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Here’s One Way To Monetise The Series A Crunch: Make A List Of Moribund Startups, Sell It For $5k (As Acqui-Hire/IP ‘Intel’), Profit

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Back in December, the sort-of-Series-A-crunch led VC analysis firm CB Insights to predict that more than 1,000 startups will be orphaned at the seed stage. But it seems there is silver-lining to the seed boom/cash crunch — at least for CB Insights itself, which is selling a list of “dying” startups. Or to give it its full title a List of Early-Stage Tech Startups Running Out of Cash (Dying). The price-tag for the list? Almost $5,000.

How is CB Insights determining that an early stage startup is running out of runway? The unlucky number is apparently 13 (or more) months since the startup raised its last round. “This list highlights seed and angel-backed technology startups whose last round of financing was more than 13 months ago and thus who may be running out of runway (aka cash) or for lack of a better phrase – may be dying,” the firm notes.

It’s unclear how many startups have made this ‘deadpool dive’ list (presumably it could be more than 1,000, if CB Insights’ past analysis is on the money — update: the list is generated in real-time and has had between 1,000 and 1,400 companies on it to-date). Or who exactly is on the list — CB Insights says only that “tech startups on this list span internet, mobile and software companies”. We’ve asked to see the full list but since we’re not a paying customer we’re setting our expectations accordingly.

Paying customers can expect the following data on each listed startup:

  • Name of company
  • Website
  • Company description
  • Industry classification
  • Mailing Address
  • Phone number
  • Total amount of money raised
  • Date of most recent financing
  • Amount of most recent financing
  • Investors

It’s also unclear where CB Insights is sourcing its startup financing data from. Update: CB Insights has provided some info on how it generates the list — see below for more — and confirmed that it does use public data, and does not contact the startups individually.

It would be possible to pull public financing data from CrunchBase, for instance, but there are lots of problem with using only public data (if that’s what CB Insights is doing) to judge whether a startup is ailing since not all rounds are disclosed in full or disclosed promptly. Add to that runways vary because of’ varying monthly expenditure, and funding can be done in tranches based on set milestones. In short: there are lots of variables so public funding data can present a misleading picture of the health (or otherwise) of a startup.

Of course it’s possible CB Insights has been contacting startups itself to track their financing and is therefore privy to private financing data which it’s using to compile the list. We’ve asked about their methodology and will update this story with any response. Update: CB Insights said it uses a “number of data points” and its own tech tool — called Mosiac — to create the list. Scores are “derived algorithmically”, using public data crunched via its Mosaic tool — which apparently analyses “thousands of information sources” to identify “signals of strength and weakness” in private companies.

“Some of the inputs Mosaic looks at and calculates are cash-on-hand, quality of investors, industry heath, and HR activity among others,” said a spokesman. “Companies not exhibiting signs of strength make the list.

“We received National Science Foundation funding to develop Mosaic as our belief is that there is a lot of digital exhaust that companies create or ‘breadcrumbs’ they leave behind which if properly extracted and analyzed give you predictive intelligence about their health.  We do not talk directly to companies as (1) that effort doesn’t scale and (2) even if we did, it’s unlikely we’d get the facts, i.e., it is not in their self-interest to tell us they are not doing well.”

The  spokesman added that the number of companies on the list varies over time as the list is generated in real-time — so companies “that may be dying” one day, may stop looking so sickly the next.  Over time, the number of companies on the list has ranged between 1,000 to 1,400, the spokesman added.

So who wants to buy a list of possibly moribund startups? A varied group, according to CB Insights, including companies looking to do acqui-hires, VC investors on talent recruitment duty, HR teams generally and companies wanting to cherry pick ailing startups’ IP. Indeed, “inbound requests for this list from the likely buyers” is the reason why CB Insights created the list — the first such one it has compiled — in the first place.

It said the following types of customers have “asked us for/purchased this file already”:

  • M&A groups looking to do acqui-hires
  • Venture capital investors looking to help portfolio companies recruit talent
  • Company HR/recruiting teams that are looking to find talent including hedge funds and more mature later stage technology companies
  • Organizations interested in the potential IP that these startups may possess