Over the past month, we’ve been rolling out the G/Score framework with partners, training G/Score assessors, and introducing entrepreneurs to the concept of a standardized, objective, transparent assessment methodology. The feedback from literally hundreds of conversations has been gratifying and tremendously helpful as we work to make the G/Score a useful and prescriptive tool for entrepreneurs and a valuable vetting mechanism for large organizations seeking to work more effectively with early stage companies.
And then, we got this question on our blog:
“Has the G/Score framework been evaluated against actual outcomes to determine how well it predicts the success/failure of early stage companies?”
When we parse the question, it’s clear that there are really two question on the table:
- “Can we use the G/Score to pick winners?” – Where ‘winner’ is a company that will receive venture funding and go on to generate outsized investor returns.
- “Can we rely on the G/Score to accurately assess a startup’s strengths and weaknesses?”
Candidly, the answer to the first question is “no.”
But then, that not what the G/Score is meant to do. The G/Score is a measure of a company’s potential and traction at a point in time. While a score might note significant market opportunity and a smart product offering, it is execution over time that drives to a successful outcome.
The G/Score’s seven factors, each rated on a four-point scale, work in combination to articulate a company’s achievement, potential and viability. No factor is weighted more heavily than another in the total scale. That weighting is left largely up to those who incorporate the G/Score into their own evaluations.
For example, a company seeking to acquire a technology may weight delivery of product to market more highly than business model, knowing that upon acquisition the technology will be integrated into the acquirer’s selling and pricing models. A serial startup executive may weight market opportunity most heavily, while looking for low-scoring teams who need the executive’s execution expertise.
By contrast, the answer to the second question is an enthusiastic, though anecdotal, “yes!” The G/Score measures where a company is today, against a clearly articulated ladder of achievement. And our observations of the more than 20,000 companies we’ve interviewed over the last 20 years indicates that if a company scores low and does nothing to address its weaknesses, it will most likely fail. But if a company works to address its weaknesses and improve its score, it dramatically increases its chance of not just surviving, but thriving.
The point is this: the G/Score doesn’t serve as a substitute for your own diligence, instincts or gap-fit analysis. It’s not intended identify a “good chemistry” between startup and investor, partner, or customer. It is, at its core, a uniform filter, a tool, that allows the individuals and organizations that work with startups to do that work more efficiently by helping them to quickly hone in on companies that meet their specific performance criteria.
We describe the G/Score as prescriptive for the entrepreneur because never has it been more clear what a company can do to move the needle on execution. By clearly articulating the achievement required to score at each level in the four-point scale, the entrepreneur can immediately see the work ahead of him to improve his G/Score and advance his business.
Along the way, the G/Score had another interesting affect on the startup ecosystem. Because it normalizes the way we look at startup businesses and provides a common language to talk about companies, it changes the dialog in the market. Already we’ve found that the conversation between a company and an assessor hones in on issues that matter to the execution and performance of a business. Hard to articulate gut instincts – and worse, feedback as public performance – are replaced by serious questions about business execution and market potential. An entrepreneur’s defensiveness is replaced by desire for constructive feedback. The conversation is qualitatively more useful to everyone.
Every organization working with startups is likely to have a set of guidelines to help them evaluate early stage companies and match them to their specific interests. The G/Score is another tool in that arsenal, one that is open, transparent, and objective, and designed to be as helpful to the entrepreneur as to the company doing the evaluation.
