The two year old French company Early Metrics has set up shop in London as it aims to become the rating agency for startups, bringing an objective methodology to assess a startup's potential growth.  

Like all good startups, Early Metrics is turning the incumbent business model on its head. Traditional rating agencies like Moody’s or Standard & Poor’s charge the company they are rating in exchange for the kudos of that rating.

© Early Metrics
© Early Metrics

This creates a fair deal of conflict of interest, so Early Metrics charges the clients, venture capitalists and large corporations, for access to a startup’s ratings and a full report. Instead of rating a company’s credit risk, Early Metrics is concerned with a company’s growth potential.

Cofounder Antoine Baschiera says it is pre-due diligence rather than due dilligence, and more of a risk management tool. The ratings are “decision agnostic” according to Baschiera, meaning it’s not just for investors but also large corporates looking to partner with innovative startups or companies exploring acqui-hiring (acquiring a company more for the people than the product).

The analysts, who tend to be experts in their fields - whether enterprise software or fintech - can rate a company in around 20 hours, and ex IBM and HP employees are among Early Metrics' ranks. 

Why get rated?

For a startup to get rated they simply have to ask Early Metrics nicely, comply with an interview, and supply the necessary documentation - a three-hour job according to Baschiera. The startup then receives a two-page certificate with their rating out of 100 and some top line objective insights such as SWOT analysis and market overview.

The company also signs a non-disclosure agreement so that their rating can’t be shared with any Early Metrics clients without their express permission. Startups are used to removing middle men from the equation, but this one looks like a no-brainer, which is probably why Early Metrics has a 95 percent hit rate when contacting startups, according to Baschiera.

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Clients then have the option to pay a £2,000 monthly fee to access the entire client base, from which they will be delivered select reports on companies that fit their investment portfolio. Or they can pay £3,000 per rating on a specific company of interest. Early London clients include HSBC, Visa, Procter & Gamble and Johnson & Johnson.

How the ratings work

Early Metrics claim that its rating methodology is scientific and completely objective. The methodology is built on three pillars: managers/founders, technology and market.

Baschiera explains the logic behind assessing founders: “We work with HR, psychologists and VCs to first identify what were the key skills that an entrepreneur needs to have. Some are hard skills, such as technical mastery, financial mastery and so on but a lot of them are soft skills, such as the capacity to self-assess.

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When asked how they can be objective when assessing something as ephemeral as leadership, Baschiera admits that it isn’t “black and white” but research shows there are certain patterns that can be used to predict if a team will succeed. Early Metrics weights management over the technology and market aspects when it comes to the final rating.

Early Metrics doesn’t try to assess how innovative a startup’s technology or service is, but rather how likely the idea is to become a minimum viable product or service. It takes a deep look at the business model, the overall market, execution speed, and the startup's business plan for the development of the project.

For the market, Early Metrics' analysts study volume, depth and evolution by looking at things like the balance of power between the different non-competitors players (like clients and suppliers), the regulatory environment, the type and intensity of the competition, and barriers to entry. 

Finally, there's the financials: Early Metrics measures the quality and coherency of the financial statements to provide an idea about the manager’s financial ability.

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Of course, no methodology is 100 percent accurate, but two years in and Early Metrics is already seeing a strong correlation between its ratings and business success down the line.

According to Baschiera: “78 percent of the companies rated more than 75, which is a good rating, have shown concrete proof of success 12 months later, in terms of how much they have raised, the relative growth of the team or revenue growth. On the other hand more than 80 percent of the companies with a bad rating have underperformed twelve months later.”


So, how good is London’s startup ecosystem according to these methods? “The London ecosystem is so mature,” says Baschiera, “the need to stand out from the crowd is higher than across Europe.”

The quality of Britain's fintech and martech startups stands out for Baschiera. But, he says, for pure B2B software and hardware, other countries in Europe are stronger - including Germany and France.

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Finally, Baschiera has one piece of advice for getting a good rating: “Focus on building the team, let yourself be challenged, that is when the idea starts to develop,” he says. Focus on qualitative metrics like the quality of the team and the feedback of your first beta users.

Rather than trying to achieve huge volume from day one it is better to focus on a smaller pool of users and to have really interesting retention metrics at the beginning.”