Starting a business is a dangerous thing.
A larger competitor might undercut your prices. Someone might sue you for patent infringement. Someone else could sue you because your products don’t do what you said it would. Or, well, the market may have no interest in what you’re selling. According to the U.S. Bureau of Labor Statistics, about half of all businesses fail within five years.
But Thomas Thurston thinks data science could remove a fair amount of the risk. For the past nine years, he’s been honing techniques for evaluating business plans statistically rather than intuitively. He calls it business model simulation, and you can think of it as something akin to Moneyball for investors.
He says his simulations correctly predicted that Snapchat, Uber, and Airbnb would be big—and that they’re now right about 66 percent of the time when predicting that a company will still exist within five years. When predicating that a company will fail, he adds, they’re right 88 percent of the time.