We Used a Company Analysis Chatbot to Analyze 50 Unicorns, Here’s What We Got

Which company has a bigger investment in patents – Lyft or Uber? Which tech sector recently suffered from layoffs or legal issues? What kind of newly established companies will face a blue ocean, and who will face a red ocean? Which is investors’ favored industry today, frequently infusing hundreds of millions of dollars, and which one is forgotten, thirsty for money and attention?

In order to answer these questions, one can hire a group of analysts and have them spend a day or two processing data and reviewing the market. However, this time we used the advice of a company analysis chatbot named Emmet to get the information faster.

Meet Emmet: The AI Chatbot for Company Analysis

Emmet is the product of Zirra, a company that built AI-based tools to analyze other companies, currently serving VCs, accredited investors, as well as startups, accelerators and stock exchanges.

Using Emmet (f.k.a Nigel), we get instant smart insights on companies using simple English phrases such as “show me competitors for Uber,” or “opportunities for Github”, or “what are the risks for Airbnb?”.

At this moment, Emmet can produce insights on subjects such as:

-Level of direct competition: Emmet counts up to 20 competitors and evaluates the competition intensity, or the degree of overlap in their offerings. 50% and up is considered as a direct competitor. In our Unicorn analysis, we counted the number of competitors with more than 40% and 50% overlapping offerings.

-Time since last funding: It also calculates how much time has passed since the last funding round for a particular company in units of: 3 months, 6 months, 12 months, two years, three years and longer. A company, or cluster of companies, that has not attracted investors for a substantial amount of time can indicate it is either, 1) suffering from a lack of growth or 2) producing enough cash that allows it to reject investment offers.

-Layoffs: Emmet can detect the occurrences of layoffs that were published in media outlets along with other sources where it is listed on the open web.

-Legal Problems: The chatbot also identifies and determines the total number of legal problems that were published in the media or on litigation websites.

-Patent investment: Normalizing number of patents, Emmet shows them on a scale of 1-5.

To achieve this level of sophistication, Emmet uses a huge array of structured and unstructured data, from multiple sources, and then applies NLP and a variety of A.I. models to analyze companies and markets.

Using direct conversation with Emmet, we analyzed 55 private tech companies (that weren’t being acquired or merged), many of them unicorns, in 11 categories such as ride-hailing apps, self-driving cars or enterprise software. With the help of the tech behind the chatbot we could characterize companies, and clusters of companies, by risk and success criteria, establishing a better notion of their behavior and uniqueness.

Clustering companies into industry segments (i.e. putting Magic Leap, MindMaze, Improbable, Blippar and Niantic into AR/VR category) helped us better understand them, recognizing the uniqueness found in each sector.

Here is the analysis based on the AI chatbot’s findings within some of the reviewed industry segments:

Ride Hailing Apps

Ride Hailing Apps are characterized by a very dynamic funding activity, according to Emmet. In order to keep expanding into new territories, subsidize rides and attract more customers, ride-hailing apps are in constant need of cash. Out of the five companies analyzed here, Uber and Lyft raised hundreds of dollars each in the last three months, while Careem and Ola have done so over the previous six months.

Also, according to the AI chatbot, more ride-hailing apps are in need to create partnerships. Careem, the famous ride-hailing app in Arab countries, announced partnerships with taxi agencies, in-car WiFi providers, and payments services to adapt their service to local communities with local services.

In contrast to what you might have thought about ride-hailing apps, the total number of competitors is low, based on Emmet’s appraisal. After all, how many Ubers and Lyfts are competing for each territory at the same time? However, the intensity of the competition remains rather fierce.

Self-Driving Cars

According to Emmet, self-driving cars technology startups invest in patents, but at an average level that is not so different from most of the startups. Contrary to their innovative, scientific image, their total patent investment is lower even than cybersecurity or adtech firms, in regards to the number of patents.

Food Delivery

Food delivery startups are low on patents but packed with legal issues, according to Zirra’s chatbot.

For example, DoorDash had to pay $5 million to settle a class-action lawsuit that had stated that the company misclassified its employees as independent contractors. Instacart settled a class action lawsuit for $4.6 million after being accused of improper tip pooling and failure to reimburse workers for business expenses.

FinTech

We also found quite a few legal issues in the fintech sector. Disruptive, innovative solutions that collide with the incumbent, traditional banking world is a high-risk potential. In addition, finding new models of dealing with people’s money can create lots of legal issues if not done right.

But not all of these lawsuits go around money. SoFi’s CEO Mike Cagney resigned last September following a sexual harassment lawsuit. Credit Karma was sued by the FTC after disabling security certificates, leaving social users’ data vulnerable to attacks.

In addition, funding activity in the Fintech segment is slow, as most of the companies sampled in this analysis didn’t raise funds for more than a year. Investors have cooled down their enthusiasm about fintech in comparison to 2016 or 2015.

Enterprise Software

However, the most dynamic industry segment we’ve seen so far is in enterprise software. Unicorns in this area are frequently funded, rated high on patent investment and partnership activity. However, they also suffer from a high degree of competition with other companies who have a similar offering, higher than any other industry segment examined in this project. This may also explain the high rate of layoffs in the enterprise software sector.

Are VR, AR and Drones still Trendy?

 Other notable tech segments that didn’t raise money recently include drones (19 months on average since prior investment), AR/VR (13 months), and adtech (more than two years). The data supports the fact that AR, VR, and drones are buzzwords that attract less money these days than what it used to be one or two years ago. Flying cars, self-driving cars, and ride-hailing companies were probably much more relevant to investors in 2017.

Adtech

The adtech industry has suffered a blow after it had been accused of creating ad networks and servers that generated profit from an arbitrage in media trading. Consequently, our research shows the industry is highly competitive and experiences layoffs. Investors also have not put their money into this industry for more than two years on average.

Emmet, our chatbot, is just making its first steps into the world of AI-based company analysis.

It’s not perfect but its ability to find critical data and present it within seconds, like no human analyst can do, provides great benefits. Over time, we’ll be adding probabilistic NLP techniques to find new sorts of information, producing more elaborate and accurate insights.

The days when a chatbot will be able to supply analysts and investors with insights needed to make an investment – including private companies – are not far off.

About Zirra

Zirra’s platform offers users company analysis tools powered by data science and machine learning. Zirra’s customers include global and enterprise brands such as Microsoft Ventures, Deutsche Telekom Capital Partners, Silverlake, and Verizon Ventures.

Recognized by the Office of the Chief Scientist in Israel, Zirra is backed by top-tier investors such as Moshe Lichtman, former Corporate VP at Microsoft and now a general partner at IGP, AOL’s Nautilus (now Verizon ventures), Professor Dan Galai, co-inventor of the VIX Index, and Professor Zvi Weiner, Dean of the Business School at the Hebrew University.

Professors Galai and Weiner are both globally recognized researchers in the field of company rating and market risk analysis.

 

So, How Much is Stitch Fix Worth?

Snap and Blue Apron’s disastrous 2017 IPOs left Wall Street tech investors with a bitter taste in their mouths. Over the summer, pessimists even went so far as to predict that these two stock market flops would impede other companies’ efforts to go public, including Uber and Dropbox.

Uber and Dropbox haven’t gone public yet, but a group of healthy tech companies made some significant inroads into the stock market in the last two weeks. Open source database company MongoDB went public two weeks ago at a $1.5 billion valuation, followed by cybersecurity company ForeScout, which saw its market cap rise by 15% last weekend to $934 million.

At about the same time, two high-profile tech companies, online fashion shopping service Stitch Fix, and marketing email company SendGrid, filed their S-1 forms. Worldwide meal kit delivery startup HelloFresh has expressed its appetite to go public and is aiming to do so soon at a $1.8 billion valuation, ignoring Blue Apron’s challenges in the market from last June.

The public tech market is experiencing its best time ever, with the NASDAQ breaking new records every month. The NASDAQ has been soaring, having passed the 6,000 point mark for the first time last April.. With Apple gaining 35% of its stock price since the beginning of 2017, Google adding 22.7%, Facebook 46%, Oracle 29%, and Amazon 30%, it’s no wonder that others want to join the party.

The S-1 documents filed by Stitch Fix and SendGrid last month gave us some sense of their growth and the good momentum they’re experiencing at the moment. Yet, they did not disclose some critical numbers, such as their valuation and churn data. Using NLP and AI, we might be able to assess both companies’ level of growth and success to complete the picture described in the filings.

In order to learn more about these firms and their prospects, let’s use Zirra’s company analysis platform. Zirra has built an automatic process that delivers insightful outputs on private companies creating high-level analytical insights within seconds. Zirra collects and aggregates data from a myriad of public and private information sources and then utilizes Natural Language Processing (NLP) techniques to process this large volume of unstructured text and data.

**Get Insights on Any Startup at Zirra.com**

Stitch Fix

Stitch Fix is one of the biggest surprises in tech and e-commerce in 2017. The online fashion retailer sends its customers a package with five items, a “fix,”  according to his or her size and style. On its face , just another Silicon Valley “kit delivery” startup. But Stitch Fix’s numbers are very impressive: the company’s revenue grew by almost 34% to $977 million in the 2017 fiscal year (which ends in July), with a net loss of only $1 million. That’s almost a billion dollars in revenue from 2.2 million active clients, not bad for an online fashion company that was founded just six years ago.

Now, let’s ask Zirra’s company analysis bot, Emmet, about the risk and success criteria we need to know about Stitch Fix. Within seconds, Emmet pulls out the following output:

Source: Zirra

In terms of successes, Emmet mentions the extensive media coverage, the fact that Stitch Fix has recently begun a funding process (IPO) and its many patents and trademarks. As far as risks, Emmet mentions a few challenges: the highly competitive market (with the likes of LE TOTE and Trunk Club) and the fact that the company hasn’t raised much more capital than its competitors.

Emmet also mentions some legal issues that Stitch might be involved in. In order to locate the exact problem, let’s go to Zirra’s homepage and search for Stitch Fix in the search line. Then we’ll scroll down to the Latest Events section and click on “legal problems”. The linked article tells us that Stitch Fix was found in the eye of the hurricane of the sexual harassment claims against Justin Caldbeck from Binary Capital. While Caldbeck was an associate at Lightspeed, one of Stitch’s investors, founder Katrina Lake, accused him of sexual harassment. According to Axios, Lightspeed compelled her to sign a non-disparagement agreement to not sabotage the next financing round. You will not find that in the S-1 document

Source: Zirra

Emmet also flagged Stich Fix’s high number of open positions, which can be a sign of future growth, as a risk factor. Double-checking this with LinkedIn’s Total Employee Count dashboard shows that the company has hit a plateau in employee growth. Did Stitch cut expenses in order to show profitability before filing its S-1? Or else, had its excessive growth in 2015 and 2016 forced it to slow its expansion in 2017?

Source: LinkedIn

**Get Insights on Any Startup at Zirra.com**

Let’s look at another important indicator, traffic. According to SimilarWeb, a service that monitors web traffic, the number of visits to Stitch Fix’s website has grown significantly in 2017: from January to June 2017, traffic doubled. Yet, this growth isn’t coming from Stitch Fix’s home market. In fact, traffic originating in the U.S. decreased by almost 3% in this period, a bad sign for a business deeply rooted in that country.

 

Source: SimilarWeb

So, after considering some company health indicators, let’s answer Stitch Fix’s valuation riddle. Let’s ask Zirra’s valuation calculator, which estimate a company’s valuation, had it been a public company. According to Zirra, Stitch Fix’s pre-money valuation is estimated at $600-$700 million. In the case that the company will file for an IPO, it can pursue a valuation of $800-$900 million as a public company (or else would it get acquired).

Source: Zirra

The Zirra valuation process involves both intrinsic and relative valuation algorithms. The intrinsic data includes revenue and expense estimations, traffic trajectories, investment history and velocity, all based on aggregated sources. In the relative analysis, data is compared and benchmarked with a database of thousands of companies,controlling for stage, space, size, and trajectory.

Let’s evaluate SendGrid and HelloFresh, two companies that plan to go public very soon. SendGrid is estimated at $360-$380 million pre-money valuation, and up to $600 million if it chose to go public right now (read the full SendGrid Zirra Premium Insight Report); Germany based HelloFresh is estimated at $1.5-$1.6 billion, and up to $2.2 billion in the case of a liquidation event. In comparison, competitor Blue Apron is now traded at a $952 million valuation (read the full HelloFresh Zirra Premium Insight Report)

Zirra has also valued some of the recent tech IPOs. MongoDB, trads on the NASDAQ at $1.46 billion, but is valued by Zirra at $1.7-$1.8 billion, while ForeScout, now traded at $916 million, can pursue up to $1.4 billion if bought.

**Get Insights on Any Startup at Zirra.com**