ARUN RATH, HOST:
Big data knows you better than your own mother. It knows what you're going to do even before you do it. That's what predictive analytics is all about. It's the way all sorts of companies search through huge amounts of data and make predictions. So Amazon can figure out what you want to buy next. Netflix knows what you want to watch next. And Target could know if you're pregnant.
In the world of venture capitalism, some investors have been using the technique to figure out which startups are likely to make it big. Now one firm is taking it one steps further - or, actually, backwards - using an algorithm to try to find promising entrepreneurs before they even start a company. Roy Bahat is the head of that venture capital firm, Bloomberg Beta. Bahat says, the competition to buy up entrepreneurs is that intense.
ROY BAHAT: There are so many companies being started and so many people trying to back those companies that if you don't start earlier, sometimes you feel like you're speaking to somebody after they're already well on their way.
RATH: So how did this idea come together?
BAHAT: You know, we'd seen some reports in the news about companies using data in new ways. And then we were sitting there, talking to entrepreneurs. And they'd come into our offices after they'd already done all this thinking about what they wanted to do. And we just thought, wouldn't it be better if we could see them six months earlier or a year earlier? And part of the problem is then they may not have themselves even known that they wanted to start a company. And so we started asking the question of could we try to use data to predict who would start a company before they did?
RATH: So what data are you analyzing? What are the features that you're looking for?
BAHAT: We mostly look at their work history and their educational history - their public presence. And from that, you can deduce a lot. You know, for example, if somebody has ever worked at a start-up that's backed by venture capitalists, then they're much more likely to start a start-up in the future because that's the world they've seen.
RATH: And can you give me, like, a basic profile of this type?
BAHAT: Well, so you know what's interesting is we have in our minds this stereotype of what a typical entrepreneur looks like, and the reality is that people who start companies are incredibly varied. Roughly 40 percent of the people we identified were 40 years of age or older - all genders, all professional backgrounds. And so that's the amazing thing is when you use the data, some of your stereotypes just turn out to be wrong. And that's great 'cause it means you're talking to people that the truth that the traditional system overlooks.
RATH: So you came up with a list of individuals. How many people did you end up with?
BAHAT: We came up with 350 people. They got this message from us saying, hey, we did this study. And based on, you know, public data about you, we've concluded that you are likely to be a founder of a start-up in the future. And honestly, we to email some people a few times because several people thought it was a scam.
RATH: (Laughter) It sounds a little bit like one.
BAHAT: Yeah. I mean, somebody wrote us back and said, you know, if this is a scam, it's the most elaborately well-organized one I've ever seen.
BAHAT: You know, and all we were offering them was a chance to get to know one another and get to know us. And so we've hosted a series of events where we've talked to them about the process of starting a company, and our goal was just to get to know them.
RATH: We decided to reach out to one of those 350 targeted future founders that were Roy Bahat and his team have gotten to know. The algorithm looked at candidates in New York and Silicon Valley. Omoju Miller is a Ph.D. candidate at UC Berkeley.
OMOJU MILLER: I got an e-mail - very random e-mail from Bloomberg Beta.
RATH: She thought it was just another networking event, so she forwarded the email to some friends and invited them to go with her.
MILLER: One of my friends emailed me back and said, I think you ought to read this e-mail a little bit closer. Don't think it's a regular networking event.
RATH: Once she realized what they were after, she was intrigued.
MILLER: And I did a cursory analysis of my own and realized that there's several things that I have in common with whoever potentially is the prototype of a start-up founder.
RATH: Miller is getting a Ph.D. in computer science and education. She has a job with Google's non-profit wing advising start-ups, and - way to go algorithm - she was planning to become an entrepreneur.
MILLER: Probably within the next 36 months, I intend to start a start-up of my own. It will be something in the ed-tech space. I'm not quite sure the scale of the problem I want to solve. That's why I'm not rolling out and creating one now.
RATH: Omoju Miller says the outreach firm Bloomberg Beta didn't really influence her entrepreneurial goals, but it did one thing for her.
MILLER: It just kind of validated me to know that I'm not crazy. It's like, OK, there are your people.
RATH: But the response from candidates that Bloomberg Beta found had been mixed, says the company's leader, Roy Bahat.
BAHAT: You know, as you might expect with any group, some people are completely disinterested and probably hit delete every time it hit their inbox. And other people are really honored that they were tapped on the shoulder this way. Some of the folks that we identified in our study already went and started companies. You know, one just got millions of dollars of venture funding. You know, my view is the real success is only going to be judged over a period of years as we see how these people's careers unfold and our relationships with them unfold.
RATH: Do you think this process, in the venture capital world, is going to become the norm?
BAHAT: There is no question. I mean, I am a believer that the things that we see in science fiction, you know, eventually come to pass. And if you've seen "Minority Report," where, you know, the pre-cogs go grab the criminals before they even know they want to commit the crime - you know, that kind of a future is - for better and for worse - coming. And so I think that'll happen in agriculture, industry, human relations, sports. I mean, name an industry - the data are coming.
RATH: Roy Bahat leads the venture capital firm Bloomberg Beta. Roy, thanks for your time today.
BAHAT: I really appreciate it. Thanks for looking into this.
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