Meet the investors who think they can pick biotech winners by algorithm: Here’s how it works: Correlation, which has been in business since 2012, has assembled a sprawling database of more than 80,000 venture capital deals, encompassing roughly 98 percent of all U.S. investments dating back to 1997, Coats said. Every facet of each deal is given a numerical score and fed into the database. Zoom all the way out, and tendrils of data form patterns that connect the winners and freeze out the losers, Coats said.
And that leads to Correlation’s proprietary algorithm, which the firm’s partners believe allows them to predict the future of new companies based on the fates of ones past.
Only about 10 percent of potential investments pass the test. In recent years, the algorithm has led them to make investments — generally between $1 million and $4 million — �in a wide range of biotech and tech companies, including a drug developer out to treat cancer, a health IT company hoping to make doctor referrals more efficient, and even an online mattress retailer.
“Everything is entirely empirical,” said Coats, who has been investing in biotech for about 20 years.
And that leads to Correlation’s proprietary algorithm, which the firm’s partners believe allows them to predict the future of new companies based on the fates of ones past.
Only about 10 percent of potential investments pass the test. In recent years, the algorithm has led them to make investments — generally between $1 million and $4 million — �in a wide range of biotech and tech companies, including a drug developer out to treat cancer, a health IT company hoping to make doctor referrals more efficient, and even an online mattress retailer.
“Everything is entirely empirical,” said Coats, who has been investing in biotech for about 20 years.