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Madrona Partners with PitchBook to Bring Machine Intelligence to the #IA40


AUTHORS: Ishani Ummat and Matt McIlwain | May 24, 2022

Madrona saw the move to intelligent applications early on – we have been investing in the founders building them, the technology powering them and the infrastructure to support them for over 10 years. Today, we believe machine intelligence is the future of software: every successful application built now and in the future will be an intelligent application. Out with SaaS, in with Intelligent Apps!
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Want to listen to Ishani and Daniel Cook from PitchBook talk through this new partnership? Listen here

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In 2021 we launched the inaugural IA40, a ranking of the top 40 intelligent application companies. Created in partnership with Goldman Sachs and over 50 of the nation’s leading venture capital firms, the list covers early to late-stage private companies building the future of software.  And – since the list was announced in December 2021, IA40 companies, in aggregate, have raised over $3 billion in new rounds of financing!

Madrona saw the move to intelligent applications early on – we have been investing in the founders building them, the technology powering them and the infrastructure to support them for over 10 years.

Looking ahead to the 2022 IA40, we are thrilled to announce the addition of our data partnership with PitchBook, the industry-leading private and public equity data provider. Madrona has worked with PitchBook for many years now (they are also located just a couple of blocks away from our offices) and their platform has become a valuable tool for the entire team.

This partnership presents an opportunity to make a significant change to the IA40. PitchBook is well-known for delivering timely, comprehensive, and transparent data on private and public equity markets collected through its proprietary information infrastructure. Now, they are harnessing that data to build powerful machine learning algorithms to predict financial outcomes. In this way, PitchBook embodies the broader shift from software as a service to an intelligent application.

To arrive at last year’s list, we asked more than 50 judges at 40 top venture capital firms to nominate and vote on intelligent application companies. They nominated over 300 companies and voted for the Top 40 – 10 companies for each category: early, mid, late-stage and enabler companies. You can find the list of 2021 winning companies like SeekOut, Gong, Starburst, dbt and others here.

This year, in addition to the judges and voting process, we’re leveraging PitchBook’s new and proprietary machine learning algorithm to help determine the top 40 companies. This algorithm leverages data from the PitchBook platform to predict the likelihood of different outcomes for each company.

As the world around us becomes more and more data-driven, we looked for an approach that would mirror that shift in our own methodology. The voting process for 2021 was based on leading venture investors’ viewpoints – a great proxy. Yet, for reference, PitchBook reports $115B invested in AI and ML companies in 2021 across over 5,000 companies in the space. And now more than ever, there is concrete data at our fingertips about each of these companies.

Employee growth, founder information, and funding rounds are valuable individual data points. Collectively, and using a machine learning approach, that data can be used to derive signal from noise. That signal will help create a better, more robust – and intelligent – ranking of the IA40. In short, PitchBook’s new machine learning algorithm will parse a number of data points across all nominated companies to help us generate a more data-driven ranking of the top intelligent applications. We couldn’t be more excited about this evolution of the IA40.

Now – a sneak peek via retrospective. We ran the PitchBook algorithm against the 2021 IA40 companies. Here are some of the key takeaways.

    • Late stage IA40 companies are 60% more likely to IPO than the average company at that stage.
    • Early Stage IA40 companies are expected to deliver 40% higher returns to investors in the upcoming round of fundraising than other early-stage companies.

PitchBook’s participation in this year’s ranking process allows us to power the IA40 list using machine learning and, subsequently, create the industry’s most accurate ranking of promising intelligent application companies. We couldn’t be more excited to showcase this algorithm’s capabilities and to partner with an industry-leading firm here in the Pacific Northwest.

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