In 2023, San Francisco-based TRAC unveiled a list of early-stage startups it predicts have a one-in-five chance of becoming unicorns, companies valued over $1 billion. Among the identified ventures are Harvey, a legal tech firm, and Kalshi, a prediction market, both now valued at $11 billion. This shift in venture capital investing comes as TRAC applies a proprietary AI model, which it refers to as "Moneyball for venture capital," utilizing over 30 public and private data sources.
TRAC's approach focuses on filtering out the majority of startups unlikely to succeed, rather than just searching for rare successes. The algorithm prioritizes 286 top investors, whose successful investments yield profits on two-thirds of their positions. Less than 2% of all startups attract these elite backers, significantly narrowing the field for potential unicorns.
While the accuracy of TRAC's predictions has improved with advances in AI, the competitive landscape for funding has intensified. As more venture capitalists pursue the most promising companies, securing investment opportunities has become increasingly challenging, according to managing partner Fred Campbell.