Michael Lewis’s Moneyball tells the story of how the Oakland A’s, led by general manager Billy Beane, used statistical analysis to identify undervalued baseball players and compete with far better-funded teams. The core insight was that traditional scouting methods, which relied on gut instinct and conventional wisdom, often overlooked players who could contribute significant value. Instead, the A’s adopted a more analytical approach, using data to challenge biases and make more objective decisions.
This philosophy has clear parallels to early-stage investing, where conventional wisdom often drives decision-making. At RSCM, we take a Moneyball-style approach to identifying promising startups, favoring data and systematic analysis over gut feel and hype.
The Moneyball Principles Applied to Startups
1. Don’t Trust Your Gut Feel
One of the most famous lines from Moneyball comes from Beane himself: “Your gut makes mistakes and makes them all the time.” This applies just as much to investing in startups as it does to scouting baseball players. Research on gut feel (known academically as “expert clinical judgment”) consistently shows that expert intuition alone is unreliable. Statistical models built on substantial datasets outperform human judgment, even in fields like medicine and hiring.
The startup world often relies on unstructured interviews and subjective impressions, but these methods are notoriously poor predictors of long-term success. That’s why we focus on quantifiable factors and structured evaluation processes when assessing early-stage companies.
2. Use a “Player” Rating Algorithm (With Caveats)
In baseball, Moneyball relies on deep statistical analysis, drawing from thousands of recorded plate appearances per player. With startups, the data is far scarcer—most founders have very few “at-bats,” and startup outcomes are highly skewed, with the top 10% generating the vast majority of returns. This means that any attempt to create a founder “rating” algorithm will inherently be more limited.
That said, the Moneyball mindset is still valuable: rather than chasing the same overhyped, high-valuation deals as everyone else, we focus on finding undervalued opportunities. Conventional wisdom often favors founders with elite pedigrees, trendy sectors, and strong “social proof.” But those deals tend to be expensive. Instead, we seek a wide range of founders across diverse sectors and geographies, where valuations are more reasonable and potential upside is greater.
The Future of Moneyball for Startups
Even if you don’t predict massive outliers (“home runs”), a systematic approach can still yield strong returns. Our focus is on building a diversified portfolio of well-valued startups and letting the data work in our favor over time. At RSCM, we’ll keep refining our approach, looking for ways to better identify promising startups before the rest of the market catches on.
In a world where everyone chases the obvious winners, we’ll keep finding value where others aren’t looking. That’s the essence of Moneyball for tech startups.
This post was originally published on 09/28/2011 and was last updated on 03/01/25.
