Why Venture Capital Is Moving Toward Startup Rating Agencies
The startup ecosystem has never produced more companies.
Every year, thousands of new ventures launch across SaaS, AI, Fintech, Climate, DeepTech and infrastructure sectors. Barriers to entry have fallen. Capital formation has accelerated. Founders can now launch globally with limited friction.
But scale creates noise.
The venture capital industry was never designed to process this volume without standardisation.
And when an industry reaches scale, it inevitably begins to formalise.
That is where rating agencies enter the conversation.
Scale Without Standardisation Creates Friction
In the early days of venture capital, deal flow was limited. Networks were smaller. Screening was relationship-driven.
Today, funds review hundreds or thousands of inbound opportunities per year.
Each startup arrives with:
• A different pitch structure
• A different financial model format
• A different definition of traction
• A different interpretation of “ready”
There is no shared baseline.
That inefficiency compounds.
When an industry reaches this stage, it historically moves toward standardisation.
Public credit markets evolved rating agencies for the same reason. Structured finance did. Insurance did. Even manufacturing did.
Volume demands structure.
The Screening Problem in Modern Venture Capital
Venture firms operate under time constraints.
Partners cannot deeply analyse every inbound company. Associates cannot fully diligence early-stage financials at scale.
As a result, screening becomes heuristic.
Pattern recognition replaces structure.
Narrative replaces benchmarking.
Speed replaces depth.
That system works when volume is low.
It breaks when volume explodes.
The number of early-stage startups globally has increased dramatically over the past decade. AI alone has accelerated company formation at a pace few expected.
The result is predictable:
• Longer review queues
• Faster passes
• Less feedback
• More founder confusion
This is not malice. It is structural overload.
Why Rating Agencies Emerge in Maturing Industries
Rating agencies are not about opinion.
They are about standardisation.
When industries mature, three things typically happen:
Risk becomes harder to price informally
Volume exceeds relationship bandwidth
Participants demand comparability
Startup rating agencies attempt to address these pressures.
They introduce:
• Defined documentation standards
• Economic architecture evaluation
• Governance scoring
• Traction benchmarking
• Structured capital-readiness tiers
Not to replace investors, but to create a common baseline.
Just as credit ratings do not replace bond investors, startup ratings do not replace venture capital.
They reduce ambiguity.
The Founder Perspective
From the founder side, the ecosystem currently feels inconsistent.
Two funds may evaluate the same startup differently. Feedback varies. Standards are rarely explicit.
As the number of startups increases globally, founders increasingly ask:
What does investor-ready actually mean?
Why are standards inconsistent?
How do I benchmark before I pitch?
Rating frameworks offer one possible solution.
They shift part of the readiness assessment upstream.
Instead of asking five investors for five opinions, a startup can benchmark structurally before entering capital markets.
That reduces wasted cycles.
Industry Pressure Is Accelerating
Three structural forces are pushing this evolution:
1. Capital Efficiency Demands
LPs increasingly demand disciplined underwriting from funds. That pressure flows downward into screening.
2. AI-Driven Company Formation
The number of companies launching annually is increasing, not decreasing. Review bandwidth has not scaled proportionally.
3. Globalisation of Early-Stage Capital
Capital is no longer geographically local. Investors review companies across borders and jurisdictions. Standardised frameworks improve comparability.
When volume, capital discipline and globalisation intersect, standardisation typically follows.
This Is Not About Bureaucracy
Scepticism is natural.
Startups resist formalisation. The culture is built on speed and iteration.
But standardisation does not eliminate innovation. It clarifies baseline expectations.
In public markets, ratings reduce information asymmetry.
In venture markets, structured readiness frameworks may reduce screening friction.
The objective is not gatekeeping.
It is transparency.
Where This Leaves Founders
The ecosystem is evolving.
As more startups launch each year, structural discipline becomes more important, not less.
Founders who understand documentation standards, governance expectations and economic architecture early are likely to navigate capital markets more efficiently.
Those who treat readiness as subjective may continue to experience inconsistency.
Industries mature through infrastructure.
Venture capital is no different.
— Jill Godden
Founder, Moonshot