Misinformation & disinformation are eroding trust in society, creating marginalization and division, reducing human progress, and costing lives.
According to Pew Research Center, 64% of U.S. adults say fake news caused a great deal of confusion about the basic facts of current events and only 39% of them are confident in their ability to recognize made-up news.
According to a report by cybersecurity firm CHEQ and the University of Baltimore, the epidemic of online fake news is costing the global economy $78 billion each year, analyzing the economic damage being inflicted on major sectors including politics, finance, advertising, eCommerce, media, and finance.
- Commercially, brands lose $39 billion a year from social media attacks and fake news.
- Misinformation about health remedies and vaccines costs authorities $9 billion a year.
- $9bn is spent globally on online reputation management.
- At least $235m is spent by brands advertising on known propaganda sites, damaging their brand alignment.
- $3bn a year is spent on social media content moderation.
For example, fake news caused stock market losses of $300billion in a single incident. This occurred in December 2017, when ABC reported that “National Security Adviser Lieutenant General Michael Flynn would testify that Donald Trump had instructed him to contact Russian government officials during the 2016 election campaign.
This would have opened the door to impeachment and a government crisis in the world’s largest economy. Following the story, from 11:06 to 11:34 a.m., the S&P 500 (the weighted index of the 500 largest U.S. publicly traded companies) dropped by 38. points. Multiplied by the S&P’s number of equivalent shares, this was a loss of $341 billion. It turned out that this “bombshell report” from ABC was false. ABC did not retract the news until after the trading day, at which point the loss was lessened to $51 Billion.
With that being said, all things considered, it’s no wonder the World Economic Forum ranks the spread of misinformation and fake news as among the world’s top global risks (source).
IN THIS REPORT
Factmata | Company Overview: Factmata is a startup raising funds on Wefunder that developed algorithms that are able to understand if content is propagandist, clickbait, one-sided, hateful, sexist, racist, threatening, obscene, toxic, and more, which are highly correlated with misinformation.
How The Product Works: Let’s dive into the ins and out of FactMata’s engine.
Product Market Fit: What’s the product? Did FactMata build something that customers want? Are they willing to pay for it? How good is customer retention? If they didn’t already find product-market fit, how likely is it that they will find it?
Market Analysis: Is the market big enough? Is it a stable/growing market? Could we make a significant return if everything goes smoothly?
Business Model: How does FactMata make money? Is the business model sustainable and scalable in the long term? Can we make a significant return in 5 to 10 years? If not, we’re going to pass.
Debt: Has the company a healthy balance sheet? Will it fail because of too much debt?
Competitive Advantage: Has the company an unfair advantage? How does it differ from its competitors?
Economic Moat: Can the company build a sustainable economic moat? Is there anything preventing other startups from being able to compete in the same market?
Financials & Liquidity: Will the company have a sufficient runway after this raise? Or will it run out of business in a few months?
The Team: Does the team have industry-relevant experience? Skin in the game? Management Experience? Can we trust them?
Conclusion: Did I invest in Factmata? Does the company meet our 10 investment criteria?