FAQs includes questions on SIRA and the Ship-It Rating Service…
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SIRA’s ratings system assesses the probability of a company meeting its planned growth through the development of revenue-generating products. Ratings range from AAA to D, with each rating corresponding to a specific probability that reflects the company’s “shipitworthiness” or ability to deliver on its product development plans. See Ratings.
SIRA ratings can save time and effort in investment readiness, improve corporate image, provide a wider audience for funding, motivate investors, and potentially lower borrowing costs. For investors, it assists in decision-making, scouting for opportunities, and understanding investment proposals.
Unlike traditional credit ratings that focus on financial viability, SIRA’s ratings focus on product development capabilities rather than creditworthiness or operational strength. It aligns with some technology assessment methodologies in evaluating technological potential but emphasizes the product development aspect crucial for high-growth firms.
The rating serves both investors and founders. For investors, it assists in making investment decisions and understanding proposals. To attract new investment, founders can use it to demonstrate their company’s potential and capacity to succeed in their developments to support their revenue growth plans.
SIRA uses credit rating categories for familiarity for investors and due to its mathematical models that align the probabilities of achieving planned growth with similar levels of probability of default rates in credit ratings. Comparing the Ship-It rating to a credit rating, the Ship-It Rating can be said to grade the probability of meeting technical commitments, while credit ratings grade the probability of meeting debt obligations.
A high SIRA rating can signal to investors and the market that a company has a strong capacity for product development and is likely to achieve its growth plans, potentially leading to easier access to finance and a positive corporate image.
SIRA was initiated by Arroware Ltd in 2024 and is in the process of seeking founding partners who are expected to help determine its future legal structure. It is wholly independent from institutions and governmental or regulatory organisations. Its objectives and remit are governed by its own clear set of commitments that all members must adhere to.
SIRA’s approach diverges from traditional financial assessments by focusing on product development capabilities rather than creditworthiness or operational strength. It aligns with some technology assessment methodologies in evaluating technological potential but instead emphasizes the product development aspects crucial for high-growth firms and has minimal bias towards the established incumbents.
SIRA is wholly independent from institutions and governmental or regulatory organisations. Its objectives and remit are governed by its own clear set of commitments that all members must adhere to. The commitments follow from the key principles laid down for credit rating activity by the International Organization of Securities Commissions (IOSCO). But SIRA is not regulated by IOSCO and is influenced by it only voluntarily.
And the term is a non-serious portmanteau. It means the company’s capacity to achieve its planned product development and revenue growth. A high shipitworthiness would indicate a clear and secure capacity to fulfil revenue-generating plans, while low shipitworthiness suggests significant risks or a lack of capacity to meet those plans.
It’s reasonable to assume that Ship-It Ratings, like credit ratings, could influence investors’ perceptions of risk and therefore impact the cost of capital for a company. Higher ratings may result in lower perceived risk and potentially lower cost of capital.
Alternative technologies such as low cost environmental solutions, if they are product-based, or intermediary technologies are just as assessable and rateable as high-tech developments in say, electronics, computing or even large scale technologies such as energy production.
SIRA’s ratings are designed for firms that are growing in revenue due to, or dependent on, developing products. The assessments and model are currently geared up for technology and RD&E firms – as opposed to service firms. This includes established companies if they are pursuing product development that is technical and will make a difference to future revenues.
University spinouts will find the ratings particularly useful as they are often high-growth firms applying technologies – sometimes deep or fundamental – that would raise many questions and doubts for investors. A Ship-It Rating would likely be beneficial as it would confirm the viability of much of the technical aspects of their business plan.
SIRA is not a financial research organization and does not assess creditworthiness or general operational strength, which are typically important for debt finance. However it will help lending investors by complementing their assessments of financial and market strength, by providing much needed insight to the viability of product development prospects..
While a higher rating indicates better performance it is not always what is sought in investment or funding decisions. For example:
- A lower rating could support the claim of having a higher barrier to entry to competition, which the investor may well be looking for.
- Some funding institutions, particularly government schemes may be targeting higher risk technology developments due to a gap in the investment landscape that they want to fill.
- Also, putting in an overly optimistic response to gain a higher rating may deter investors in the long run as they may perceive that the management is not properly appreciating the technical risks.
A Putative Rating is based on self-assessment with minimal verification, while a Certified Rating requires all assessment responses to be validated by an assessor, offering a more reliable indication of the company’s capabilities.
The Ship-It Rating was developed to support due diligence work for investors. And early applications were for SaaS solutions. It was quickly realised that a generalised rating measure was needed and the model and system was developed to be agnostic of the type of engineering that is being applied to develop the products.
Definitely not. The assessment applies to any ambitious firm that will be creating products that will be generating revenue. The products must require some technical development – the rating is not suitable for consultants or architects’ offices for example – but any firm that has planned product development will have answers to the assessment questions.
A Certified Rating involves verification of assessment responses provided by the rated entity. The verification will be to check that responses are understood and complete and that the entity has claimed a sound basis for the responses. As with all ship-it ratings, the calculations are also checked and verified.
Examined Assessments go deeper and can be based on either a Validated examination, which is largely a desk/remote activity, or a fully Audited examination. In both cases the evidence for the responses is sought and claims are only permitted to the extent that they are supported in the evidence.
If such an assessment results in a Validated Rating, it means the research has been done and is validated based on documented evidence. While the Audited Rating provides the most thorough assessment and will be based on a full audit of the product development process, probably in person and over a number of days.
Another difference to note is that, since the level of confidence in the assessment increases with Examined ratings, for the same facts, the rating could go up or down. This is because the probability of accuracy of the assessment increases with Examined responses. It is a mathematical inevitability calculated using Bayesian Inference which will slightly increase the probabilities for “good” ratings and decrease them for “bad” ratings.
SIRA provides a range of ratings from AAA, indicating the highest probability of achieving the planned product development, to D, indicating the lowest probability. The scale includes AAA, AA, A, BBB, BB, B, CCC, CC, C, and D.
SIRA evaluates a company’s product development capabilities based on an extensible set of less than 50 measures and some essential planning data from the business plan. The assessments can vary in depth of validation and investigation and are calculated using a statistical model, system dynamics and Bayesian Inference, with the results expressed in the probability of meeting growth plans.
An AAA rating in SIRA’s system signifies a 98% probability of a company operating its product R&D effectively to fulfil its plan, indicating high “shipitworthiness”. Conversely, a D rating indicates only a 2% probability, negligible “shipitworthiness” and a high likelihood of not achieving the planned growth.
This is a young organisation founded in the UK and is currently seeking members and early participants in the UK. Communications are also currently limited to English. However, assessments are easily conducted remotely, resources are all online and the assessments and ratings are perfectly applicable to technology and scientific companies anywhere in the world.
SIRA maintains confidentiality by controlling the dissemination of ratings and keeping non-public information confidential. We follow policies and controls to ensure that the information provided by assessed organizations is kept secure.
SIRA’s assessments consider a combination of categorical answers to fairly abstract and general product development questions and more quantifiable financial ratios from the business plan.
Ratings are recorded with a date and when publicised are done so including the year of issue. However, there is no obligation on the rated entity to update every year. Updates more frequently than a year would only be necessary due to some substantial operational change or a change in level of the assessment.
SIRA offers fours levels of assessment: Auto (initially to be free of charge), Assisted, Validated, and Audited, each with increasing depth of scrutiny, influencing the final rating assigned to the firm. More information here.