Yes. You can be confident that every FHR you see published by RapidRatings is robust. This is part of our core philosophy.
Small tech firms in the early phase of a life cycle have some unique characteristics, but they still need to play by the rules of business. Financial characteristics can tell you a lot about the risk a company is operating with. When we identify a company as High Risk, this typically means they need to either improve their core health and reach sustainability, or find additional funding to support their growth.
A few points to note in this respect:
- High-tech firms will be assigned to an industry based on the description of their operations
- Technology firms have an average life-span of about five years, as opposed to 12 to 15 years for a listed company. Comparatively, this may be why you notice that smaller, fast growing technology firms may frequently be rated as higher risk
- Due to the relatively higher turnover with technology firms, it is even more important to have some sort of way to predict which firms are most at risk. That is why RapidRatings financial health assessments are critical in this area
As a reminder, weaker firms, as measured on our FHR scale have a higher tendency to default, and firms with a poor Core Health Score have not yet reached a level of ongoing sustainability