Friday, September 11, 2015

Hedge Funds Craving On Big Data

From DealBreaker:
If you’re building a startup that collects unique data, hedge funds want to talk to you… by yesterday.
If you work at a medium to large hedge fund that doesn’t have a data team, rest assured that you’ll be seeing some kind of data initiative in the next 12-18 months because everyone and their mother’s boss is looking for new sources of edge/alpha on the buyside.
Here are examples of company archetypes for data deals we’ve been seeing and some metrics around revenues those companies are commanding for data:
  1. Consumer spending data  – Yodlee was recently profiled in WSJ and has subscription fees of $2M per fund for consumer spending habits. Yodlee was acquired for $800M by Entrust, it’s unclear whether or not they’ll still be selling this data to hedgies after the acquisition is complete.
  2. App engagement data – AppAnnie has grown to a team of 25 salespeople selling app engagement data for public companies to Finance customers. Price varies based on customer AUM.
  3. Advertisement spending data – MediaRadar tracks ad spend on real-time basis. Sells ad-spending data feed to select hedge funds for annual 6-figure contracts
  4. Agriculture data – Descartes Labs measures photosynthesis using proprietary imaging technology developed at Los Alamos. Selling feeds on corn production and other crops to commodities traders and other clients at 6-figure annual subscriptions.
  5. POS data – a variety of Point of Sale technology providers anonymize SKU-level sales data and sell to hedge funds, mostly through third party data brokers but some are starting to go direct to the buyside.
  6. Social data – Companies like TickerTags (a ValueStream portfolio company) are extracting social mentions of brands and connecting them to the underlying public companies. There are also a plethora of social sentiment startups monitoring mentions of stocks in social feeds. Twitter itself has become a data company by selling their “decahose” (10% of all tweets) and full “firehose” of tweets for 6, 7 and even 8 figure contracts depending on the customer and amount of data requested.
While there are examples of companies building sales teams themselves, most startups are resource-strapped and aren’t able to do it themselves, e.g. packaging the data, marketing data properly to a buyside client, building signals, etc. We’ve already seen instances of startups that wanted to work with brokers, then reversed course because they decided they could do it themselves.....MORE