Saturday, December 24, 2016

Financial Search Engine: “the Google for competitive intelligence.”

From The Financial Revolutionist:

Interview with AlphaSense's CEO, Jack Kokko
Jack Kokko is a serial entrepreneur who came up with the idea for AlphaSense after laboring away in Morgan Stanley’s research department for several years. The problem he identified (i.e., information overload confronting financial analysts) wasn’t easy to crack. But thanks to Kokko’s efforts, those of his co-founder Raj Neervannan and a deep team, AlphaSense now counts several hundred of the world’s most demanding institutions and corporations as clients. The FR’s Gregg Schoenberg recently sat down with Kokko for a far-reaching conversation. Everything from the rise of passive investment strategies, declining buy- and sell-side budgets to his move from San Francisco to New York was fair game. We came away believing that Kokko and his team are well positioned to seize the opportunities and face the considerable challenges associated with helping today’s financial professionals in their quest for alpha.

The Financial Revolutionist:    Jack. It’s great to see you. Can you describe how you found your way from Helsinki to Morgan Stanley’s Menlo Park office?
Jack Kokko:    Sure. After I studied in Finland, I went into telecom banking in London. From there, I convinced Morgan Stanley to send me to Silicon Valley because it seemed like the place to be. It was a crazy time but too tantalizing to miss. While there, I worked as a tech analyst and spent many nights and weekends poring over a massive load of information. However, the tools my colleagues and I were given to process all of the information were sorely lacking, so the work was very manual.

FR:    So you had dog-eared stacks of paper around you?
JK:    Exactly. We had these big piles of paper all over our desks. We flipped pages and used highlighters a lot and had sticky notes all over the place trying to keep track of things. But despite the hard work, there was still this constant nagging fear that I was missing something critical because there was no way to electronically search through all the content.

FR:    So what led you to actually do something about that problem?
JK:    My ultimate aspiration was to become an entrepreneur, but the first company I built was in a totally different tech field. I then went to Wharton (San Francisco) where I met my current co-founder, Raj, on a project. That project jogged my memory of my Morgan Stanley years, which I discussed extensively with Raj, who had a deep software background. Specifically, he had experience both in natural language processing and machine learning. He also understood the context of how to actually address the challenges I was describing. 

FR:    And what exactly are the problems that AlphaSense is addressing?
JK:    We address information overload the vast quantity of fragmented information that knowledge professionals must sift through in order to get to the piece of information they need to do their work. We find the information for them so they can focus on connecting the dots rather than manually digging for the data. Before AlphaSense, there wasn’t any professional tool for optimizing and indexing this data.

FR:    So prior to AlphaSense, all of the search engines used by financial professionals indexed for consumers?
JK:    Yes. There was no search technology out there focused on the needs of knowledge professionals. So we decided to fix that by creating a semantic search engine that's been built for professionals, which helps them find critical information rather than focusing on the grunt work of manually looking for those data points. We present those data points and let users connect the dots. 

FR:     Enabling the analyst to focus on adding value to the information?
JK:    Yes, we amplify their intelligence.

FR:    There’s a blog entry on your site that equates AlphaSense to “the Google for competitive intelligence.” But if you are going to be Google for anything, you’ve got to be very comprehensive...
JK:    If Google is boiling the ocean, we try to be the targeted Google that goes to thousands of databases, thousands of places on the web, and just collects pre-curated information from high quality sources. Then, once the information is aggregated, it’s cleaned and processed in the same way to make all the information searchable through one interface. 

FR:    How long was the product under development before it was ready for beta testing?
JK:    It took two or three years of tech development before we released the beta. And then, even with that beta, we worked with a few hedge funds for close to a year before we felt that the product was good enough to actually charge money for it.

FR:    Once you had a product that was ready for prime time, how hard was it to get that first true sale?
JK:    Getting that first client was terrifying because I had to make the call. I'm not a salesperson and I'm not a cold caller, but it had to be done. 

FR:    And who was the client?
JK:    I can’t name the fund, but I will tell you that I'm happy to have made that first sale, which was the first step in our journey to having more than 500 clients today.

FR:    So no more cold calls for you?
JK:    (Laughs). Yes, I'm very happy to not have to do anymore cold calls.

FR:    Can you provide a sense of the cost per seat?
JK:    The seat cost really depends on a number of things. A firm that's buying hundreds of seats will negotiate a different price than a firm that's starting out with a few. But the pricing is in the thousands of dollars per user per year. 

FR:    Can you give a breakdown of your buy-side clients?
JK:    We are about three quarters hedge funds and one quarter long-only funds....

HT: Abnormal Returns