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This is Why Data Startups Are Disrupting Financial Analysis

A new generation of startups is making financial analysis easier, with open, collaborative and visually intuitive, cloud-based platforms.

Opening Up the Estimates Business

Many of the new founders have worked in finance where they pinpointed a gap or weakness in the technology or workflow of financial analysis. Drogen previously was a trader for hedge fund Geller Capital, and then worked at StockTwits, before he set out to build a crowdsourced model for earnings estimates that would be more accurate than traditional sell-side analysts. Today Estimize covers 900 stocks per quarter and is more accurate than sell side analysts 69.7 percent of the time.

While Estimize concentrated on gaining the buy side and independent analysts to contribute estimates, it's bringing on sell-side estimates as well. Now the firm is adding earnings estimates from Needham, Suntrust, Oppenheimer and Susquehanna. "We're basically going to capture the whole data set as well so we'll own that too.

Drogen says he founded the company to transform "the general ecosystem around data and estimates." Launched in December of 2011, Estimize has grown into a community of 4,000 contributing analysts and 28,000 registered members, up from 3,000 contributing analysts and 16,000 registered users last September.

One characteristic of the startups is that they grow fast and are constantly adding new types of data. In line with this trend, Estimize plans are to roll out macroeconomics data, such as GDP, CPI, jobs numbers, oil inventories, retail sales and other data. It's also getting attention from investor relations departments who typically call the sell-side analysts to get color on their companies.

While anyone can join Estimize and contribute estimates for free, Estimize is adding premium services on top of the public data. It charges the hedge funds that want to receive the estimates into their models.

Making Time Series Data Searchable

Recently, Kensho sparked media coverage for developing "Warren" a market assistant named "Warren" that can answer complex financial questions posed in English about global asset prices. While "Warren" uses advanced natural language processing, New York-based Eidosearch has brought a content search engine to query the world's time series data throughout history. "The whole idea is that people sit on a mountain of time series data, and there's fascinating relationships they would like to uncover," says David Kedmey, president and co-founder of EidoSearch. "But unless you give people a natural way to query for that information those relationships remain untapped," says Kedmey.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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IvySchmerken
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IvySchmerken,
User Rank: Author
2/24/2014 | 3:15:47 PM
re: This is Why Data Startups Are Disrupting Financial Analysis
Making life dramatically easier for institutional investors is definitely the way to attract attentions from customers. The quality and accuracy of the financial analysis is important, but without ease of use, why would anyone switch or take on a new provider? I agree that disruption doesn't mean destruction. Startups can partner with the larger financial information or software providers to gain distribution since they already have the audience.
IvySchmerken
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IvySchmerken,
User Rank: Author
2/24/2014 | 3:11:42 PM
re: This is Why Data Startups Are Disrupting Financial Analysis
I totally agree. Startups today can test their ideas with cloud-based infrastructure without incurring the cost of a fixed capital investment. This elastic model is helping startups scale up when they need to. They can develop their products, sales/marketing and distribution without allocating scant resources to servers and just keeping the lights on.
Nathan Golia
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Nathan Golia,
User Rank: Author
2/21/2014 | 3:44:09 AM
re: This is Why Data Startups Are Disrupting Financial Analysis
Yes, the cloud goes a long way in helping new entrants quickly fill the need for certain capabilities in markets. Defraying the cost of infrastructure goes a long way in making any company effective quickly.
ArielY766
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ArielY766,
User Rank: Apprentice
2/18/2014 | 2:56:03 PM
re: This is Why Data Startups Are Disrupting Financial Analysis
Excellent article on the power of cloud technology and innovation to radically change the ways that financial analysis is performed. Thetica Systems is proud to be one of those cloud based innovators, making life dramatically easier for institutional investors in ABS, CLO, RMBS and CMBS bonds.

I believe itG«÷s also important to note that disruption doesnG«÷t have to equal destruction. By working in partnership with leading industry providers, weG«÷ve been able to greatly enhance the experience for our mutual end users.
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