The Random Walk theory: The efficient markets hypothesis (EMH), popularly known as the Random Walk Theory, is the proposition that current stock prices fully reflect available information about the value of the firm, and there is no way to earn excess profits, (more than the market over all), by using this information.
The Private Eye of Open Data: The buzz around open data notwithstanding, open data itself, is not new. And it has been used since decades to analyse information on privately held companies. We used to call it secondary research in competitive intelligence parlance during pre-open-data days.
One possible application: Now, if we apply the above two concepts to the information asymmetry in the exploding world of start-ups and investors in India, how does it play out? Search for information on private companies was always a time-consuming and complicated exercise with the lack of structured, available data. Dependence on company news and referral networks used to provide hazy sketches of company profiles that looked only like lost parts of an incomplete puzzle. In today’s world, there are a few companies, many of them start-up firms themselves, which are trying to make some sense of this information asymmetry by using open data, web crawlers, crowdsourced intelligence as well as good old fashioned news reporting.
Who Could Benefit From This Information?
- Strategy and competitive intelligence teams of companies searching for information on their “private” and potential disruptors
- Start-up firms looking at sizing up competition
- Investors looking at deal discovery and evaluation
Let’s look at a few such firms and the information they are aiming to provide:
The 8 different routes: companies that are addressing this gap
About: Owler aims to provide free and crowdsourced information on private companies
Type of information:
- Free quarterly competitive intelligence report on the competitive set including revenue, CEO face-offs, press mentions, blog posts, social media statistics
- Regular alerts on company news
- Special reports on funding, acquisition and leadership alerts
Risk: Since the data is dependent mostly on users via crowdsourcing, quality of information around revenue, employees etc. could be indicative and not actual.
About: Mattermark focuses on making deal discovery easier by using machine learning, web crawlers, primary sources and natural language processing methods for data discovery. They do charge for usage.
- Company details, funding details, funding events.
- Provides flexibility of either using data or requesting for the API and customizing it.
- Differentiator: Scoring algorithm to score companies on growth score and other parameters
Risk: Automated prospecting sounds like a sweet deal for investors who are wading through a pile of entrepreneur information but the real power of data in automating strategic decisions is still not proven.
About: Started by ex-Venture Capitalists, Tracxn aims to make deal discovery easier and become “Gartner for start-ups” by using data analysis techniques and intensive research by their own team. They have free and premium access.
- Sector trends including market landscape, key business models, active investors and emerging companies
- Newsletters and company profiles on interesting start-ups found by sectors/regions
- Custom due-diligence support
Risk: With their own incubation firm, “Tracxn Labs,” the ertwshile Investment Banking “Chinese Wall” concept could become relevant to look at the business model matures.
About: Started off as an individual news and opinion blog, Trak.in today reports news as well as deal data about start-ups. Information access is free.
- News about start-up world
- Monthly Investment chart updating announced deals across sectors
Risks: While it is very easy to use, specially the listing of the key deals announced, with the sheer volume of information currently available, the firm will need to ensure they have scalable methods to access and update reliable information.
Background: Started off in the era where there were single digit start-up deals, Venture Intelligence aims to be the leading provider of data and analysis on private companies in India.
- Database on private companies, financials, mergers
- Deal intelligence
- Listing of investors
Risk: With more competitors now claiming marketshare, veracity of information will become a key differentiator for Venture Intelligence as well as others.
About: Started off as a blog handled by a single person, VCCircle today has become one of India’s largest digital platforms in the field of online business news, data, events and trainings.
- VCCircle: media platform about Indian investment ecosystem.
- VCCEdge: financial data about companies
- TechCircle: tracker for India’s booming technology startups
- VCCircle Training: executive education division
- VCCircle Conferences
Risk: Same as Venture Intelligence
About: Started off as a news site to tell the inspiring entrepreneur stories, Yourstory today uses a storytelling method to bring to light key news around the start-up world.
- Entrepreneur stories classified by types of start-ups include women entrepreneurs, social start-ups etc.
- Start-up events
- Regional language specific content
Risk: Yourstory has a lot of personal, textual information which is interesting to read. Using the information for analysis and discovery is more difficult compared to the firms using natural language processing and web crawlers.
About: last but not the least, Glassdoor provides a sneak peak into the culture of a new firm. After all as Peter Drucker said, “Culture eats Strategy for breakfast.”
Method: crowdsourced information from employees and companies
- Information on jobs, salaries and interviews
- Employee feedback about company and CEO approval rating
Risk: Glassdoor has a wealth of employee information. Tying that to employee engagement could be an interesting way to understand perception vs. reality.
The task of discovering, evaluating and monitoring private companies both as competitors and as potential investments has never been more important than now when India is seeing an explosion start-up firms and investment deals. And the companies mentioned above (not an exhaustive list), with their focus on using open data either for data discovery or dissemination will definitely add value to the intelligence methods used by companies and investors like. But the questions remain:
- As an Entrepreneur or an Investor, are you finding more such useful resources today? Would love to know about them and keep updating the list
- Given the lack of valid information on private companies, which information aggregation method will find most value?
- Will these firms be able to really use open data to provide information asymmetry or just provide multiple views on information that has already been discovered by someone where the price of the information has already been priced in, per Random Walk theory?
These are questions that are neither random nor private.