Rachel Carpenter has big goals in the financial services industry. The chief executive officer of Intrinio, a Fintech start-up that provides financial data to investors, thinks transparency, simplicity and encouraging investors to only pay for the data they use can beat the established Wall Street goliaths. Intrinio provides data to investors at a nearly 70% lower cost than the “oligopoly” of data providers, breaking what she says is a monopoly that is hurting start-up innovation and taking advantage of even sophisticated institutional investors. “People get mad when they discover the truth,” she said, pointing to a method to unbundle data needs and obtain useful formatted financial data.
Intrinio business model: Provide financial data users a better deal
Carpenter and her partner, Intrinio chief financial officer Joey French, know all too well the challenges of trying to innovate in the financial services industry.
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Nearly three years ago, they developed an algorithmic application that helped investors determine intrinsic value in stocks. The method was based in part on the investment philosophy of Warren Buffett but dove deep into analytics to add algorithmic overlays to Buffett’s wisdom. The idea was to provide smaller investors, those who didn’t have inside Wall Street access and research budgets, a level playing field.
When the application was complete and they wanted to roll it out onto investor desktops, they ran into a problem: financial data needed to drive the analysis.
The existing methods of accessing financial data through “the big five” — Capital IQ, FactSet, Thompson Reuters, Bloomberg and Morningstar – was prohibitively expensive to the point it put a halt to financial innovation from smaller start-ups, including Carpenter’s idea.
“They are a monopoly,” Carpenter proclaims, noting that their pricing models work to preclude smaller players from competing on Wall Street. This was the start of Intrinio.
Intrinio: The data bundle is dead, don’t pay for what you don’t use
What Carpenter eventually discovered after starting Intrinio to compete with the larger data players is that institutional investors have an “ah-ha” moment. When they understand the pricing, formatting and data flexibility differentials, “they actually get mad,” she said. “They don’t understand why they were paying so much, using so little of the institutional package and generally not receiving value.”
Purchasing data from one of the “monolithic” providers involves purchasing a “bundle” of products, much of which the investor never uses. A key to the success of Intrinio is that they allow users to “unbundle” the data and only pay for what they want.
“Paying for unused data is an unnecessary waste of resources,” she said.
Not only is there a cost advantage to Intrinio, but Carpenter claims that there is a data formatting advantage.
Getting data into the proper format is half the battle
The formatting of corporate 10K reports from the SEC can be a challenge to investors. For example, Oracle formats its revenues in numerous buckets based on business line – none of the titles standardized – while Apple provides one revenue number.
“Most company data comes in an unstructured format,” Carpenter said. Programmers can experience significant setbacks when they use data that has not been properly formatted. Using machine learning applications, Intrinio cleans up the data so it can move quickly into a production environment, be it for a quantitative hedge fund or a small start-up looking building a business platform.
The list of data offered by the St Petersburg, Florida startup is mind-dizzying. The information spans stock, futures and options markets around the globe and covers real-time data from NASDAQ and IEX to the Munich Stock Exchange and even the Zimbabwe Stock Exchange. As if that wasn’t a fine enough detail, the firm offers pre-formatted data on US Public Company Financials.
The use of data mining on Wall Street has become an arms race of source. Finding “alternative data” that is not known by a large number of traders has become complex, as trading firms are increasingly trying to find the next killer algorithm.
For those firms just starting out, Intrino offers a helping hand, an incubator program of sorts. The “Intrinio Developer Program” provides six month of free access to a variety of data feeds while they build their applications. Designed for start-ups with less than $10,000 in revenue and less than $200,000 in funding, the idea is to provide entrepreneurs with a solid idea and an execution plan a platform from which to launch into the financial services world.
The effort has attracted two types of customers: Both developers looking to crack into the business opportunity on Wall Street and existing institutional investors who are currently purchasing data from larger, more established players who realize they can purchase the same product for a much lower cost.
In a world in which properly formatted and unique data can change investing outcomes and access to information matters, there stands Intrinio ready to level the playing field for the start-up players – and the institutional stalwarts who buy data are taking notice.
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Disclosure: This is a sponsored post – but we do like the product, people, and story, and heard very good things about the company from partners of Intrino.