When does AltData become Traditional Data & Analytics?
TL;DR - I dissect an interview with Matt Ober, the Godfather of AltData Data Sourcing
So far, the most rewarding and unexpected aspect of publishing my thoughts has been the conversations that it has sparked with people.
Nearly 100 people (up from zero at the start of January!) are now subscribers, and plenty of you have dropped me a line to give me your opinion or offer advice or introductions. You’re a mix of Corporate Finance people, data folks, friends and family, and a few brave souls who I don’t know at all. I appreciate you taking the time to read my musings. If you know someone else who might be interested in this, please forward it on.
Thank you also to the three of you who have pledged to pay for access. You know who you are. I’m not planning to turn on a paid-for version any time soon, but I appreciate you offering your financial support. Thank you.
Thank you also to
for contacting me to let me know that I erroneously referenced him rather than in my last post. If you are interested in AltData, both Jason and Jonathan are well worth following.My ex-colleague, Joe Watson, now MD at Solomon Partners focusing on Data, Analytics and Information Services, contacted me to bring the recent Alternative Data Podcast interview with Matt Ober to my attention. The interview merits closer scrutiny because Matt provides some answers to the questions I posed in my last post around the latest developments in Data & Analytics, particularly the impact of AI.
(BTW Solomon Partners’ research on the Financial Data & Analytics market is well worth reviewing if you have the time. I found the graph on the Drivers of Value slide particularly insightful. Thank you, Joe and team.)
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and , comes from the Data Sourcing/hedge fund/investment community, and has some great insights into where the AltData market is going. Matt publishes a non-Substack newsletter called The Rollup which you should subscribe to if you are interested in Data & Analytics.In my last post I was struggling to differentiate between AltData and Data & Analytics as a whole. Having spent more time now studying the AltData community I can see that AltData can be defined as data used by the financial services community to make trading decisions that provides them with a differentiating edge. So it’s very much an internal Financial Services industry lens on Data & Analytics. But it’s still somewhat hazy around the edges.
In the Alternative Data Podcast interview Matt makes the point that:
As tradable data sets become more established in a community they go from being alpha data to beta data (i.e. from offensive to defensive).
You could put this another way and say:
Data shifts over time from being AltData to becoming traditional Data & Analytics.
At some point I may try to think about how you define this scale more precisely. Is it just a time scale? Or an adoption scale? Does it follow a curve like the Gartner hype cycle?
When asked about the future of AltData products, Matt says:
Investment Analysts (particularly those focused on fundamental research) should embrace AI tools as their co-pilots to enable them to be more efficient at their work.
Matt mentions FinChat, a business in which the VC firm (Social Leverage) that he’s a partner at has invested, as an example of this.
Products like FinChat fuse two separate aspects:
Proprietary datasets used in your workflow to give you a decision-making edge;
AI serving as a co-pilot to direct your thinking.
AI essentially acts here as an enhanced analytics tool. Whereas in a traditional Data & Analytics product it is incumbent on the user to query the data using analytics tools, an AI-driven product has the potential to automatically surface the most relevant data, present it in a meaningful way, and suggest to the user how they might use it.
Again, this area of AI-driven Data & Analytics tools is one I will likely look to dig into in future. I seem to be making a long list of future work for myself! If anyone has a list of AI Data & Analytics products they can share with me I would be most grateful.
Matt goes on to talk a little about investment and consolidation in the AltData space:
In his view not many AltData businesses have recently reached venture scale without being taken out by an acquirer. He names Tegus and Alphasense as examples of companies that buck the trend.
New Data & Analytics companies are launching all the time by ex-employees of Data & Analytics and Financial Services businesses who spot niches, use new technologies, or think that existing providers aren’t doing something well enough. He has launched a free service called Initial Data Offering promoting new data sources as they launch.
The AltData market remains highly fragmented. Consolidation is happening but there is plenty of opportunity to build the next IHS or Informa. (I lost count of the number of Data & Analytics businesses we sold to these two consolidators at Quayle Munro in the 2010s…)
Tegus and Alphasense share an interesting commonality in that neither is truly creating new datasets. Instead both are really just doing a better job of surfacing publicly available data - particularly on listed businesses - and making it tradable. To my mind they already look more like an enhanced version of traditional data providers like Factset or Moody’s Bureau van Dijk than truly AltData. So where are they on the aforementioned scale from AltData to traditional Data & Analytics? Have they already shifted from Alpha to Beta?
On their continued independence, is the fact that both firms are not focused on just one niche but provide data on all industries a factor here? Does this make them less-obvious tuck-in acquisitions? And has this prevented their early acquisition by a Bloomberg or a Refinitiv/LSEG? Perhaps, although I suspect that the truth is just that it hasn’t happened yet, and that they will go the way of Kensho in due course.
Thanks for reading. I would be delighted to hear from you if you have any thoughts or comments. Drop me a line. And please forward the email to anyone you think may be interested.
Some things I’ve found interesting in the last week:
Short article from Datanami on the AltData space summarising reports from Deloitte and Lowenstein Sandler.
Dan Wang’s 2023 Letter on China. Lots on the trend of young Chinese living in Northern Thailand. I visited Chiang Mai last year and saw the diaspora there first hand. They have started some great coffee shops!
I’m a big fan of wearable Consumer Healthcare devices. So when I came across this device from Prophetic to promote lucid dreaming I was intrigued.
This podcast discussing the acquisition of Elevar by Buxton. As an investor in Littledata I was intrigued to know more about the rationale for the acquisition, bringing together online and bricks-and-mortar retail analytics:
I started reading The Japanese: A History in Twenty Lives this week. I’m three lives in and it’s fascinating reading. If you are interested in reading this along with me and then discussing our thoughts, drop me a line. Looking forward to getting to Osamu Tezuka, the “father of manga” and author of the brilliant eight-book Buddha series, which I read last year.
I’m three-quarters of the way through reading The Mountain in the Sea. Again, if you would like to read this and discuss it with me, please drop me a line. It is fantastic on language, communication, artificial intelligence and what it is to be human (in the vein of Asimov and Dick). It’s also making me want to go back to South-East Asia and go scuba diving :-)