The financial industry is no stranger to data -- both buy-side and sell-side institutions have a long history of buying data, even if it was only through a monthly subscription to a Bloomberg terminal.
As new business models appear in finance, revenue models are following suit. Selling data is becoming cool again and that means, for some firms, generating revenues becomes a priority.
We recently sat down with Jeremy Baksht, the chief revenue officer for
Estimize. His firm crowdsources sentiment data around stocks (like earnings and revenue expectations) and sells this information to financial institutions. His title says a lot about his role and mandate -- it's not just sales. He's also tasked with customer development, scaling the sales organization, driving adoption of paying customers, and, to a certain extent, contributing to product development.
Baksht, who joined the firm mid-2015, draws parallels between building a sales operation for a young financial data firm to his experience as an investment banker at Citi working with firms like GE, Northrop Grumman, and Carlyle in Asia and Europe.
He shared 4 key things for executives to focus on when scaling revenues in today's financial markets:
Identify target customer segments
For Baksht, his job was somewhat clearer because when he joined Estimize, the firm already had a head of sales who focused on selling into hedge funds. Bakst's job was to sell to other segments. And to do this, he had to quickly identify viable customers.
He soon targeted options trading brokerages as potential clients: “Large brokers are very interesting for us,” Baksht commented. “Our data can help options traders going in and out of strategies around earnings announcements. In this way, we’re a more modern whisper number. ” Estimize now counts 2 of the 5 largest options brokerages as clients. These firms count 6 million accounts in total with 1 million of them active.
The next category the chief revenue officer identified as a potential market segment was the sell-side. For sell-side clients, it became clear that the firm’s data could be a differentiator for equity sales teams. What Estimize has done is work with sell-side firms to become contributors to Estimize’s data as well as potential clients. Once a bank’s analysts are included in Estimize feeds, equity sales teams can see where their analysts are in relation to the rest of the market and use this to market their firm’s ideas. For now, sales, research, and trading (SRT) clients generally don’t pay to access Estimize data but Baksht doesn’t see a reason they wouldn’t become paying clients of the firm in the future. For now, he’s content to get the sell-side contributing to Estimize data and beginning to consume it as well.
Create beachhead clients
Baksht eventually closed his first deal with
BCA Research which became his firm’s first non-hedge fund client. BCA is a nearly 70-year old independent provider of global investment research that focuses on macroeconomic data. By tying up with Estimize, the research provider can offer its clients an indication of certain stocks tied to a macro strategy that were most likely to beat expectations. Estimize is the
micro to BCA’s
macro strategy, providing actionable recommendations to its clients.
Estimize's CRO also sees some challenges selling in to large financial clients. A market that is increasingly gravitating to index products is also quick to sour on bigger-than-life stock pickers. He cites Bill Ackman, who's made billions for himself and clients over the years, but is having a tough recent bout with the market. "There's a growing skepticism among institutional money managers," Baksht said. "We're seeing more and more fallen angels crack on their own mistakes, making it harder to sell data [intended to beat the market]. It's hard to see a human beating smart algorithms over time."
Professionalizing the product
Baksht also found a way to work with large buyside firms like Steven A Cohen’s
Point72. Buyside firms are interested in Estimize as a stock screening input into their investment decisions, but they’re also interested in the workflows the product team has created. For example, when speaking to a director of research at a fund like Point72, Baksht makes sure to emphasize that his software can be used as a compliance tool, as well.
In this capacity, Estimize can be used by a client to analyze its team of stock pickers. “We log the analysts and see where they fall out vis-a-vis their peers,” Baksht commented. “We provide compliance tracking and ranking to track teams of analysts. It’s a kind of paper trading — to see whether an analyst is right or wrong.” Baksht said some clients see his firm’s software as a development tool: if stock pickers aren’t doing their job to the best of their capacities, a firm can step in and coach performance.
Create incentives to build-in product reliance
It’s here that Baksht’s background in M&A helps him play the long game. His experience as an investment banker working on M&A transactions with industrial firms instills him with a form of patience to work through the entire sales cycle. “I’ve worked on deals with 5 year cycles and know how to be patient,” he admitted. “I get past common objections — they don’t bother me. I can grind it out over years, applying rigor, patience and discipline from other industries. I don’t have the same biases [as other sales professionals in financial data] — I have a fresh view and fresh legs.”
He’s confident that getting a firm to use Estimize will lead to good things in the future. Firstly, any firm consuming Estimize data, in any form, becomes a potential contributor of data in the future. If his company intends to professionalize crowdsourced data, getting more and more professionals contributing their data improves the product.
Baksht also incentivizes usage. He’s been willing to give sell-side institutions access to his product in return for contributing their analysts’ coverage of stocks. More, Estimize encourages professional clients to de-anonymize their estimates when they submit them to the earnings database. Being able to use an analyst’s name and firm around an earnings or revenue estimate is valuable for the data and Baskht has exhibited a willingness to find the right subscription price point for clients in return for their contributions. In this way, sales can not only drive revenues back to a firm selling data — it can also improve the product along the way.
