November 27, 2008 § Leave a comment
My friends Mike and DJ launched OneSeason about two months ago and have built a very interesting platform for buying and selling synthetic ownership interests in sports teams and players among friends. Think playing cards merged with an online industrial strength trading platform. « Read the rest of this entry »
October 17, 2008 § 1 Comment
Great Op-Ed by Warren Buffett in the Times yesterday.
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”
I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.
September 24, 2008 § Leave a comment
The recent partnership announcement between the Gerson Lehrman Group and Credit Suisse sparked some commentary from research industry insiders who were surprised that GLG was letting sell-side analysts access the GLG network, even for what is sure to be a hefty fee. I was a bit surprised to learn they weren’t doing this already. GLG and other expert networks have tens of thousands if not hundreds of thousands of experts in their networks. Sell-side research operations, while they may be on the decline, still control 75% of the $5.7 billion in trading commissions distributed to research providers annually. At KnowledgeBid, our best customers are firms that sell research and services based on primary research. Contact us if you’d like to learn more about our network and how we can help you meet your customers’ needs. We’d love to help.
May 27, 2008 § 1 Comment
The Times recently ran an article by Michael Fitzgerald on the red hot cloud computing trend. Fitzgerald defined cloud computing to be “obtaining computing resources . . . from someplace outside your own four walls, and paying only for what you use.” The concept of cloud computing makes perfect sense: instead of paying for massive amounts of computing capacity to be ready for spikes in usage, site owners pay only for what they need, when they need it.
Fitzgerald’s definition illustrates the parallels between cloud computing and what we’re up to at KnowledgeBid as well as, in a larger sense, a growing trend in the professional services space. Like cloud computing services, KnowledgeBid provides services on an as needed basis, the difference being that instead of tapping into a cloud of computational power, KnowledgeBid facilitates access to a cloud of expertise and information.
A new lean breed of professional service companies is maturing with similar operating models, silently taking market share from the incumbent players. These firms have minimal office leases on their balance sheets and aren’t burdened with massive annual partnership payouts. They offer customized, lower priced services and often have broader offerings than their traditional competitors. The management of these firms plays a new and rapidly evolving role, combining matchmaker, headhunter, temp agency, accounting firm, compliance officer, and human resources department.
One of the hottest of these new breed is Axiom Legal Solutions, Inc. Founded in 2000 by Mark Harris and Alec Guettel and backed by Greenhill & Co., Benchmark Capital, and Panorama Capital, Axiom is disrupting the legal world by working closely with the in-house counsel at major corporations to fuel them with niche, qualified attorneys on a contract basis. Axiom “combines the flexibility of outside counsel with the best attributes of a sophisticated corporate law department”, collecting fees on attorney hours but without the weight of partner payouts and massive office leases. Axiom “is not a law firm” and “does not provide legal representation or advice” but does interview attorneys, hire them full-time, then place them directly with clients for specific engagements. Their clients include American Express, Bank of America, Cisco, Dow Jones, Goldman Sachs, Johnson & Johnson, New York Times, Nokia, Sun Microsystems, and Viacom, among others.
The most advanced segment of these new service providers is arguably the web development and design sector. Dominated by oDesk and eLance, these companies give customers access to a global network of developers, designers, and database architects. They don’t hire service providers directly but serve as a platform for clients to screen, interview, monitor and compensate service providers. These companies have seen explosive growth thanks to the web 2.0 boom. The chart above shows the number of hours worked through oDesk by month since 2003.
Running a similar model in the engineering space, Exponent, Inc. hires professionals on full time and staffs them with clients according to their specific needs much like Axiom. Exponent has been around in one form or another since 1967, and has morphed several times. It’s currently a publicly traded company and employs over 500 engineering and scientific professionals, covering 20 practice areas including biomechanics, buildings & structures, civil engineering, construction consulting, ecological & biological sciences, electrical & semiconductors, environmental & earth sciences, health sciences, chemical registration, food safety, epidemiology, biostatistics, computational biology, toxicology, mechanistic biology, exposure assessment, public health, industrial hygiene, industrial structures, mechanical engineering, materials science, statistical & data sciences, thermal sciences, and vehicle analysis. Exponent does have significant lease liabilities (~$5M in ‘07) but most/all is non-premium warehouse and laboratory space. The company saw solid growth vs the S&P last year.
At the end of the day these companies all provide value by making connections and managing relationships. As the world becomes more and more connected, I think this trend will continue. The professional services cloud will become more accessible, and the companies that facilitate access to it will gain market share at the cost of traditional professional service providers.
April 18, 2008 § 3 Comments
I had the opportunity to present KnowledgeBid at the Investorside Alternative Research conference in New York last week (conference agenda), attended by an interesting mix of independent alternative investment research providers and buy-side folks. The investment research industry has undergone massive change in the last 10 years, much of which is a result of the information technology explosion, Regulation FD, and unbundled commissions. The dominant groups at the conference last week primarily fell into three categories: 1) expert networks, 2) data mining, and 3) research management. Very few, if any, new players are producing traditional research reports with buy/sell recommendations or general industry analysis. Even fewer are associated with particular trading desks, something that never would have been seen 10 years ago. The recent explosion of the alternative research space has in large part been at the expense of traditional sell side research.
The sell side and other large financial service players are now actively partnering with, investing, and acquiring alternative research operations. There has been an explosion of activity in the space in the last six months, part of a larger trend that has been emerging since Reg FD was passed eight years ago. I’ve aggregated major announcements and milestones below (let me know if I missed anything interesting).
- 10.23.2000: Regulation FD Ratified by the SEC
- 3.2001 – 11.2001: US Economic Recession
- 10.15.2001: FirstRain $11M Series A
- 4.28.2003: $1.43B Global Analyst Research Settlement
- 7.15.2003: FirstRain $8M Series B
- 7.21.2003: BNY launches Jaywalk initiative
- 2.2004: Bessemer Ventures invests in Gerson Lehrman Group
- 3.4.2005: Standard & Poor’s acquires Vista Research
- 2.6.2006: Goldman Sachs invests in Investars
- 3.2006: UBS announces partnership with ASSET4
- 6.2006: Goldman Sachs launches Hudson Street initiative
- 6.29.2006: GS / Hudson Street invests in ASSET4
- 9.7.2006: DFJ invests in Monitor110 $5M Series B
- 10.30.2006: DFJ invests in Monitor110 $11M Series C
- 12.20.2006: Morgan Stanley partnership with Tamale Software
- 2.9.2007: GS / Hudson Street invests in Connotate Technologies
- 3.29.2007: BNY / Jaywalk announces alliance with Code Red
- 4.5.2007: GS / Hudson Street invests in iSuppli
- 5.2.2007: Evalueserve acquires Nitron Advisors
- 5.8.2007: GS / Hudson Street invests in Medley Global Advisors
- 9.10.2007: GS / Hudson Street invests in Lusight
- 9.27.2007: Merrill Lynch announces partnership with ASSET4
- 12.19.2007: Silver Lake invests +$200M in Gerson Lehrman Group
- 1.14.2008: Oak Partners invest in $13.6M FirstRain Round (Series C ?)
- 1.25.2008: RiskMetrics $245M IPO
- 2.11.2008: GS / Hudson Street invests in TrimTabs
- 2.27.2008: BNY / Jaywalk announces alliance with Tamale Software
- 3.6.2008: UBS invests in Integrity Research Associates
- 3.21.2008: GS / Hudson Street invests in QSG
- 3.27.2008: Morgan Stanley partnership with Gerson Lehrman Group
- 4.7.2008: Standard & Poors / CapIQ announces alliance with FirstRain
- 4.9.2008: Merrill Lynch launches Open Minds with Asset 4; Audit Integrity; Cypress Group; Decision Resources; Global Media Intelligence; HPDI and Primary Source
- 4.17.2008: Instinet exclusive relationship with Norbury Financial