Estimize aims to replace sell-side analysts with crowdsourced earnings estimates — and now Gnip is selling its data
You only have to listen to one public company earnings call to understand how wary sell side analysts are of standing up to the companies they cover. Each question posed during any call’s Q&A begins with “First of all, congrats, CEO, on your great quarter, and thanks for taking my question,” before a roundabout, jargon-filled softball question asking for “more color” on some topic.
They do this because they don’t want to lose all-important access to the management. Even after a massive overhaul of “chinese wall” rules trying to prevent stock pumping in the style of the dotcom bubble, the wall is pretty weak, argues Estimize founder Leigh Drogen. This March FT report (non-paywalled summary available here) explains the way hedge funds pay sell-side banks $20,000 an hour for access to the management of companies they cover.
Drogen believes his product solves the problem of inflated earnings estimates by tapping into the power of the crowd. Estimize simply crowd-sources estimates from its community of 13,000 hedge fund, asset management and independent analysts. Of that group, 2,700 freely provide their own analysis and estimates on quarterly earnings. The company’s algorithms then create a consensus, giving more weight to contributors who are more active and accurate, and eliminating outliers that would throw things off. The result is a track record that is more accurate than Wall Street analyst consensus 69.5 percent of the time, and by an average of 14 percent, Drogen says. Oh, and its free to use.
The company has an API which some hedge funds and investment firms pay between $3,000 and $15,000 a month to integrate with, but in general Estimize hasn’t done much in the way of sales. The seven-person company is backed by $1.4 million in seed and Series A funding from Rob Ross, Todd Sullivan, Michael Bigger, Jacob Carlson, Contour Venture Partners, and Longworth Venture Partners but is made up primarily of engineers, not sales people, Drogen says.
That’s why today, the company teamed up with social media data broker Gnip to sell its data. Gnip already sells social data from the biggest financial social network, StockTwits, where Drogen previously worked. The partnership with Gnip basically allows Estimize to earn money on its data without having to go out and sell the data itself, Drogen says. In addition to Estimize data, Boulder-based Gnip’s offerings also include access to the “full firehose” of data, aka everything anyone has said ever, from Twitter, Tumblr, WordPress, and Disqus. Given how protective companies are of their data, access to the “full firehose” of anything is generally not cheap.
- EstimizeCrowd-sourcing financial estimates with a powerful analytics layer
Estimize is an open financial estimates platform which facilitates the aggregation of fundamental estimates from independent, buy-side, and sell-side analysts, along with those of private investors and students. By sourcing estimates from a diverse community of individuals, Estimize provides both a more accurate and more representative view of expectations compared to sell side only data sets which suffer from several severe biases.
Over 3,500 analysts contribute to Estimize out of a registered user base of more than 20,000, resulting in coverage on over 900 stocks each quarter. The Estimize consensus has proven more accurate than comparable sell side data sets over 65% of the time.
The firm was founded in 2011 by former quantitative hedge fund analyst Leigh Drogen, with the belief that the financial ecosystem was ready for an estimates platform built with an open and transparent philosophy.
Estimize data is now available on major financial research platforms such as Bloomberg.