Investment Analysis (4) — Street Contxt, bringing data-driven CRM to Wallstreet
Investment opportunities: Street Contxt (http://streetcontxt.com)
Founded: 2012, Funding: $8M Series A round in Jan 2016
Investment analysis
Street Contxt is a vertical CRM that manages daily workflow of developing, deploying, and tracking morning notes for the financial services industry. Thus, it significantly improves marketing effectiveness and research team management on the sell-side; and investment analysis efficiency on the buy-side.
Wealth management (WM) firms in the U.S. spend $150bn in annual trading commissions for sell-side professional services and the number has been increasing even during market downturns. Morgan Stanley alone paid $2.3bn in professional fees for its WM business in 2015. However, the sell-side still predominantly distributes thousands of morning notes and research reports via email/pdf attachments, leaving no collections or analyses of associated data. Most banks use circa 1990’s in-house CRMs which require manual data entry and consistently fail to keep up with the fast paced world of trading. Sell-side firms are calling for tech-driven tools to analyze the effectiveness of their morning notes and to quantify the performance of their expensive research teams.
On the other hand, buy-side investors who usually have to spend hours manually going through piles of buy-side notes to filter out noise and make informed decisions also encounter a serious pain point. Bringing data-driven solutions will make the previously opaque and relationship-driven processes more meritocratic, while incentivizing better research and fairer yield.
Street Contxt integrates into the existing email-based workflow of sell-side analysts and tracks their notes to determine if they were opened and for how long. This information is then stored in a CRM, which provides analysts visibility into the effectiveness of their campaigns and commissions made. The information also allows sell-side managers to evaluate their teams and quantify performance. The key feature for buy-side is content discovery. Based on users’ interested topics, Street Contxt’s software automatically builds a profile for readers that can still be used even if that person changes e-mails or firms by scanning wall street reports for key words and themes. Long-tail small firms can also subscribe to get previously exclusive research reports or pay per report.
Compared to similar firms such as Mail Chimp, an e-mail marketing tool to track open and click rates, or Blue Matrix which tracks readership, Street Contxt goes further to address the industry-wide problem, connecting the two parties by providing valuable services for buy-side. In the long run, Street Contxt has the potential to become the portal of Wall Street information, owning the allocation of billion-dollar trading commissions as well as great volumes of proprietary structured data.
The management team and the advisor group have strong domain expertise and entrepreneurial experience. Founder and CEO Blaire worked at sales and trading at RBC Capital market. Blaire’s brother, Ted Livingston, is CEO of Kik, a Canadian messaging app with $1bn valuation.
Currently, Street Contxt charges users $500-$5,000 per year, and has gained half of top 20 wall street brokerages signed up. In the concentrated WM market where number of users cap around 400k, the company could capture large market share with its vertical-focus approach. It can exit via acquisition by horizontal incumbents that have historically paid more than 5x revenue multiple for similar deals. Alternatively, it can go public in 5–7 years with an expected higher EV/LTV multiple than average for vertical SaaS since it targets the relatively lucrative trillion-dollar financial services industry.
