Monday, March 31, 2014
Decoding Signal From Noise For Wall Street, With Bitvore
Story by Benjamin F. Kuo
In today's electronic world, there is an immense number of data sources creating millions of data points that companies are hoping to make sense of. That data--if you could just find the right piece--could be useful in a number of areas, particularly in the financial markets. Bitvore (www.bitvore.com) has created a system which takes thousands of sources of data, and extracts intelligence out of it to create actionable information out of that vast stream of real time data. We spoke with CEO Jeff Curie, to hear how the company's systems are initially being used by Wall Street to sort through thousands of pieces of data--initially for intelligence on the municipal bond market--but which could be broadly used in many other areas. Bitvore is based in Irvine, and is backed by serial entrepreneur Yuri Pikover at 37 Ventures, as well as the Tech Coast Angels and other angels.
Tell me about Bitvore - what's your technology used for?
Jeff Curie: Bitvore is an intelligence gathering and analysis system. It originally came to fruition through the work and efforts for intelligence agencies, but now it's been applied to different business problems. We're rolling it out to finance and Wall Street, monitoring thousands of sources of continuously changing information, such as news, social media, internal email systems, and analyzing specific, material conditions that our customers are looking for. There are lots of products that might look for any mention of a product name or company name, and yes, we do that--but more importantly, we are also analyzing situations that arise. A good example of this, we can keep track of a supply chain. You might know that some people are mentioned in the news, but we can also see that there might have been fraud mentioned at the executive level, that someone is now deceased, or that there has been a bankruptcy or lawsuit. We're looking for lighting bolts in time which are important. Whether that's for competitive analysis or market analysis, our product is basically able to monitor--on a very large scale--things that are important to your particular company. It's designed for business people. It's not a programming tool, even though it uses a lot of big data. It's an easy to use, simple package, and not complicated. It's about as complicated as Google Adwords. What companies are looking for, and what they care about, are material events. Our system will go off and watch those things for you, trend them over time, do statistical analysis on them, or you can use it as a very advanced news gathering system, which is what we're doing with it today for Wall Street.
What's your background, and how did you get into this?
Jeff Curie: I've been a startup guy here in Orange County for a long time. I was at Access360 in Irvine, and got involved with Access360 right when they completed their Series A round. Yuri Pikover was the lead investor in that company, and become the CEO. I was hired to head up strategy, marketing development, and product management. We grew that up, and did very well, and eventually sold it to IBM. That was a very successful exit for everyone involved. I then spent a few years at IBM as their Chief Strategy Officer in their identity management area. After three years of that, I decided I needed to go back to the entrepreneurial world, and joined up with another young company, which was SupplyFrame in Pasadena. I helped to grow that to a major player in ecommerce and online advertising, which is used to find and buy chips used in your iPhone, in your computer, and everything else today. I got involved in Bitvore because I knew some of the original founders from Access360. I got Yuri back involved, and he was the lead investor in the A round we just completed.
There's a fair amount of software and computer science involved in this area. Where did all of that technology come from?
Jeff Curie: It is a very advanced piece of technology. We're using state of the art tools. The team here that preceded me include Greg Bolcer, a Ph.D. out of UC Irvine. He ran DARPA research out of UC Irvine for almost a decade, until stepping out and focusing purely on entrepreneurial efforts. Alan Chaney is our Chief Architect, and ran a group at Olivetti Research in the UK. Between Greg and Alan, we've come up with a very innovative way to solve this problem. That's really where the genesis of this comes from, and we have patents around the idea of continually analyzing both unstructured and semistructured data from a wide variety of sources, simultaneously. That's the unique nature of this technology. It's built and deployed as a service in the cloud, with nothing to install. It's all done through your browser. It's pretty amazing what you can do in the cloud. Obviously, it's very compute heavy, and storage heavy. It all runs on distributed clusters of computers all sitting up in the world of Amazon.
Briefly, we see your first product is for the Muni market - what's the idea behind that product? Why did you start in that market?
Jeff Curie: One of the things I believe is important in a product, is to have a very specific market to aim at. I am a believer in a market driven product, not technology in search of a market. I got involved with talking to CTOs at large, Fortune 500 companies, introducing them to what this system could provide, and figuring out if they have this capability. One of the folks was the CTO of an investment bank in New York, who immediately saw what we did, and said he had a problem he wanted us to approach.
We took a look at the problem, said that okay, it sounds like a good fit with what we're trying to do, because we were trying to sink our teeth into a real world problem with our technology. We were not so particular on what the problem was at that point. We wanted to use that to refine the product, prove it out, and scale it. As it turned out, and what we learned to solve for this first customer, ended up finding a huge amount of interest across Wall Street, and anyone who has ever been in the Muni space.
To give you an overview, there are something like 6,000 equities in the U.S. which are super actively traded, those stocks that we all trade. However, in the Muni bond market, there are 1.25 million municipal bonds, which is a huge number, and they are not actively traded. They might be based on a stadium, a toll road, property tax for redevelopment of a city. The kind of news that affects the credit worthiness of those bonds could be coming out of a local newspaper in Ridgecrest, California. It wouldn't be covered in the Los Angeles Times, and not by the San Diego papers. If you trade those Muni bonds, you have no way of seeing what might be affecting bonds in your portfolio.
At the same time, regulators in this industry are also asking traders to make sure that they actually know what risks are in a bond before selling them to the consumer, to mom and dad. Muni bonds have always been known as being safe--but if you read the news, you realize they aren't safe anymore. There are cities, counties, and stadiums going bankrupt with ever increasing frequency. Suddenly, everyone is trying to figure out if they need to disclose more information, and need to track that local news. Bitvore ingested, in the last 90 days 3,450 different sources of information in the US looking for situations that would affect the credit worthiness of a bond. It's automatically ingesting data, grooming it and filtering it and presenting to the traders, so that they see a very refined set of information they can take action on. There are several other markets like this, in that corporate bonds are not dissimilar, mortgage backed securities, and commodities. There are lots of similarities where local news affects value and risk in these things. It's how do you gather that news at scale. That's what Bitvore is being applied to.
It was interesting for us to see that, in addition to equity, you also turned to crowdfunding. How did you end up raising both?
Jeff Curie: If you're a pre-revenue startup, raising money today is a tough grind. We had our early investors in the round, Yuri Pikover got involved, and got other notable folks involved, and we even had our eye on our first customer--but we were not in revenue. We talked to venture capitalists, but being here in Orange County, there's not that much venture capital here right now. We went up to San Jose, but when we talked to venture capitalists, they said that if we were not in revenue, if we were not doing something sexy and high velocity, and if we were not in their backyard, they were not interested. That's the problem with everyone doing anything which isn't sexy in Silicon Valley. We started to talk to the angel networks, through the Tech Coast Angels, the Pasadena Angels, and were making progress through our goals, and we even tried AngelList, where there was lots happening, and we had a good response with that. As we started to understand that environment, we tried to do an online fundraising through AngelList, which was successful, and we raised a pretty good chunk of money through AngelList--and thought, since that's not the only crowdfunding site around, let's try the others. We tried all of them, and had quite a bit of success. We ended up raising nearly a million online, which was remarkable in a couple of different ways. First, we were not a company in Silicon Valley, and we were able to reach lots of people we never would have reached--investors in Nebraska, in Florida. Second, it was very low impact. All of our documents were done for raising money, and it was a very simple transaction. There was not a lot of work involved. We talked to them online, gave a presentation, gave them documentation, and they were in or out. That's pretty efficient.
The other thing that was remarkable for us, was that as a technical, enterprise software company, it's not the sexiest thing in the world. The fact that we could raise a sizeable amount of money from crowdfunding, for sophisticated enterprise software, says something. You don't have to be building some social network, or a mobile app, or something sexy and consumery--there's money out there for sophisticated business products via crowdfunding. We were able to combine both a big chunk of money through crowdfunding and a big chunk through more traditional angel investing, at the exact same time and terms. It was a hybrid fundraise. I don't know if anyone else has ever done it, but it worked great for us.
What's the next thing for you?
Jeff Curie: We are about to roll out a brand new version of our product, and we have a long pipeline of customers waiting to get a hold of it. Next, we want to get deeply into revenue, with a whole bunch of famous finance companies on Wall Street, and make them happy. We believe we have a very strong shot at getting to cash flow break even this fall, and will be going at that one hundred percent. There are many other serious use cases on Wall Street and other markets, such as consumer product goods, retail, fashion, and even agriculture. We're interested in applying our product, first and foremost for our Wall Street customers, and using that as a lever to build a revenue stream for the company to grow into other markets.