When it comes to the financial markets, the most valuable commodity today is data, and for those living in the private markets and startup space, reliable data has historically been hard to come by. Yet, one name that is popping up more and more as an unlikely authoritative source in this space is CB Insights, a tech market intelligence platform that’s known as much for its irreverent newsletter as it is for its predictive analytics.
CB Insights has raised over $11.2 million in funding since 2009, primarily through three relatively small grants by the National Science Foundation before its $10 million Series A round with Pilot Growth Equity in November 2015. While the company spent the better part of its seven years of existence scouring for data through various means, it wasn’t until founders Anand Sanwal and Jonathan Sherry made a conscious decision to inject some much-needed personality to accompany its compelling data that things started to take off.
In addition to their popular newsletter (in which Sanwal always signs off with “I love you”), CB Insights is known for visually sleek charts and infographics detailing some of the more complex themes of the startup and technology industry. It’s also published active lists tracking unicorns, future unicorns and down rounds.
Equities.com recently spoke with Sanwal to learn more about CB Insights and its growth trajectory, as well as where he sees the company going from here.
(Editor’s Note: This interview has been edited and condensed for clarity. Be sure to also check out our other conversation with Anand Sanwal on where startups and private markets are headed.)
EQ: What was the goal of CB Insights when the company first started in 2010?
Sanwal: I had worked in venture and in M&A prior to CB Insights. One of the challenges that I saw when I was in those roles was that the understanding of the private markets is very difficult. We just used products by the legacy data providers, and I always felt the UI, UX, data accuracy and timeliness was kind of subpar, especially coupled with the prices that we paid. So I wanted to do my own entrepreneurial thing and saw this opportunity. When we started, I think our vision, to be honest, was a lot smaller. We were sort of a dealmaker tool targeting VCs, bankers and corporate M&A folks. I think our unofficial tagline was to be the Bloomberg for the private markets. Over time, as we tackled that market, we saw people using our data in other ways, and that gave us insight into a much larger market we could go after. The company has evolved into something that I think is a lot larger in terms of its focus and total addressable market it's going after.
EQ: What were some methods that you used to address the private data issues that you noticed? Are you just crawling the web and news for mentions to create your own data points?
Sanwal: That was our initial approach. My co-founder Jon and myself would try to manually go get historical data by crawling around the web. And we realized–and this wasn’t just us–that there was a ton of information out there, but it’s just a matter of it often being unstructured or being in places that are a little bit harder to find. So we thought we could apply machine learning and technology to it. Crawling is sort of the easy part, but classifying these inputs was a bit more complex. There are lots of articles and websites out there. So how do you know when a company website or press article indicates a financing, exit, partnership, HR event or some other life event? We thought we could take an algorithmic approach to classifying, and ultimately extracting entities for data. In 1993, you had to manually call and get this data using armies of data entry folks offshore. That is an antiquated model today but surprisingly still used by most in our space.
Today, our data gathering extends way beyond news. We're visiting, as an example, Kleiner Perkins’ portfolio page every day and looking for new logos. We’re crawling regulatory filings. We’re now crawling a couple million sources daily. Then over time, as our newsletter and other things have become more prominent, people actually wanted to give us their data. About 18 months ago, I would have said we're probably 90% programmatic, 10% direct submitted. Now, that ratio is probably closer to 70% programmatic and 30% being submitted directly to us from the investment community or companies. The main reason they do that is they want to be featured in our newsletter and research briefs. So our data acquisition strategy has evolved over time as we’ve become more credible.
EQ: You’ve discussed the company’s shift from just providing data to becoming more focused on predictive intelligence. How has the strategy evolved since your start?
Sanwal: A lot of this is driven by how we’ve built the business. We were revenue funded for basically the first six years of our existence. When you are reliant on customers to fund the business, you listen to them pretty closely. We saw a couple of things. One, the dealmaker community, which we have a lot of customers in, wanted more forward-looking intelligence. They didn’t just want, as an example, to be shown all the deals that happened in Silicon Valley in the mobile space that were less than $5 million. They actually wanted a view into which companies were doing well. So we started working on the predictive side of things, such as looking at hiring, news sentiment, partner or customer signings, web traffic and a bunch of disparate data sources. We got some funding from the National Science Foundation to build this algorithm called Mosaic around that approach. That was one of the big predictive elements that we started working on.
Another thing we saw was a lot of non-dealmakers using the platform. Folks from product groups, corporate strategy, corporate innovation, and CIO teams who weren’t necessarily interested in buying and investing in companies but who view our data as a leading indicator of where business models might be going or where technology is going. They were interested in abstracting things up one level. They’re trying to make decisions about what markets they should enter or what products they should build. We started getting those questions more frequently, so that is becoming a bigger focus of ours over time. But again, it’s all based on how we saw our customers actually using the data. It’s definitely influenced the direction of the product quite a bit.
EQ: You mentioned being the Bloomberg of the private markets. Bloomberg obviously is a very straight-laced type of organization. Granted, they’re gigantic, but when you look at CB Insights, you guys really put your personality out there. Was that a conscious decision?
Sanwal: I wish I could say that it was sort of a grand plan from the beginning. But initially, we were thinking about how we were going to create something that will get our name out there. We had no money, so we couldn’t take anybody out to dinner or to a Yankees game. So we decided to do data-driven content, and I think initially we looked at two publications primarily for inspiration. One was Nate Silver’s FiveThirtyEight. The other, which some people may be surprised by, was the OkCupid blog. They used to do a lot of very data-driven pieces about dating. It had a little edge to it and it was funny, but they kind of demystified certain aspects of dating and relationships using all the data they had.
Tech and venture capital are kind of anecdote- and pundit-driven areas, so nobody has really actually challenged the thinking there with data. We started doing that. But if you look back at our newsletters from the early days, they were very boring because it was just data point after data point. That said, it worked pretty well, just because I think we were the only game in town doing something like that.
EQ: So when did the lightbulb go off?
Sanwal: Jon and I were having a dinner we do quarterly for planning, and he had this view–his exact words were, “The band needs a lead singer.” He said, “Listen, we have these interesting conversations internally in our chatroom about the ridiculousness sometimes of what's going. Let’s try putting that in the newsletter.”
So we started sort of being more approachable and human and having a voice. It actually just started working really well. From there, the newsletter just kind of skyrocketed in terms of its number of subscribers. People really liked it. It started getting forwarded around a lot. That formula just started working and we just doubled down on that. It’s worked very well for us. Not everybody likes it, but our view is we want you to have an opinion on us. We don’t want to be somebody that you forget. It has opened lots of opportunities for us.
EQ: With that said, recently you mentioned in a recent letter that a lot of people mistook your Nasdaq Bell Ceremony at The Future of Fintech Conference as an IPO celebration. You kind of poked fun at that, but is going public in the works at some point?
Sanwal: We have always been really focused on building a good product and good technology and doing right by our customers, and as a result of that, I think we've got a really good, solid foundation. In November, we raised some money as sort of our first institutional round after being revenue funded to millions in revenue and 65 people. And now, we’ve got a decent amount of fuel in the tank to really scale things up. We’re scaling up engineering, business development, customer success and really all parts of the organization. We were 25 people at the end of 2014, 65 at the end of 2015, and we’ll be probably about 120 to 130 by the end of this year. We’re growing quickly.
In terms of eventual outcomes, we tend to not to focus a lot on the final score of the game and just focus on playing it. That means just continuing to build a good company with a phenomenal product and unit economics. It will open up new opportunities and lots of options, but we'll take those as they come to us right now. We’re pretty focused on big-product things and just making sure that as we grow, the culture that we’ve built doesn’t get diluted or lose some of what has made the company special so far.
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