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Organize this: Software notebook for financial services grabs $19M funding

When Alap Shah was an investor, he would print out financial statements, highlight them, organize the stack of documents into a model and then present proposals.

He guesses research was about 80% of his workflow. “I spent most of my day reading documents,” he says.

To simplify the process, Shah and a team of Wall Street analysts built a tool that he calls the Evernote for financial analysts. The software is the basis for Sentieo, a financial research management system that allows clients to do research and collaborate in one software notebook.

Targeting managers at hedge funds, mutual funds, pension funds, family offices, corporate users and RIAs, the San Francisco-based startup recently picked up $19 million in Series A funding, led by private equity firm Centana Growth Partners.

With updates coming slowly for systems such as the Bloomberg Terminal and S&P Capital IQ, Eric Byunn, co-founder and partner at Centana, believes that financial research technology is an area that is ripe for disruption.

Alap Shah, CEO and co-founder of Sentieo

“On one hand you have modern tools that are not finance specific, like Yahoo Finance and Google, and on the other hand you’ve got a bunch of systems that were architected quite a while ago,” Byunn says.

For many investors, data overload stands in the way of getting work done, says Leonard Langsdorf, chief technology officer of Capco’s digital innovation labs.

“How many more deals are out there today? And since I have been in the industry to today, not much has changed,” Langsdorf says.

Sentieo also allows analysts to search through their own internal content, the financial disclosures of the companies Sentieo tracks and research from over 1,000 sell-side contributors. The system intuitively searches for synonyms: “Guidance” will also bring back results for “Forecasts,” “Looks,” and “Expectations.”

Sentieo also understands the structure of financial documents.

“You don’t just search a Tesla earnings conference call transcript, you can go so far as to search and find what Elon Musk has said, what the CFO said, what specific analysts said,” Shah notes. “Similarly let’s say you’re looking at the risk factor section of the 10K or the 10Q, instead of searching the entire document, you can ask who is so exposed to the Trump administration that they are actually calling out that fear within the risk factor section?”

With Sentieo’s natural language processing abilities, the program can analyze how sentiment changes from one document to the next and build a history of financial tables from multiple documents.

“We try to build tools that will string data from a bunch of different platforms all into one whereas some of the older tools are built in a different era, where you typically just want to get the data out of the platform and then pull that data out onto your desktop and use microsoft suite products to really process it,” Shah says.

Once an analyst buys a stock and puts it into his or her portfolio, that analyst can repeat this research on Sentieo every quarter to see how the stock’s performance compares to the analyst’s original investing thesis. The platform also surfaces textual and financial insights and news for clients.

Sentieo has more than 700 clients and covers 20 million financial documents from more than 64,000 sources.

Most of the funding from this round will go towards building Sentieo’s go-to-market strategy. The company wants to add employees to marketing, sales, customer support and product specialist teams.

“We’re really focused on making sure that a lot more folks in our industry, take a look at the product, and understand how powerful it is for their workflow and how custom built it is for what they are trying to do,” Shah says.

At this point, Capco's Langsdorf doesn’t believe Sentieo will be able to compete with the Bloomberg Terminal because of how much of a social network Bloomberg has built for investors — traders partly pay for the terminals so they can talk to other traders.

The startup is much more likely to pose a threat to S&P Capital IQ, he says. Rolling up many resources and producing a research report for portfolio managers is the platform’s key advantage. “They’re getting rid of some of these desks that are just sitting in banks and automating processes of junior staff,” Langsdorf says.

Shah says that one advantage of his system is that the more companies join Sentieo’s platform, the more financial data it has to train its system.

“The underlying challenge that everyone faces in the investing business today is really around information overload and how do you process more and more data,” Shah says. “The folks that are better at processing it are going to generate better returns. For that reason, you can no longer expect someone to come in, log into your platform and pull the data out.

"We want to become more and more of a push vendor, where we understand what the user cares about based on their previous actions, as well as do our own actions to understand the content coming in.”

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