Boston-based Hyperplane Venture Capital, a venture firm specializing in backing machine learning and data companies, is leading a $2.4 million investment into Elsen, a start-up that has built technology allowing financial professionals with or without quantitative expertise to test out and discover new investment strategies.
Jack Klinck, a managing partner at Hyperplane who founded State Street’s Global Exchange data and analytics business, will become chairman of Elsen’s board. Early-stage venture capital firms Accomplice and Launch Capital, as well as angel investors from Silicon Valley and finance, also participated in the investment round.
Elsen has developed web-based systems — which work with financial institutions’ existing technology — that allow portfolio managers to easily extract and clean up their own proprietary data and data from external sources that they can then use for research, risk analytics, and backtesting investment models, among other functions. For example, Elsen recently developed a product in conjunction with Thomson Reuters that lets users easily analyze Thomson’s and other third-parties’ financial data, as well as other alternative data sources.
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Klinck says the asset management industry — particularly traditional firms — has been struggling to tap into the explosion of data that it collects every day on the markets and its customers as well as how to integrate innovative new sources that can lead to investment insights. Well-known quantitatively-focused alternative investment firms like Two Sigma and Renaissance Technologies employ hundreds of highly paid professionals to do this work. One challenge is that simply preparing data, including structuring it and turning it into a form that can then be processed, takes up the majority of users’ time.
“How can anybody be productive in that environment? You spend 70 to 80 percent of your time doing that and haven’t yet gotten to do your core work,” says Klinck.
Zac Sheffer, the 27-year-old founder of Elsen, says, “with fees being compressed, managers need tools to show where they are generating alpha. I wanted to enable non-tech folks and fund managers to leverage data to make better decisions.”
Elsen will use the additional funding to expand sales and marketing, engineering, and customer support, and to add other financial data. Other existing investors include Sequoia Strategic Advisors.
