Goldman Sachs leads $15m financing of data service for investors

Goldman Sachs has emerged as the largest investor in a financial analytics start-up that enables institutions to mine a wealth of big data, underscoring Wall Street’s drive to tap new technology.

Goldman led a $15m round of financing in Kensho, an analytics platform that can instantly answer millions of complex financial questions by automating previously human-intensive research. The bank will roll out the platform across its business as well as to some of its big clients.

Kensho, which has been likened to a Siri-style service for investors, analysts and traders, enables them to ask questions such as, “What happens to US homebuilder stocks if a category three hurricane makes landfall?”

Analysts said Goldman was probably seeking to save on costs while also tapping into a wealth of so-called “unstructured” data. Such information involves text as opposed to the numeric “structured” data that have traditionally been easier for computers to digest.

Research scientists estimate that 80 per cent of all data come in unstructured form; being able to quickly analyse this wealth of information is the holy grail for banks seeking to use big data to augment their business.

“Wall Street historically was constrained to playing in the 20 per cent of data that move markets,” said Daniel Nadler, chief executive of Kensho. “Every Wall Street bank could only look at – with any real speed or automation – financial statistics: P/E ratios, and book value and market cap and similar things.”

He said not being able to quickly analyse hard-to-structure events – central bank announcements, geopolitical events, weather phenomena, technology product releases – was “trying to see the world with not only one eye covered, but one eye covered and the other eye half-closed.”

Initially called “Warren” in a nod to both the billionaire octogenarian investor Warren Buffett and the IBM supercomputer known as “Watson”, the platform has been rebranded to match the company’s name Kensho, partly on Goldman’s advice.

While the exact size of Goldman’s Kensho investment is unknown, it is big enough to make the bank the single largest strategic investor in the company, which has previously secured money from groups including Google Ventures, Accel Partners and CNBC, which last week announced its own investment and partnership with the platform.

Goldman has historically kept its strategic investments under wraps and largely focused on developing its own in-house technology, but has recently been making more public announcements when it comes to its tech-related developments.

Mr Nadler said one problem for banks such as Goldman has been the limited number of data scientists available to analyse financial information. “These graphical- and natural language-based computer systems open up data science to the entire firm for the first time,” he said.

As part of Goldman’s deal, Rana Yared, managing director at the bank’s securities division, has joined Kensho’s board of directors, while Don Duet, co-head of its tech division, joins the company’s advisory board.

The move follows two other recent high-profile tech investments by Goldman, including a deal with Motif, a self-termed “disruptive” investment firm, and Perzo, a start-up that specialises in communications technology.