Lizette Chapman – Wall Street Journal – Venture Capital Dispatch – September 8, 2015 – For investment professionals, the performance of one Texas oil well during a single day could be an easy item to overlook when it is buried among billions of other data points.
Discern Group Inc., a San Francisco-based startup that specializes in finding what it calls "weak signals" that could affect financial markets, used public data to determine that a well drilled by an Oklahoma-based energy company one day last November performed better than 95% of the company's wells in the region, was an outlier and therefore deserved a closer look.
"They were using a different method than they had in the past, and that data was filed with the state of Texas," said Discern founder and Chief Executive Harry Blount. Discern, which sells such signals as a service to portfolio managers, analysts, traders and other financial professionals, alerted its customers that a significant event had happened. The energy company "was expected to have trendline results, but they produced results better than expected and they outperformed their peers over the next 90 days by 11%."
With the goal of building out similar data signals as a service for the real estate, banking, retail, technology and other sectors by the end of the year, Discern has secured a $20 million Series A round led by Artiman Ventures.
The idea–to aggregate data sources and program algorithms to transform signal noise into actionable insights–is n't a new one. From hedge fund Two Sigma Investments LLC to startup Kensho Technologies Inc., financial firms are employing armies of programmers and mathematicians to make more data-driven decisions. The data sources include everything from Twitter comments to geological events and are designed to augment work done by quantitative analysts and analyze in seconds information that used to take days or weeks to understand.
Unlike Kensho, which operates like a Siri for investment professionals and is backed by investors including Google Ventures and Goldman Sachs, Discern's platform is designed to surface information that users aren't aware of and don't know they should be seeking. And unlike Two Sigma Investments, which has built its $25 billion hedge fund business around such technology, Discern isn't a financial firm and has no interest in executing any trades itself.
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