First off, a quick mention of the professors who were brave enough to risk “teaching” us entrepreneurship! Taking the entrepreneurship class with Prof. Naeem Zafar and Prof. Safwan Shah was really cool, and easily the most memorable experience at HBS. Prof. Naeem is a fun personality who knows everything about the startup world and is mentor to some very successful, and some not so, entrepreneurs in the valley. Prof. Safwan, who I personally admire, likes to live at the higher altitudes teaching us the nuances of “being free to express” our true colors if you will. The two really put on a show at Haas.
What follows in the rest of this post is the executive summary of a startup that four other members in my team helped create. In a future post I’ll detail the advertising strategy we used using Yelp and Angie’s list as models very similar to our own.
1. Company and Vision
Interactive Financials is a SaaS company that increases the reliability of the financial data used by individual investors. In order to identify the most reliable data, we examine several data sources ranging from free to up to $2,000 per month, and rank the freely available content at the most granular level with our proprietary algorithms. Our plugin displays in real time the result of the quality check for Yahoo! and Google Finance and points individual investors to the most reliable free website for only $10/month. Once we build the skills in cross checking multiple data sources to improve data quality for individual investors, we will develop more sophisticated tools that address the data issues faced by professional investors, such as traders and brokers.
2. Fundamental Pain Addressed
Free financial websites are not particularly reliable when used independently. Lack of standardized data collection system and auditing process make individual investors vulnerable to data errors. Individual investors need accurate data to make financial decisions, but currently they can’t rely on a single source without being exposed to several data issues. We don’t just find you data points; we find you the most accurate data points. Interactive Financials will direct individual investors to the most reliable freely available data in seconds. No more worries about the honesty of your data.
3. Products and Technology
Interactive Financials is a data processing center with sophisticated analytics capabilities that meets the end user via simple plugins, which will be offered for the major Internet Browsers as well as Excel. These plugins will play the role of a bridge between the free financial websites and individual investors. Our plugins will communicate with our datacenter, which is refreshed multiple times a day, in order to determine what the most reliable source to get the data an investor is currently looking at is. Imagine one is checking the stock price of Apple in Google Finance and the price on Oct 2nd, 2012 is wrong. If she had the Interactive Financials plugin, she would see a warning label next to the price column with a ranked list of alternative sources that had more reliable price data for that specific day.
4. Competitive Advantage
Our research suggests a complete lack of competition in this space, although there is a clear need for affordable reliable data. During our interview with Karolina Netolicka, Product Manager of Google Finance, she acknowledged the frequent data errors in her product and admitted that neither Google has the priority to fix these data errors nor any other company offers potential solutions to it. Both our market research and interview with Karoline suggests that Interactive Financials will be operating in a niche market and can secure a solid customer base by utilizing first mover advantage.
5. Market Analysis
According to our survey, 58% of individual investors view data quality as “Very important” (the highest rating), and 70% have experienced or foresee bad consequences caused by incorrect data. Interactive Financials’ goal is to bring data integrity to individual investors, who heavily rely on freely available data to make financial decision. Yahoo! and Google Finance dominate the free financial data source market with over 50 million unique users. Our core target group is 7.5 million “Technical” investors, who are aware of data issues and directly suffer from them. Based on our market research, we foresee 10% of “Technical” investors as part of our customer base at the end of the 5th year.
6. Sales Strategy
Interactive Financials will pursue a B2C model by giving access to its database to individual investors using a monthly subscription model and via plugins for popular software. We will be focusing on targeted online advertisement to acquire most of our customer base. Based on our forecasts, we will be serving close to a million customers in year 5. In addition to direct sales, we will be working with popular financial sites, such as Seeking Alpha, to raise awareness about our product and partner with Linnsoft, and companies similar to it, to expand our customer base. Interactive Financial also has several growth opportunities such as building advanced products for professional investors, opening to international markets, and making plugins compatible with other websites.
7. Financials and Other Key Metrics
Costs- The main expenses categories are data ($800k/year), staff ($3M/year), and customer acquisition ($20/customer).
Revenues- After 5 years of operation, Interactive Financials could potentially generate $80M in sales reaching the one million customer mark in year 6.
Necessary Funding- Interactive Financials seeks $1M in convertible debt @ 8%/year, with a premium at conversion during Series A at 125%. After 12 months, Series A funding will require $7M, which will allow Interactive Financials to operate for the remaining 27 months after which the company will be profitable.
The Berkeley MBA 