Backing Entrepreneurs #since1999 | AlphaSights
Making good decisions is already challenging under the best of circumstances, but even more so in the uncertainties of a global crisis. Also the smartest leaders need access to relevant and reliable knowledge. They are looking for perspective gained through a deeper, human understanding of how things work rather than pure information. AlphaSights connects decision and deal makers to the knowledge they need to make smart decisions for their organization. Founded by two Stanford fellows in London amid the Lehman crisis in 2008 — and since then supported by a VC from Munich — the company is now the world’s leading knowledge broker. With its global pool of specialists and insights into any kind of market, AlphaSights has thus become one of the torch bearers of the rising expert economy.
How to obtain real wisdom in “Big Data’s Big Bang moment”?
A new study by Upwork shows, that freelancers meanwhile account for more than one-third of the total workforce in the US, contributing nearly $1.2 trillion to the economy. Amid this freelance revolution fueled by Covid-19, there is a growing class of knowledge workers — freelance professionals with specialized expertise who can command up to $1,000 an hour for sharing their wisdom with companies.
According to a pre-pandemic Civic report by Bruce Reed, Joe Biden’s former Chief of Staff , the so-called “expert economy” includes now 1.5 million people, about as many US employees as Walmart, the world’s largest company by revenue. The report concludes: “It is quite an irony that at Big Data’s Big Bang moment, when the universe of information is expanding faster than humanity can comprehend, one of the most efficient and effective ways to gain useful, actionable knowledge is to spend an hour on the phone or face to face with someone who knows and can teach us the very thing we want to learn.” So when the author asks, “Could sharing wisdom be the next gig?”, the question is rhetoric.
For decision-makers at major corporations, investment funds, strategy consultancies, or non-profit organizations the real question is: how can specific wisdom be obtained? Especially given that most companies prefer not to advertise when they are lacking expertise in a particular sector — and Google might not be the most reliable source of expertise either. Additionally, some people with useful expertise often don’t consider themselves “experts”, whereas others don’t know where their insights are needed.
Early days of the expert economy and a pioneer from Europe
10 years before a US report identified knowledge brokerage as “a little-known, but high-growth sector”, a European start-up had already begun answering that question: “Max and I, we founded a company to tackle one of our society’s most intractable problems,” says Andrew Heath, co-founder of AlphaSights. “Decision-relevant knowledge stems for the perspective one gains through experience. Determining who is a possessor of relevant knowledge for a given question therefore requires data and insight into which experiences tend to be correlated with positions held. Our founding insight was that digital connectivity would provide the visibility and the tools to tackle this problem hands-on.”
This original “founding insight” inspired the business idea of a global knowledge network that connects companies — especially in fast moving businesses such as consulting, private and public equity, or tech ventures — seeking reliable specialist knowledge with those possessing it. “Everybody is an expert at something, even if we don’t think so. Useful knowledge is dispersed, hidden and buried in the minds of individuals. This expertise is worth sharing and has real value to someone somewhere else,” says Max. “This is where AlphaSights comes into play.”
“You can find useful knowledge everywhere, but rarely available where and when it is needed most.”
Investing in the “probably smartest founder duo I know”
Andrew and Max met in California in the late 90s at Stanford’s MBA program. They shared a similar background: both from Bavaria (Max from Munich, Andrew from Nuremberg), both moved to England to go to university before starting their careers as strategy consultants. Apart from their CV, both shared a vision to start their own company.
After Stanford, the fellow students parted ways. Andrew went back to London and consequently founded GoIndustry, building it into the world’s largest industrial asset valuation and sales provider, with a global footprint spanning over 20 countries by the time of its admission to the AIM market of the London Stock Exchange. Max moved back to Munich and founded Ciao AG in 1999, backed by the Acton team and ultimately acquired by Microsoft in 2008. When Max’s and Andrew’s paths crossed again in London, each had a track record of founding, running, scaling, and exiting a successful business in Europe.
“Both founders are outstanding serial entrepreneurs and highly complementary: Max is a very charismatic person and a great strategic thinker, Andrew is the hardcore operator,” says Sebastian Wossagk, Managing Partner at Acton Capital. “These guys are extremely smart and driven; in combination they’re probably the smartest founder duo I know.”
Adapt, change, thrive in times of the Lehman crisis
Acton’s investment in AlphaSights came just months after its establishment. “Max and Andrew approached us directly to discuss their business idea and potential funding. Although extremely early-stage, we were confident about AlphaSight’s disruptive potential in the industry, based on a tech-enabled approach,” Sebastian recalls their initial meeting. For the founders, the investment team from Munich was the obvious investor choice: “I had worked closely with Christoph [Braun] and Sebastian [Wossagk] while running my previous start-up Ciao.de,” explains Max Cartellieri.
“I appreciated their value add, strong support and business acumen, especially when the going gets tough.”
Yet when the going gets tough, the tough get going: Just a few months after the investment, the Lehman crisis had a severe impact on institutional investors in public securities, a significant part of AlphaSights’ targeted customer base. “I still remember our first board meeting after the Lehman crisis,” recalls Acton Managing Partner Sebastian, who has been part of AlphaSights’ board since its early days in 2008. “We had a profound discussion on the extensive implications of the Lehman crisis — prospects on the buy-side weren’t even answering the phone anymore. We ended up redefining the company’s go-to-market strategy, scribbled a new pricing model onto the whiteboard, and adjusted the overall business model in light of this new situation.”
The adapted strategy turned out to be extremely successful, in particular, the focus on completely new customer segments proved to be spot-on. Over the course of the investment, Acton Capital remained a strong sparring partner on the board of directors in all strategic discussions such as corporate governance or internationalization: AlphaSights has since developed into a global knowledge broker with offices in Europe, the Americas, Asia and the Middle East: London, New York City, Hong Kong, Dubai, San Francisco, Seoul, Hamburg, Shanghai and Tokyo.
“Sharing the world’s collective knowledge” to drive progress
AlphaSights has been awarded numerous times for its working place culture (e.g. by Forbes) and is regularly named one of the fastest-growing and most-disruptive companies by The Financial Times, inc. magazine. Despite its fast growth, the company is highly profitable with a 30% EBITDA margin. The two founders use its strong profitability and cash flow to step-by-step buy back shares through recaps. “That’s why we invested in them in the first place,” says Sebastian Wossagk. “They have a long-term vision for AlphaSights.”
“The market for expertise is expected to grow, as new areas are activated and established client segments make use of a broadening service spectrum provided,” says the Acton partner, who is also AlphaSights’ client, using the expert network when looking into potential investments. Researchers and experts agree: in many ways, the expert economy is much more than a business: A recognition of the value of humans collective knowledge, experience and wisdom. A realization that sharing this knowledge is not only power, but also key driver of progress. “We want to make sure that every decision-maker can easily tap the world’s collective knowledge,” Andrew Heath rephrases. “Our vision is a world where knowledge available somewhere informs critical decisions everywhere.”