Google has led the way in understanding and valuing the importance of a good search engine in unlocking all the information you can find on the internet. The next iteration of this was vertical search: providing tools to drill down into very specific silos of information for particular uses.
And in the wave of companies creating solutions for it, a New York-based company called AlphaSense, which focuses on providing research tools to query market analysis and business intelligence, has now raised $225 million. Its valuation with this Series D round – $1.7 billion after silver – is double what it was in 2021 (when it raised $180 million in a series D round). VS). This not only speaks to the growth of AlphaSense, but also to the potential to fill more gaps in enterprise vertical search.
The funding is co-led by two investors, the Growth Equity business of Goldman Sachs Asset Management (Goldman Sachs) and Viking Global Investors. Goldman Sachs is both a financial and strategic investor here, Finnish co-founder and CEO Jaakko (Jack) Kokko told me: The company’s analysts use the platform for research and to publish their own reports. The $225 million figure also includes a “substantial” debt pledge from BlackRock, although AlphaSense does not specify the exact amount.
When we last covered the company in 2019 – a $50 Million Series B Round — AlphaSense had 1,000 customers. That number has now risen to 3,500, with last year seeing the number of customers increase by 110% in 2021, with the range of typical uses including S&P 100 companies (75% are customers); the Dow Jones 50 (97%); and large asset management companies and banks (70% of all of these in the US, according to the company, are users); as well as those working in the energy, industrial, consumer goods and technology sectors.
ARR is currently over $100 million, though Kokko tells me that AlphaSense isn’t yet profitable (and hasn’t chosen to be).
COVID-19, if any, actually served as a boost to the startup’s growth. Typical users of the platform – business analysts, strategists, financial planners, investors and others who regularly buy and use market reports and competitive information – not only still needed to do their jobs, they were less likely to face-to-face – face meetings to discuss research with colleagues and clients to find and provide information.
On top of that, given the lack of visibility on what was brewing in terms of the pandemic and its impact, research, insights and simply more information were all in greater demand than ever. In both of these scenarios, useful search engines for accessing and disseminating research came down to being in the field.
The gap identified by AlphaSense is actually not uncommon in every information silo, but how successfully it is addressed remains the tricky part. In the case of business information, Kokko said the problem is that it comes from a large number of sources and, in many different formats, is most often delivered as stories.
“We focus on finding unstructured information and giving it structure,” he said. Web search intelligence is a problem that is constantly fed by machine learning algorithms. The more people search on Google, the better Google gets. “But our system has to understand the language and land on the right information without the benefit and information of billions of web searches. None of that exists for private information.”
In other words, our world – or at least the information about it – is our oyster on the Internet, and search engines have been instrumental in shucking it. But the same is not true for unstructured information when it is essentially private and not uploaded to the Internet.
Beyond basic research, given the nature of why people search AlphaSense in the first place, the company’s second product layer comes in the form of how it presents information.
Its algorithms are AI-based and focused on understanding natural language both to extract meaning and purpose from search queries, but also to analyze the search itself.
So while AlphaSense negotiates deals with companies to provide links to their research and make it searchable, Kokko explained that it also takes some of this information into its own hands and presents it in a way that is digestible from many sources in more concise search results.
This is especially important when you consider that when, for example, you have a few forecasts for the size of the cloud-based security services market, you can weigh the various forecasts and what they include or don’t include, because you often see different numbers and different KPIs from different analysts.
“We add more structure to unstructured data, but we also organize it, for example providing heatmaps to show who is more or less optimistic about a particular data point,” he said. “If a user asks for an addressable market size, we can provide a response that examines and integrates all that data.”
Another area where AlphaSense wants to do more, Kokko said, is internal enterprise research, to help companies better organize and access their own data. So while its current products could potentially be compared to Wolfram Alpha or LexisNexis, the internal research product would potentially bring it closer to Elastic or Algolia.
Overall, the opportunities speak to the case for this investment, Holger Staude, managing director of Goldman Sachs Growth, told TechCrunch, especially at a time when so many other companies are struggling to raise funds.
“AlphaSense is a large-scale company growing at an accelerating pace, which we attribute to the strength of the product and team, as well as the size of the market opportunity. Regardless of market reset broader technology, we’re excited to support high-quality companies with a strong fundamental unit economy, like AlphaSense,” he said. “AlphaSense is building a research and intelligence platform for a wide range of users, and not just for financial services companies. We believe that access to retained business information will remain a priority for companies throughout the cycle. AlphaSense is well positioned to seize this opportunity.”