New York-based S&P Global (ticker SPGI — $48 billion market cap) announced it has signed an agreement to acquire Boston-based Kensho for $550 million in a cash and stock deal.
Kensho deploys scalable machine learning and analytics systems across global government and commercial institutions to solve difficult analytical problems.
We first met Daniel Nadler, Founder and CEO of Kensho, in June 2013 at Harvard Square, where he was starting Kensho while finishing his PhD in Math at Harvard. At the time, only a handful of hedge funds and trading groups would hire their own coding teams to write algorithims on top of large data sets to predict asset direction and volatility.
Instead of starting a hedge fund based on his own internal algos, Daniel’s vision was to start Kensho that would instead sell this predictive analytics platform to the world. In the same way that the real-time stock quote gave Wall Street an edge many years ago, Kensho hoped to give the world an easy way to compute complex market data analysis once confined to a limited number of large trading firms and hedge funds.
The team at Orbital Ventures has worked in both the investment banking and hedge fund worlds. Knowing the unique ways of these industries, it was clear straight away that through machine learning and natural language processing (NLP), Daniel was building something the buy side would notice. At the time, only the largest hedge funds could afford the quants needed to do the analysis that Kensho could do, and none of them had built the complexity of data sets that one day Kensho would offer.
Despite that Wall Street and the buy side are very difficult industries in which to sell, we deeply shared Daniel’s enthusiasm for where he wanted to go as well as the massive need for this product. Better yet, if the product worked, this market was full of forward-thinking customers who wouldn’t be shy about paying large sums for innovative solutions that would augment their business models. Daniel and the team were gracious to let Orbital Ventures invest in Kensho’s seed round during the summer of 2013.
Since those early days, Daniel and Kensho charged ahead and never looked back. After what seemed like “nos” from everyone we thought would say “yes,” Wall Street and hedge funds ultimately started to deploy Kensho’s platform throughout their firms. Daniel would later bring on such investors as General Catalyst, Google Ventures, Accel, NEA, JPMorgan, Morgan Stanley, Goldman Sachs, CNBC and S&P, to name a few. He expanded offices from Boston to New York to Washington DC to Los Angeles.
Daniel’s vision and execution of what scalable machine intelligence could bring to financial and government markets were ultimately spot on. There is still much to do at Kensho, and the S&P Global acquisition is smart and will enable even further innovation and distribution in the days ahead.
One interesting footnote. After we invested in Kensho back in 2013, it became comical how many people went out of their way to tell us that Kensho would never work. Many of these smart and respected people were VCs as well as Wall Street and hedge fund insiders. It is an all too familiar refrain: the best ideas are many times the most controversial, and industry insiders are often times the loudest voices doubting the innovation…until they’re not.
At Orbital Ventures, we believe we are still in the early innings of AI/Machine Learning disruption and have been investing aggressively in this space since our inception six years ago. In addition to Kensho, other notable ML focused investments within our 60+ startup portfolio include CrowdFlower, CrossLend, Mapbox, Cape Analytics, Merlon Intelligence, Behavox, True Fit, Cobalt Robotics, Enview, Marble, TerrAvion, June, StatMuse, Sonia and other announced (and unannounced!) startups.
Congratulations to Daniel and the entire Kensho team!
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