Hatched Analytics: The Dublin Analytics Startup Moving the Markets on Wall Street

An interview with Charmaine Kenny and Donal Byrne of Hatched Analytics, by Joe Gorman NDRC Programme Manager.

Charmaine Kenny and Donal Byrne, co-founders of Hatched Analytics, in Dogpatch Labs' Urban Garden

“It was a bit of luck,” admits Donal Byrne, the CEO and co-founder of Hatched Analytics, with a hint of irony. After all, Hatched Analytics is a business predicated around certainty - delivering bulletproof accuracy in data to hedge funds.

Building a startup involves quite a bit of stumbling around in the dark. You clip your shin off the bed and stand on quite a few pieces of LEGO before you find the first light switch. The irony is that when Hatched finally found the light switch, it was by accident.

“Donal was doing a small consulting project for a local e-commerce business here in Dublin,” says co-founder Charmaine Kenny. “When he suddenly realised that he could tell something about one of their competitors by looking at customers’ purchase history.

Byrne jumps in: “So I thought - “Wow, maybe I could do this for a much bigger company?” I tried determining the subscription revenue for Adobe, and got it right. We knew this was valuable information but had to find the business model.  That’s how we ended up in the Alternative Data space.”

I’m curious about alternative data and how it could have spawned Hatched Analytics, a data startup with over twenty staff that has quietly bootstrapped its way to almost €2m ARR from an understated redbrick office on Pearse Street. They are one of the most sought-after data analytics sources in the financial services world, tracking over 100 headline KPIs for companies like Amazon, Apple, and Spotify.

“We’re a small group of dedicated people in Ireland influencing the financial markets on Wall Street. We get a bit of a kick out of that,” smiles Kenny, as if it’s no mean feat.

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Alternative data covers a broad spectrum, from satellite imagery to social sentiment, and much more. Among these, transaction data, generated by tracking buyer activity with credit card and e-receipt data online, is a key segment. Every online transaction touches multiple nodes as the payment slips through several payment processing gates: your bank, a vendor’s bank, VISA or Mastercard, that kind of thing. 

This information can of course be packaged and resold. The Hatched approach is a “little bit different”, according to Donal: “Take ASOS or Zalando. When you make purchases, those websites are inadvertently leaving little clues that allow us to estimate the number of orders going through their platform. We capture enough of those signals to create a report which estimates how Zalando is doing every week and every month, which we then sell to our clients.”

How on earth do they capture these signals? Kenny explains that these clues are gathered and collated via a vast global network of 20,000 gig workers who submit snippets of data and are paid on a per-submission basis. Users have the ability to choose what data they share, ensuring they can protect their personal details before any information is submitted: “If you’ve signed up to our community, you’ll get an email from us to say: “Joe, we're running a project on H&M fashion retailer. We want to know if you made any purchases on H&M over the last five years. If you did, you can participate in our project, we'll gather snippets of information from you, and we'll pay you to do so.” Then, Joe checks his H&M account and gives us info on his purchase data and we'll pay Joe a couple of euros. If we do that thousands of times, we have enough data that we deem valuable.

Byrne and Kenny do not come from the financial services world. They met in the Paddy Power digital team when it “wasn’t a prefab, but it wasn’t far off it,” according to Byrne. Then their paths diverged. When Byrne initially discovered that he could predict information about public companies long before it was discussed on public earnings calls, his mind didn’t jump to the trading floor straight away. He jumped on the phone with his old colleague.

“We thought the angle was to sell to competitors,” Byrne explains. “We tried to cold call people in Microsoft with Adobe data. We did that for two years. Eventually, we found a company in the US who offered to sell it to hedge funds for us, and it was a few months before we even realised we were in the alternative data space, helping hedge funds gain an edge.”

This reseller relationship was fine for a while - Hatched sold their data through a reseller for three years, before deciding that commission fees were an unnecessary expense. “But we would say a great deal of where we are today is due to that reseller partnership,” explains Byrne, “We had so much time to build our product, source more data, and launch more compelling reports while another company was doing our sales and marketing.” As a result, Hatched has been around for a while, but only four years as a standalone brand.

Acquiring customers in an industry cloaked in secrecy is a tricky task. If you’re selling to hedge funds, you can’t rely much on glowing word-of-mouth referrals or public LinkedIn testimonials from your customers. Kenny tells me the story of an equity analyst who would call Hatched and extol the virtues of their data, saying how hugely impactful it was in his organisation. Kenny and Byrne thought they had a product champion on their hands, someone who could attract other people internally to adopting Hatched data. That wasn’t quite the case.

“We spoke to someone else in that company yesterday, it’s one of the biggest hedge funds on the planet,” says Kenny. “She told us that this guy didn’t want anyone else to know he was using our data, because it gave him such an edge when trading. It turns out the person we thought was our biggest champion was actually our biggest blocker to developing more business in the company, because he was gatekeeping the data.”

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Byrne chimes in: “Sometimes there is an unwritten social contract. If I find the data first, it’s mine. It’s not just that you won’t get word-of-mouth referrals between different companies. Sometimes you won’t even get them within companies.”

With the clandestine nature of how their data is used, how does the team know they’re delivering value? The feedback is scarce, according to Byrne, but Hatched has a renewal rate of over 90% - “which shows that you’re doing a good job.”

“There is a third-party platform in this space that analyses the alternative data of 40 different vendors such as Hatched to produce a dashboard for hedge funds,” explains Byrne when I ask for a bit more detail. “This platform analyses the 40 vendors for Amazon, for example. They will rank all 40 to say these are the top vendors for Amazon’s international revenue or predicting Amazon's AWS revenue.”

“So we know that right now across those 40 vendors, 28 are trying to predict Amazon's international revenue. And we're the strongest of all 28. We’re number one for Zalando. We predicted their total orders within 0.2% of their published results last week. That’s the dopamine hit for our analysts. It also lets us know that when we then talk to clients, we know to promote Amazon and Zalando.”

There are about 30,000 hedge funds in the world. At the moment, probably 200 are sophisticated users of alternative data, according to Byrne. What do those clients look like to the Hatched team?

“Some of the largest hedge funds have 50 to 100 portfolio managers, or PMs. Each of those PMs have individual budgets for data, with data analysts who are looking at slightly different tickers or stocks and various geolocations. They’re all potential clients of Hatched.”

Kenny jumps in: “There are 200 sophisticated outfits now. The rest, though, will have to up their data game to even be at the races. Never mind being at a disadvantage - to even show up. We’re at the tail end of the early adopters but it’s now moving into the mass market realm.”

The Hatched team knew they truly had something when they released a report on Spotify and received an exciting email from a client. Kenny remembers: “We got a note asking: “What time exactly did you launch that Spotify report? Because we think your report has moved the market on Spotify”. Three of us were stuck out in a coworking space in Sandyford, and we moved the market on Spotify.”

For Byrne, the surreal feeling is still happening every day.

 “If you look at the top twenty hedge funds by AUM, you're going: jeez, most of these are our clients. How did that happen? Those moments, you realise that you're selling data to some of the most sophisticated, data-hungry companies on the planet. We’re in the top three globally for two-thirds of our predictions. We know we’re incredibly accurate. And accuracy is everything in this game.”

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