The following is a Q&A with AlphaSights’ co-CEO Max Cartellieri, who co-founded the firm with Andrew Heath in 2008. AlphaSights is one of the fastest growing expert networks, having grown nearly 40% to £66.5 million ($95 million) in 2016 according to regulatory filings [link requires subscription]. Prior to AlphaSights, he founded Ciao AG a European price comparison and product review service sold to Microsoft in 2008.
SB: Congratulations on the recent 10-year anniversary of the founding of AlphaSights. What have been the biggest changes you’ve seen in the expert learning industry over that period?
MC: I’d say the biggest changes relate to the degree of professionalism in the industry and adoption of our services by the wider business community. When we started back in 2008, the industry essentially consisted of one dominant pioneer and a few fringe competitors. Across all aspects of the business model – from the service spectrum and quality offered to clients, to the quality and acumen of the workforce, to the relationship with experts and the industry’s compliance protocols – everything was essentially at the level of sophistication originally pioneered in the late 90’s. It was a cottage industry offering a service used by a few early adopters based almost entirely on Wall Street. Wind forward to today and there’s now a handful of strong global firms competing along all of the dimensions above. This has resulted in a much better value proposition for all stakeholders, a significantly higher level of professionalism, and a much broader take-up of the services well beyond Wall Street. In fact, our client base includes the large global professional services firms, PE funds and Fortune 500 corporations.
SB: What prompted you and co-founder Andrew Heath to begin AlphaSights ten years ago?
MC: We’d both founded, built and exited digitally enabled businesses before and were looking for a new space on the cusp of being transformed by the arrival of digital connectivity. We liked the high-end knowledge economy because of our own professional heritage – we’d both started off in strategy consulting – and because we felt we could relate to our clients: driven, ambitious professionals who face complex challenges every day and are receptive to services that render their lives easier and remove some of the roadblocks they face. More philosophically, we loved the idea of ‘connecting knowledge’ because it really is the key to driving innovation and progress.
SB: How did your prior experience with Ciao AG inform your vision for AlphaSights?
MC: Both my own and Andrew’s prior experience informed many of the critical decisions we made along the way. If I were to name three insights that were guided by past experiences and that have served us well, they would include, first, our conviction to not simply match requests for expertise against a pre-recruited ‘expert network’ but to custom-qualify experts (whether or not they have worked with us already) in response to every client’s unique request; second, to not hire a sales team but rather build a superior product that would grow via word-of-mouth; and third, to hire and be willing to pay the price for top talent situated in prime locations rather than go down the path of offshoring parts of the workforce to lower-cost locations.
SB: We estimate the expert network industry at around $1 billion in annual revenues currently. What is your perspective on the addressable market for the industry?
MC: I think we’re still in the early stages of adoption of our industry’s services. If you view us as essentially providing access to third-party knowledge, we sit alongside and both complement and substitute for industries such as strategy consulting (~$100 billion), B2B information services (~$200 billion), and market research (~$30 billion). So there are huge established industries right next to us, and the only question is to what extent we can deliver better, faster or cheaper solutions to clients’ problems than these traditional players can. I don’t see the industry maxing out at $1 billion – I think it can and will grow into $5 billion, $10 billion or even more over time as the boundaries to adjacent industries blur.
SB: AlphaSights has been growing extraordinarily quickly, but growth rates become much harder to sustain as companies scale. Where do you see future growth and how do you plan to sustain it?
MC: Annual growth rates naturally come down as your revenue base increases, but the absolute growth increment – how many millions of revenues you can add each year – doesn’t have to. We’ve always been focused on how much incremental business we can add each year as a reflection of whether our core business processes – from client onboarding to growing our client relationships – continue to scale. We believe the market we operate in is large and continues to grow, so our own growth will naturally follow if we can better ourselves year after year.
SB: What effect do you see MiFID II’s research unbundling provisions having on your industry, if any?
MC: In my personal opinion: very little. I think all sophisticated investors that benefit from using our industry’s services have long woken up to our industry’s existence and adopted our services at some point over the past twenty years. So I don’t think MiFID II will lead to a dramatic substitution of our services for what the sell-side used to bundle into trading commissions. If anything, I think a lot of sell-side research will simply vanish.
SB: The other big growth area we see in the research space is the increasing use of alternative data by institutional investors. Do you see any intersection between alternative data and expert learning?
MC: At this point, I don’t see too much of a nexus between the two spaces. Basically, I think that data – whether ‘alternative’ or mainstream – is either of such high signal-quality that it feeds directly into trading algorithms, in which case there is little room (and no time) for experts to opine on it. And the business model of sourcing and selling such high-quality data (e.g., satellite images or app data) is quite distinct from our core capability. Alternatively, when data is more ambiguous or less easily interpretable, it may give rise to demand for expert conversations around it, but these would not be substantially different from any other expert conversations we facilitate.
SB: Thank you, Max.