Smartkarma, a Singapore-based research aggregator, raised $4.7 million in a second funding round bringing total capital raised to $7.5 million.
The latest financing was received from five Asian institutions including Singapore-based venture capital firms Wavemaker Partners and Jungle Ventures. The initial funding round was in January 2015.
Smartkarma’s platform, which charges one fee to buy side users analogous to a streaming music service, officially launched from closed beta in April 2016 [subscription required for link]. Revenues are allocated back to contributors based on the level of engagement and usage by clients and peer analysts.
The firm said its platform is used by 140 global professional institutions, a 267% increase over the last year. The firm has only recently begun hiring salespeople, having relied on marketing by the firm’s co-founders and word of mouth for its initial growth.
As of April, the platform offered research content from 375 analysts at 70 research providers. The platform signed a distribution agreement with Morningstar in September 2015 [subscription required for link], focusing primarily on Morningstar’s Asian coverage of over 130 stocks from 30 Asia-based analysts.
Smartkarma is designed to be a collaborative publishing platform for independent researchers. The system incorporates word processing and graphics engines and all research is digitally native and mobile friendly in HTML5 format.
Smartkarma has also been hiring “Content Strategists” who are originating analytics internally. The firm has two analysts providing event-driven research which focuses on Asian equity special situations, merger arbitrage, and discount arbitrage.
The founders of Smartkarma — Raghav Kapoor, Jon Foster and Lee Mitchell — worked together at Aviate Global (Asia) before its acquisition by Religare Capital Markets. Foster had worked for many years on the buy side, including a stint as a portfolio manager at Millenium Partners. He and his partners started the firm in 2014.
Our Take
As far as we know, Smartkarma is the first research aggregation platform to manage an all-inclusive fee for research. Given provider concerns about revenue cannibalization, this is not an easy trick to pull off. For this reason, it is important for the platform to scale quickly to generate revenues for its contributors.
Smartkarma is also helped by its Asian focus, particularly as investment banks have been cutting back their Asian research after the market meltdowns in the latter half of last year.
The latest funding round allows the platform to hire salespeople to expand buy side usage, which is the key to success for all research aggregators. The axiom remains true: Research is sold, not bought.