The following is a Q&A with Third Bridge CEO Emmanuel Tahar, who co-founded the firm with Rodolphe de Hemptinne in 2007. Third Bridge is one of the fastest growing expert networks, having grown 36% to $92 million in 2017 according to regulatory filings [link requires subscription]. Prior to Third Bridge, he and co-founder de Hemptinne were strategy consultants at Bain & Company.
What prompted you and co-founder Rodolphe de Hemptinne to launch Third Bridge in 2007?
Rodolphe and I met in business school and subsequently both worked at Bain. We stayed in touch and reconnected in 2006, with a shared aspiration to become entrepreneurs.
We liked the investment research space because it was clear to us that the appetite of institutional investors for high-quality information was going to grow. Specifically, we saw an opportunity to enter the expert consultations industry.
The market was growing fast but it was fairly US-centric – the incumbent players did not seem able to deliver a consistent offering globally. Also, we anticipated a paradigm shift in the industry that would create an opportunity for ambitious new entrants.
Let me explain. The pioneers of this industry started before the explosion of social networking. At the time, their vision of creating ‘expert networks’ made sense. They were building an asset (the ‘network’) and were in the business of monetizing it, i.e. selling clients access to whomever from the network was available to speak. However, in the world of Google, Facebook, LinkedIn, etc., the network became a commodity. We knew that clients would value partnering with a firm like ours, which was not looking to build a network but rather to be the best at understanding their needs and connecting them with the best sources, regardless of whether the experts belonged to a network or not.
We were able to take advantage of this shift and that has allowed us to grow much faster than the market.
How did your prior experience at Bain inform your vision for the firm?
Bain trained us to look at our industry with a fresh pair of eyes and to apply critical thinking and first principles to anticipate what the future holds.
Working at Bain also taught us what good looks like, especially when it comes to building a sustainable business and a great global team that shares a consistent set of values. There are no shortcuts – it takes effort and time to build a great company, and we always wanted to build a firm that would last. When new recruits join, they are often surprised by how much we invest in our training programs. We are very proud of our Learning and Development team.
Finally, our consulting heritage is still present in our approach to understanding and serving clients. Just like good consultants, we are obsessed with asking questions to understand exactly how we can solve our clients’ challenges. That makes our research more targeted and relevant.
Third Bridge grew by over a third for each of the three years from 2015 through 2017 as you approached $100 million in annual revenues. Where do you see future growth and how do you plan to sustain it?
We are proud to have crossed the $100m revenue mark earlier this year, but our growth journey is set to continue.
We have a lot of runway left with Connections, our expert consultations business. We have been pleased with the continued growth of demand across markets and asset classes, and our market share is low enough that we can continue to outperform the competition for a number of years.
We are also very excited by the potential of Forum, our content offering. We address a similar need for human knowledge by publishing thousands of curated, high-quality expert interviews every year. We are investing aggressively in the quality and breadth of our content, and we are getting smarter about distribution to make it widely accessible for the investment community. We believe that Forum is defining a new category in the investment research space.
You mention your content offering, Forum. How does it differ from other research products on offer currently?
We believe that human experience – and the insights it yields – is the critical ingredient to inspire confidence in a trade idea, more certainty in an existing investment thesis, and ultimately more conviction to make the right investment decision.
In our Forum offering, we identify the important topics and the most relevant experts, and we ask the questions ourselves. Our global team of over 100 moderators, researchers and analysts provides the content – 6,000+ transcripts per year of unfiltered (yet curated) information – to our clients.
Whether it’s helping clients get up to speed on a new company or industry, providing the information they need to increase or decrease an existing position, validating market opinions and model assumptions, or picking up red flags early on a name, our Forum interviews give clients access to unbiased views in a format that is easy to access, search and consume.
The differentiation is all about knowing what questions matter and what experts are relevant: we go deep, discover contrarian views, look for the gaps, and unearth insights that help our clients make better investment decisions.
Compliance has been an important topic for the industry over the years. Have you seen any interesting developments recently?
Of course our industry was impacted by the wave of investigations in 2011 and 2012. It forced a conversation between clients and their research partners to agree on core principles that provided safeguards against the risks of securities fraud.
Once the dust settled, the industry converged towards a situation where the large global players invested significantly and adopted similar principles.
More recently, we have explored ways to protect our clients against a new type of risk; rare cases where experts misrepresent themselves or their experience. We have developed a proprietary detection system called FactShield that uses multiple inputs to create a composite risk score that triggers a review of some individuals and potentially their removal from our systems.
What effect do you see MiFID II’s research unbundling provisions having on the expert-learning industry?
MIFID II has been a positive development for our industry. It’s creating more accountability and pushing asset managers to be savvier about their research spend.
Obviously the change has been painful for some players in the investment research industry, but firms that deliver true value will continue to thrive and will draw the best talent and research spend disproportionately.
The other big growth area we see in the research space besides expert networks is the increasing use of alternative data by institutional investors. Do you see any intersection between alternative data and expert learning?
There are a lot of new developments in the industry. It is still early days, but we are interested in evaluating the applications of AI and machine learning to enhance and supplement what can be done with human insights.
For example, we want to explore how software can help our teams improve the success rate of matching experts to particular requests from our clients.
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?
We have a slightly different way of looking at it. Our market is the investment research industry, which is worth globally at least $10 billion in annual spend. We are going to dominate a particular segment of the market: delivering human insights to help clients make better investment decisions. We think that it is a multi-billion dollar opportunity.