TipRanks Levels The Playing Field For The Average Investor

Robinhood just became a public company valued at $30 billion on the basis of its promise of Wall Street “democratization.”  When I asked Uri Gruenbaum, co-founder and CEO of TipRanks, why he is not using the D-word, he laughed and said it was included in his pitch in the early days of the company. But now he prefers to talk about Wall Street “accountability” and “transparency,” and his mission to help individual investors make “informed investment decisions.”

10 years ago, while working as a software engineer, Gruenbaum decided to invest his bonus in a large automotive company following an analyst’s recommendation in an article he read online. Six months later the stock was down 50%. So Gruenbaum created a spreadsheet that tracked the past recommendations of that particular analyst and discovered, like many before him, that the analyst he thought “knew better than me what he was talking about,” was wrong most of the time. “That’s how I came up with the concept of financial accountability, a data-driven solution that tracks and measures what the experts are saying,” says Gruenbaum.

Launched in 2012, TipRanks at first made a name for itself by becoming the ultimate Wall Street analysts’ rating service. Today, more than 50 global financial institutions (e.g., Nasadq, eTrade, TD Ameritrade) license its products, according to Gruenbaum. Another source of revenues for the company is subscriptions (from $360 to $600 annually) that provide subscribers with additional data and analysis. Between 3 to 4 million users access the TipRanks website each month and, including the users of the trading platforms that display the “powered by TipRanks” analysis,  Gruenbaum estimates that 30 million investors “look at our products” each month.

Having established itself as the arbiter of Wall Street accountability, TipRanks evolved further its quest to “level the playing field for the average investor.” It followed the shift in how investment houses make their investment decisions, the trend towards relying more and more on “alternative data” that is uncovered by computer programs searching for new sources of data (e.g., web traffic, credit card information) and making automated, algorithm-driven investment decisions.

To give individual investors access to the “alternative data” that is available to hedge funds and large banks, TipRanks has become an aggregator of financially-relevant data scraped from the web, including analysis of the output of financial bloggers. Only a small fraction of the funds it has raised to date—close to $100 million—have been used for operating expenses, so TipRanks plans to employ this year its considerable financial resources to purchase data sets that are not available on the web, says Gruenbaum.

Other planned uses of these funds include acquiring other companies, spending on marketing and video content, and expanding to new markets, both in terms of actual presence and language localization. To stay ahead of the competition, TipRanks keeps innovating in how it presents data and analysis to its users—“we focus on simplifying complex staff” says Gruenbaum—and adding new features. For example, it recently announced the addition of “Risk Factors” research, presenting its users with an easy-to-understand overview of the risks companies report to the SEC, condensing various risks into six well-defined categories.

Unlike other efforts to “democratize” Wall Street, TipRanks does not offer trading (commission-free or otherwise), nor does it offer stock recommendations. It simply wants to help educate the more than 10 million new individual investors that traded on the U.S. stock market in 2020 alone, in addition to the millions before them, all deprived of the kind of financial data and analysis available to institutional investors.  

As Crunchbase puts it, “This is a pivotal moment in the liberation of the public markets… Without a rigorous understanding of financial products and how the markets work, amateur investors can risk too much or fall prey to nefarious actors. However, the idea that it’s simply too dangerous for regular people to invest directly in the stock market is a myth—one propagated by the very financial institutions and advisers who stand to gain by keeping the markets shrouded in mystery… Americans do not need to be protected from a free public stock market; they need to learn enough to participate responsibly, feel confident about the risks they choose to take, and realize the financial gains that big institutions and the wealthy have been enjoying for decades.”

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