Original networker bets on SumZero, an exclusive online community for investment professionals
2/4/2013 - The problem with equity research from the sell side, says SumZero Founder Divya Narendra
’12, is that the investment banks producing it are typically conflicted. They only issue research on companies that are their own investment banking clients, and they don’t take positions in the stocks they recommend.
“If they’re wrong, they really don’t lose anything,” he says. “They hold no risk.”
The cofounder of early social networking site HarvardConnection is building SumZero
into an exclusive online community for buy-side investment professionals focused on sharing in-depth investment research. He’s betting that historically secretive buy-side analysts will join SumZero in exchange for access to the unique insights of their peers.
Narendra and co-founder Aalap Mahadevia, who met as Harvard undergraduates, launched an early version of the site in 2008. Today more than 7,800 investors at hedge funds, private equity firms and mutual funds are members, all personally vetted by Narendra and his team. They pay nothing, but agree to share and rate each other’s investment ideas.
The network also includes retail investors and others seeking buy-side research. Basic membership, which provides idea summaries and industry news, is free. Those who want more pay $199 a year or $129 a month, depending on the level of access to additional research. Inspiration
Narendra spotted the opportunity for SumZero while working at Sowood Capital, a former Boston hedge fund.
“I realized there was no way for buy-side professionals to share their research, and as a natural consequence of that, to build their own professional networks,” he says.
So the co-founders initially bootstrapped with money from their own pockets and then raised $275,000 in angel funding, including funds raised while Narendra was a student in the JD-MBA Program
SumZero was often relegated to the sidelines, sometimes crashing due to technical glitches. Still, it pulled in more than $130,000 in 2011, near the end of Narendra’s grad school stint.
“It dawned on me: If I can generate meaningful revenue as student, I should be able to turn this into a decent sized business,” he says.
At Kellogg, Narendra majored in finance and accounting, honing his investment skills and learning to work in teams. Obtaining the law degree helped him navigate the highly regulated securities industry.
In June 2012, SumZero secured $1.05 million in financing from the Winklevoss twins, the famous rowing pair Narendra met at Harvard. While they were students there, the three co-founded HarvardConnection, later renamed ConnectU; they considered it to be the precursor of Facebook. Real names, real networking opportunities
Unlike other on investment networks Narendra says SumZero is built around transparency. Buy-siders use their real names, lending credence to their research.
Among the site’s advocates is Kellogg alumnus James (Jay) Kilroy
’01, managing director at Willis Investment Counsel in Gainesville, Ga. He was among the first to join.
“Over the course of a year, I’ve found five to seven good ideas simply by reading the research on SumZero’s website,” Kilroy says, adding: “I’ve really built out my Rolodex.”