WHAT COMES AFTER the fall?
As the still-feeble U.S. economy stumbles to its feet, some entrepreneurs are applying lessons from the economic crisis to new websites that provide financial information and data. The models are all over the map—as is the information they supply—and most of the sites decline to provide their traffic numbers. But founders have tapped venture capitalists for backing and are now looking for subscribers. One of the most popular models offers the ability to track the investment strategies of pros like Warren Buffett. Another seeks to give individual investors access to the same financial models that institutional money managers use to pick their stocks.
What kind of legs the sites might have is another question—as is exactly how many new businesses are underway. According to the U.S. Bureau of Labor Statistics, 171,000 businesses launched in the first quarter of 2009, down more than 20% from 207,000 during the first quarter of 2008. Here, a look at some of the Web’s newest financially-oriented entrants.
Founder: Michael Kane
After watching retail investors, himself included, lose money during the financial meltdown, former analyst Michael Kane spent a lot of time thinking about safer ways to invest money. His solution: Hedgeable.com, a web site that offers investment advice based on changes in the market, rather than standard asset allocation recommendations. Some of the services are free–including ongoing performance and risk reporting and hedging suggestions. For rebalancing recommendations, Hedgeable.com charges a $20 a month fee. Although users currently can’t make actual trades on the site– they need to sign onto their online brokerage accounts for that—Kane hopes to advance to that stage eventually, and to enlist 10,000 paying members and 250,000 users within a year (he declines to give current traffic numbers). For now, “we’ll manage their portfolios and we’ll answer any investment questions,” says Kane, who invested $40,000 in the start-up.
Founder: Daniel Carroll
What is the investing strategy of a so-called genius worth? In KaChing.com, former trader Daniel Carroll is betting that people will pay 1.25% of funds managed for access to investment strategies of investors who have passed a test administered by KaChing.com. Upon signing up, users choose one of the site’s 10 pros—currently, they include a bio tech expert, an investor who specializes in growth stocks and Carroll himself. Since launching in October, the experts’ track record has varied from 200% (the bio tech guy) to just 6.4% (Carroll). The fee is less expensive than a traditional domestic equity fund, which charges an average 1.39%. KaChing.com pays the experts 75% of the fees they generate and keeps the balance for the site.
Carroll, who launched the site in October, has raised $10.5 million from investors to fund KaChing.com up. So far, he says he has $4 million under management and 420,000 users. He says the test administered to the advisors is rigorous, but in the case the strategy of an advisor goes awry, or he or she strays from her strategy, the site sends out an alert to investors. “When a lot of people buy mutual funds, they buy the brand; Most of the time, they don’t even know who’s managing their money,” he says.