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The Internet is supposed to have democratized investing, but for Manish Jhunjhunwala, it’s not doing enough.
Jhunjhunwala is the first-time entrepreneur behind Insight Guru Inc. The young company’s website, Trefis.com, aims to let investors research a company’s stock through the things they are most familiar with — its products and services. They’ve raised $550,000 from angel investors including Timothy Weller, CFO at EnerNOC Inc.; Bob Johnson of California-based Founders Capital Partners, and an MIT board of trustees member; and Semyon Dukach, a serial entrepreneur and former president of the MIT Blackjack team.
Trefis, short for “trends, forecasts, insights,” is in a private beta phase with about 300 testers until next week, when it plans to open the site to the public. The site uses earnings statements and other market data to estimate how much each division of a company’s business impacts its market capitalization.
“There’s no place today where I can actually understand how the products I know impact companies in the marketplace,” Jhunjhunwala said. “If you know products, you should know the stock price.”
For example, fans of Motorola Inc.’s (NYSE: MOT) new Droid phones may be surprised to learn that Trefis’ analyst models estimate mobile phones are only 15 percent of that company’s business, with digital TV boxes and security devices contributing nearly two-thirds of the company’s stock-market value. A user familiar with any of those three divisions can make their own performance predictions by clicking and dragging a line on a chart. The website automatically recalculates the company’s share price to what it “should” be, based on the user’s guess and that division’s impact on the company’s business.
For now, Insight Guru is working from a former conference room at Boston law firm Fish & Richardson PC, which is also putting in sweat equity and assisting with intellectual property issues. Unlike other law firms with more intensive venture law practices, Fish & Richardson does not typically defer fees for startups, according to principal David Feigenbaum. Trefis is one of only about two companies the firm has incubated in this way, he said. He declined to name the other startup.
Faith in Jhunjhunwala’s ability as a founder was a primary motivator for the investment, Feigenbaum said.
“He understands that unless you can make this absolutely simple and transparent to people, it doesn’t matter how good the idea is,” Feigenbaum said. “Over the years I’ve worked with a lot of people, and it’s not common to find someone who sees both of those kind of things.”
Insight Guru plans to make the basic Trefis service free, with hopes of establishing a broad user base capable of evolving into a marketplace for stock picks and predictions. Users with domain knowledge would then be able to sell their picks, with Trefis taking a cut. Additional revenue will come from advertising on the site, Jhunjhunwala said.
The company’s 11 employees — Jhunjhunwala, two engineers and one financial analyst in Boston, as well as a team of seven analysts in India — create models for each of the 50 companies it now tracks. The predictions thus generated are only a starting point, Jhunjhunwala said. The idea is to provoke a response — possibly more valuable than the original estimate — from investors who have particular domain expertise.
Jhunjhunwala described a friend who is a 16-year veteran in semiconductors and who holds stock in Intel. Every day he checks the company’s stock price on financial websites such as Yahoo and Google Finance.
“There is nothing there that relates to his experience,” Jhunjhunwala said. “It’s a shame experts like him are insulated from the market today.”
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