Numerous indicators make it clear that the next five years will usher in an extreme transformation for a multitude of cannabis-related sectors, as well as for the global economy as a whole. This begs the question: what drives such a significant and rapid change? This big question could be answered in two words: alternative data.
Cannabis companies that are slow to incorporate alternative data into their R&D, marketing, investment, risk analysis and other key processes are exposed to an extreme loss of opportunity at best and operational risk. in the pawn.
As a first example, active investment management firms, including hedge funds as well as private equity funds, run the strategic risk of being overtaken by competitors who exploit alternative data in their process. securities valuation and trading signals. This as alternative data has emerged as an essential tool for investment management firms looking for a market return, known as “alpha”.
As a constantly evolving methodology, the last decade has introduced a myriad of new types and alternative data sources. Contrary to traditional data available from financial exchanges and indices, SEC filings, financial statements, corporate archives, analyst forecasts, press releases, management presentations and other well-established mainstream sources, today’s race of alternative data sets are compiled from a wide and disparate. sources. Everything from financial transactions, satellites, sensors and IoT devices, to e-commerce portals, public records, mobile devices, social media, web traffic and more. However, web scraping and financial transactions are, by and large, the most common methods of alternative data acquisition.
As lucrative is the economic advantage of alternative data assets, the category is experiencing a true gold rush mentality that is driving extreme growth in the world in almost every sector of the industry. This is because the size of the global alternative data market is projected to reach $ 143.31 billion by 2030 – a staggering increase from $ 2.7 billion in 2021 – with the category expected to expand at a growth rate. composite annual growth rate (CAGR) of 54.4% from 2022 to 2030., according to Grand View Research.
As a case in point in the industry, investment firms are actively expanding their information advantage by incorporating alternative data into their investment and risk processes. A survey by the EY Global Alternative Fund found that the vast majority (70%) of hedge fund managers and more than half (56%) of private equity funds currently use, or plan to use, hedge fund managers. use, alternative data to support their investment process.
In addition to banking and financial services and insurance (BFSI), reported that they have collectively led the alternative data market in 2021 with a revenue share of more than 15.0% over the period, there are other alternative data first used. A few notable companies that are making great strides in the space include online retailers, SaaS providers and hospitality. These and other such industries harness the power of this alt intel for a range of projection activities, with predictive and algorithmic models, demand and trend forecasting, lead generation and competitive intelligence between them.
“There are numerous categories of alternative data, and the best performing companies are those that have the ability to undermine insights from data collected and cross-reference and combine with other types of data, thus allowing investors to identify profitable trends. and strategic opportunities, ”notes Julia Valentine, Managing Partner at AlphaMille Professional Services.
According to the Global Alternative Data Market Report 2022, North America was the largest region in the alternative data market in 2021. The main categories of alternative data — characterized as the non-traditional type by conventional sources — are they can serve as an indicator of future performance. – are credit and debit card transactions, e-mail receipts, geolocation logs (foot traffic), mobile app usage, satellite and weather data, social and sentimental data, web scraped data and web traffic .
“The engine of this phenomenon is twofold: investors’ appetite for data usage and the willingness of providers to sell credit card transaction data, ”says Valentine. “In addition, data providers have updated their capabilities to classify credit card transaction data by gender, age, vendor, geography and other metrics.”
Of course, these types of drill down insights can make it much easier to identify and assess opportunities, especially when advanced analytics and data science are applied to examine alternative data sets.
According to Valentine, these offerings produce a crucial differentiator that generates the alpha for buying entities such as hedge funds, mutual funds, private equity funds, pension funds, unit funds and investment companies. life insurance.
“It’s essential for investors to have curated alternative data to make their teams, innovation and companies more competitive,” said Tracy McWilliams, CEO of Inspire Global Ventures, which launched the company’s management system. private JASPY single source. “Alternative data analytics enabled for e-learning helps our clients, mid-market companies and investment firms make faster, informed decisions about investment, innovation, M&A and partnerships with top-tier companies. stage is private “.
The benefits of using alternative data are seemingly innumerable. “Among the most important is its ability to derive private signals in real time that provide alternative views, unforeseen insights or perhaps both,” notes Valentine. “The ability to go beyond standard financial data to understand business performance, market dynamics or consumer behavior is extraordinarily valuable for companies and investors who want to plan and execute in a calculated, informed manner. and intentional with mitigated risk. “
Even in the midst of the extreme upside, a number of pesticide challenges are emerging to incorporate alternative data into investment and risk models. “Compared to traditional financial data collection, alternative data assets are known to be destructured, lack specific models and, given their high frequency of collection, require significant storage and processing resources,” says Vita Koreneva. AlphaMille Managing Partner.
“The collection and analysis of alternative data sets certainly requires navigating any amount of direct difficulties or obstacles,” warns Valentine. “This includes the acquisition of expert personnel and cutting-edge technology such as analytics, fluid data architecture and data science platforms, as well as testing tools to truly leverage significant insights gleaned from the data. For example, AI tools such as ML and Natural Language Processing (NLP) are used to analyze alternative data, unlock their insights and value, and drive the growth of these assets. a key example of alternative data where many providers in public markets are supplemented with the use of multi-modal AI to collect data used by private markets that are not available from existing data providers.
According to Valentine, starting or strengthening an alternative data platform involves several steps: designing, planning, source data, integrating, transforming, using ML, implementing, supporting, and evaluating. A shorter, five-step implementation model is also available for entities that are ready for a fast track to value creation.
With such specialized tools and skills involved with alt data mining and distillation, many understand the outsource function. “Some key considerations for a future professional services partner involve their ability to quickly integrate new solutions with existing infrastructure; cost of data; and demonstrate what they consider optimal. Unrelated data sets really add value. quantifiable instead of noise, ”he says.
Valentine also recommends demonstrating an attitude towards the key needs of an alternative data platform, such as the rapid and efficient insertion of data sources; combining structured, semi-structured and unstructured data sets; and data preparation and normalization, among others.
“Data mastery is key to taking a look at this seemingly unlimited universe of information,” notes Christian Robertson, CEO of Datasynthesis. “It means tracking the life cycle of data from its source – whether real-time or historical, structured or unstructured – through a strict rules-based validation process that generates action data used to feed data. various business intelligence tools used in the decision, however, in order to distill the meaning from so much information, it must adopt an active approach to data mastering, which can only be achieved by exploiting the latest open-source technology with capabilities that exceed all grain. what is possible with existing legacy systems.
Preconditions and complexity aside, AlphaMille’s Chief Revenue Officer Rick Lutz keeps an optimistic eye on the big picture. “Alternative data has hardly reached critical mass so far and there is tremendous growth going on in this area,” he says. “The big winners will be those who put themselves on board the right kind and caliber of experts who can navigate this highly specialized and ever-changing field. Well done, the financial advantage is stratospheric.”
Digital transformation requires agility. What companies can quickly identify and adapt to is always fluid business conditions in order to survive and thrive. Having the ability to properly process and process alternative data provides a tremendous advantage … especially for those who need to pivot in the short term. This can be done by configuring a strategy, structure, process, team or technology to ensure better value creation or value protection opportunities. To enable an organization to expand quickly and cost-effectively. To save costs realize that it is more beneficial to outsource non-critical functions to experienced providers. Use cutting-edge cloud, cybersecurity and data science tools to increase productivity. The profit promotion results are seemingly endless.
No matter what industry you operate in, now is the time to architect a sound and scalable alternative data plan that will ensure that your company can keep pace in the digital age of the 21st century.
Forbes Business Council, Newsweek Expert Forum and Rolling Stone Culture Council Member Merilee Kern, MBA is a senior level brand, leadership and communications analyst and strategist. As Founder and Executive Editor of The Luxe List, he works with companies, agencies, C-suite thought leaders and subject matter experts worldwide in a wide range of B2B and B2C companies. Merilee is Merilee is also Founder, Executive editor and producer of “The Luxe List” and also a guest on both “Savvy Ventures“Business TV Show Going Nationwide on FOX Business TV and Bloomberg TV and the”Savvy Living “Lifestyle TV show airing in major American markets. Connect with her at www.TheLuxeList.com and www.SavvyLiving.tv / Instagram www.Instagram.com/LuxeListReports / Twitter www.Twitter.com/LuxeListReports / Facebook www.Facebook.com/LuxeListReports / LinkedIN www.LinkedIn.com/in/MerileeKern.