Investment Memo: Koyfin
In my first public investment memo, I'm going to give a slightly deeper dive into why I'm bullish on the investing software
Koyfin is a free, web-based investment research tool for analyzing securities, market trends, and news. The software is sophisticated and user friendly, positioning itself as a no/low-cost alternative to the more expensive platforms such as Bloomberg.
The founders both come from financial backgrounds. Rob worked in equities, options and macro strategies at banks and hedge funds. Rich’s expertise is in fixed income, distressed securities, and special situations. Koyfin raised $3M from 6 investors in its September 2019 Seed round.
In September 2019, three years after its founding, Koyfin had 10,000 users. As of early February 2021, Koyfin had 170,000 users, quadrupling its 2020 user base. Koyfin’s primary user base is retail traders, and that group is growing quickly. Its secondary user base is professional investors.
Over the last 12 months, retail trading has seen a boom thanks to Covid-19 tailwinds. Awareness around Robinhood (and competitors), zero-commission trading, as well as social emphasis over Reddit, TikTok, and more have given Koyfin a growing opportunity to capture an immense market of customers. The work from home trend has also forced professional traders to find alternatives to their Bloomberg Terminals that can be used remotely.
Koyfin is web-based, opening doors that aren’t available using platforms such as a Bloomberg Terminal, which is only accessible on site. However, just like Bloomberg, a user can research any security they can think of and perform fundamental analysis on it, such as comparing it to the 150-day EMA (below). Users can also track their portfolio in the “My Dashboard” section, follow customized watchlists, and connect socially on Twitter or StockTwits.
Koyfin solves the market need for retail and professional traders who are looking to actually complete technical analysis on securities but don’t want to use bulky or expensive platforms. Competitor platforms, such as YCharts ($15.7M) and Sentieo ($35.5M), have proven to be successful in raising from prominent financial institutions, such as Morningstar, but they do not have anywhere near the traction or community buzz that Koyfin boasts. Koyfin differentiates itself from the two by enabling users to create custom dashboards with a simple drag-and-drop UX and easily populate the dashboards with any chart or template data.
The Koyfin product roadmap includes company transcripts, upgrades to dashboards and linking across widgets, comp tables, and a screening tool. Koyfin also plans to roll out a new premium pricing tier to generate revenue, which it can position as an alternative to Bloomberg, etc. as a full-suite cloud offering. Koyfin is currently used at firms and companies such as Seeking Alpha, Goldman Sachs, Barclays, BlackRock, and Franklin Templeton. Koyfin has a strong opportunity to continue growing its retail user base with a more sophisticated and user-friendly product, and eventually capturing a share of the professional market with its premium tier offering.
Koyfin is the only product of its kind that has a free tier and will eventually roll out its premium model, which will have a fee, but can extract users from its existing funnel. As Koyfin continues to grow, it can position itself well to roll out enterprise licenses and fees. This could gain quick traction as work from home becomes more commonplace and the UX is familiar to many traders already. Lastly, there is opportunity for acquisition by a Bloomberg or other large player in the space, who wants to target the retail space that they currently don’t have a grip on.
Koyfin does faces risk from its competitors both on the smaller scale (Sentieo and Y Charts) and the larger scale (Bloomberg, FactSet, etc.) of customer acquisition, as the others currently have larger marketing budgets. Additionally, as Covid-19 restrictions end and the public is free to return to the office and other places, there is a chance that the remote and retail trading booms could slow down significantly, resulting in fewer potential users having an interest in trading. Lastly, Koyfin has developed a strong following thanks to its freemium offering, but it is difficult to predict how many members 1) would pay for a more advanced offering and 2) would pay anything if required to, or simply churn.
Koyfin has established itself as a major player in the trading industry, and it has gained a cult following thanks to significant promotion on Twitter and podcasts like Invest Like the Best with Patrick O’Shaughnessy. Thanks to a new approach, Koyfin has the potential to become the alternative to Bloomberg for professionals and to give retail traders a seat at the table. Koyfin’s roadmap and tiered offerings give it the potential to be revenue positive quickly and stably.