investment analysis

Former Wall Street Execs Shake-Up Real Estate Investment Analysis

In 2008, The National Academy of Sciences Committee for Forecasting Future Disruptive Technologies invited Wall Streeter Harry Blount to help conduct a research study. Their thesis was that better foresight using data, tech and processes could help reduce the frequency and magnitude of events like 9/11.

Intrigued by that experience, Blount, an investment research industry veteran, formed a team of Wall Street and Silicon Valley pros to apply his insights to analysis in the asset management world. The resulting company, Discern, was initially focused on data tools for the oil and gas industry. “During my 20 years on Wall Street, I saw financial decision-makers suffer significant potential return loss due to antiquated data aggregation, monitoring and analytical processes,” remarked Blount.

Harry Blount
Investment research industry veteran Harry Blount formed Discern after more than 20 years on Wall Street, including senior roles at Lehman Brothers, Credit Suisse First Boston, Donaldson Lufkin & Jenrette, and CIBC Oppenheimer. (Image: Discern)

Last week, the San Francisco-based company announced that it had raised $20 million in a Series A financing round, valuing the startup at almost $60 million. Blount said the company plans to use the funding to expand its PaaS-based (platform as a service) system to build upon its success in the energy industry and apply what it’s learned to other financial sectors, including real estate.

Dave Wigginton, Discern’s director of real estate curation, spent ten years in the public real estate space, specifically with REITs. He saw funds lose money, even though they had the information available to them to make better informed investments. “The sources of lost return include disparate data, episodic monitoring, and limited insight, meaning that your time is so limited, that you or your analysts spend so much time aggregating the data and just trying to organize it to give you simple outputs that you minimize the amount of value-add information you get from that data.”

Discern’s platform attempts to answer questions like: Where are net effective rents accelerating? What are leading indicators implying about the housing market? Where is job growth improving and who will benefit?

According to Wigginton, Discern filters out the signals from the noise. “There’s so much information out there, that if you’re not focused on the right information, then you will continue to be surprised,” he said. “We take all of the information and augment it and synthesize it in such a way that you can actually monitor it based on specific criteria to help focus the decision maker on the areas that are most important at a given time.”

Discern aggregates real-time data from multiple public sources including the U.S. Bureau of Labor Statistics and the Federal Reserve. They also rely on commercial sources including property condition database BuildFax, housing data provider Altos, and portfolio management automation company Alpha Theory, among others.

There’s so much information out there, that if you’re not focused on the right information, then you will continue to be surprised.

Processing vast quantities of data using custom algorithms is essentially what harnessing big-data is all about. For example, Two Sigma is a hedge-fund that uses what’s known as quantitative investing, scouring data sources like earnings reports, newswires, and even social media, to identify patterns or anomalies to help the firm make trading decisions. Another company, CrediFi is a big data platform serving the CRE finance market, providing risk scoring tools, loan and asset data, as well as high level market assessments.

Discern’s platform still relies heavily on a human touch, according to Wigginton. “Generally speaking we are very quantitatively oriented, so we back test, we look for relationships and find inflection points and trends that have historically led to meaningful changes. The information we provide is actionable but it still requires human judgement. It’s not a black box. Anyone that subscribes to the platform also gets my insights.”

Wigginton said Discern’s customer base includes 10 of the largest active equity managers in the U.S., but due to confidentiality agreements, couldn’t share the names. User fees start at about $12,000-per-seat for an annual subscription.

The Series A round was led by Palo Alto-based Artiman Ventures. Artiman partner Yatin Mundkur has joined the Discern board. “Discern’s strong team of financial industry experts and unique technology platform make it well-positioned to address the $22 billion investment decision-making market,” said Mundkur.

According to Wigginton, the funding will be used to accelerate the build-out of the platform including making the UI (user interface) more appealing and intuitive, as well as expanding Discern’s scope. “We are continuing to build out our platform for private market users, so whether you’re a private equity fund or a corporation, a broker, a lender, whatever your niche might be within the real estate market, our software will have something to offer.”

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