Alternative data: 360° view of companies and professionals
Alternative data, also known as external data, is information collected from non-traditional sources, generated either by individuals, business processes, or sensors. In finance, alternative data is leveraged by businesses and investors to extract valuable insights, generate business opportunities and guide investment decisions.
What is alternative data?
Alternative data is data generated either by individuals, business processes, or sensors that are collected from non-traditional sources. For example, traditional data is exclusive to data that's produced by companies themselves, while alternative data relies on the collection and scraping processes. Specifically, traditional data can include investor presentations, SEC filings, financial statements, and press releases. In contrast, alternative data includes externally sourced factors such as company size based on headcount or revenue, location of HQ and branch offices, website traffic, reviews, employee salaries, organizational structure and much more.
Alternative data is most commonly acquired through web scraping of public web data, acquisition of raw data, and third-party licensing.
There are various ways businesses and investors can leverage alternative data. For instance, within investing, the professionals that utilize alternative data the most are algorithmic traders, also known as quants, who use the datasets they acquire to construct computer models for trade. However, alternative data is also utilized by hedge funds, analysts, and other institutional investment professionals.
Additionally, businesses can utilize alternative data to help fuel and build AI-based technologies, generate more business opportunities, conduct competitive analysis, and enrich their existing datasets. More specifically, HR tech companies, lead generation platforms, B2B, and B2C companies are all able to extract valuable insights from alternative data.
What is alternative data in finance?
So, what exactly is alternative data in finance? Alternative data refers to data that exists beyond the sphere of traditional data sources. These alternative sources are utilized by investors, analysts, and hedge funds to aid in company and investment evaluation. Some brief examples of alternative data include public social media/sentiment, satellite and weather sensor data, transactional data from credit and debit cards, email receipts, survey data, and much more.
In increasingly data-driven financial markets, alternative data provides investors with fresh sources for enhancing their alpha. Alpha, also known as an active return on investment, measures the performance of an investment based on an appropriate market index. Ultimately, alternative data provides investors with robust data insights for their investments, increasing their active return on investment.
Alternative data vs. traditional data
Alternative data sometimes referred to as exhaust or external data, involves data generated by three sources: individuals, business processes, and sensors. Whereas traditional data is exclusive to data that's produced by companies themselves, alternative data relies on the collection and scraping processes. For example, traditional data can be things such as investor presentations, SEC filings, financial statements, and press releases.
While both alternative and traditional data provide financial insights into a given company, the progress surrounding the alternative data sector provided investors and hedge funds with a more complete picture of short-term and long-term investments and business decisions.
The different types of alternative data
Over the past decade, alternative data sources have grown significantly. In its infancy, alternative data sources included credit card transactions, web-scraped data, and geolocations. As alternative data continues to prove its success, along with the advent of new data sources, experts in alternative data are finding new ways to retrieve these datasets as well as analyze them.
According to Forbes, alternative data has expanded to include a taxonomy of 24 different types of data. Beyond these 24 data types, alternative data, as mentioned earlier, is generated from three main sources: individuals, business processes, and sensors. Let's take a more detailed look at what they entail.
While individuals provide large amounts of robust qualitative data, alternative data generated by individuals also proves to be highly unstructured and often difficult to sift through. For this reason, it's important that datasets consisting of individual data are well-structured and that only the essential data points get picked. Some individual data sources include:
- Social media
- Product reviews
- Search engines
- Comments and web interactions
Unlike individual-driven data, businesses tend to produce structured data that provides investors with comprehensive financial insights for a given business. Some business process data sources include:
- Credit card transactions
- Sales data
- Corporate data
- Government data
Another largely unstructured data type, data generated from sensors, is expanding in the alternative data field. Due to the interconnectivity of devices and the development of sensor-based technology analysts and investors alike find this data extremely valuable. Some sensor data sources include:
- POS data
- Other devices
How is alternative data acquired?
As mentioned previously, alternative data is acquired through web-scraping, acquisition of raw data, and third-party licensing.
Web-scraping processes unstructured data from web pages and online sources. Through data parsing methods, the data is transformed into structured and readable CSV and JSON formats ready for interpretation by analysts and investors. This is the sort of data that Coresignal offers.
Raw data acquisition
Raw data acquisition is the process of obtaining sizable amounts of unprocessed data, obtained from multiple source types. This data type contains lots of noise and requires significant processing in order to be analyzed and utilized by investors.
Third-party licensing refers mainly to recovered financial data involved in transactions. Companies recover said transactional data like POS data, credit card transactions, etc., and package it in easy-to-read formats for investors.
Who uses alternative data?
Due to alternative data's multiplicity of use cases, many professionals have found a use for alternative data. Professionals that utilize alternative data the most are algorithmic traders, also known as quants, who use the datasets they acquire to construct computer models for trade. However, alternative data is also utilized by hedge funds, analysts, and other institutional investment professionals.
Alternative data covers a broad range of factors that influence a company's alpha, making alternative data sets a commodity for predictive investing. Specifically, investors consider factors such as scarcity, granularity, history, structure, and coverage when choosing what types of alternative data sets to invest in.
What data do investors use?
Investors utilize some of the most well-known alternative data sets, including social sentiment, credit card transactions, and web data. These data types provide investment firms with competitive intelligence and risk management insights due to their pervasiveness in the alternative data space.
Additionally, investment firms find alternative data favorable due to the accessibility of alternative data compared to traditional data, which sometimes takes longer (due to legal processes) for official figures.
Further, some widely used data sets such as credit card transactions and traffic patterns, are important to both private equity firms and hedge funds. On one hand, private equity investment decisions tend to focus more on the long-term, while on the other hand hedge funds focus on both long-term and short-term. Both hedge funds and private equity firms benefit from alternative data because alternative provides robust short-term and long-term insights.
Continue reading for an overview of what data Coresignal offers and its uses.
Coresignal's alternative data
Below you will find our full data offering consisting of a total of 20 unique alternative data sources in 8 categories.
Community and repository data
Access public data about software projects, experienced developers and data analysts.
Discover noteworthy software projects
Source talented professionals
Use it for social listening
Company employee review data
Leverage public data from company review sites to gain internal insights on how a company is doing.
Gain unique insights on companies
Identify underlying risks and problems
Capture changes in sentiment over time
Company funding data
Make better investment decisions based on accurate company funding data.
Generate business opportunities
Screen investment candidates
Understand market landscape
Get firmographics of millions of companies worldwide, grouped by unique identifiers.
See the full company picture
Map company locations
Dig deep into company structures
Job postings data
Track the growth of selected companies and their teams, identify locations to which a company is planning to expand to and more
Generate business opportunities
Capture company traction
Gain strategic competitive insights
Public resume data
Utilize public member data from business-related platforms to generate unique people intelligence insights.
Track talent movement for investment opportunities
Source best-fit talent for your recruitment needs
Fuel your lead generation pipeline
Tech product review data
Product review data uncovers market sentiment for specific products or companies by various slices.
Measure product traction
Identify market winning conditions
Technographic data provides overview on the technological stack of the company, as well as detailed information on specific technologies.
Generate business opportunities
Evaluate technological capacity
Alternative data for investors
Alternative data enables extracting up-to-date and accurate insights, allowing hedge funds and investment firms to survey potential startups, track company or product popularity, their growth rates, and more, ultimately leading to a better-informed investment process.
Alternative data for businesses
Our data sets provide B2B and B2C companies with up-to-date market knowledge and always fresh business-related people intelligence. From researching market trends to generating leads or unlocking the power of data-driven recruitment, alternative data is becoming increasingly indispensable for the modern business.
Use cases for alternative data
Although alternative data, in general, might be used creatively in a near-infinite amount of cases, the data offered by Coresignal is mostly used for the practices listed below.
Combine public data with traditional data sets for enhanced investment analysis. Alternative data, combined with the power of AI/ML, enables investors to generate trade signals, identify risks and make better predictions.
Data-driven recruitment takes the hiring process to a new level. By leveraging data when analyzing talent and prospects, recruiters can make efficient and data-driven decisions.
With Coresignal's rich and continuously updated public resume datasets, fuel your lead generation pipeline with data on a wide range of decision makers and stakeholders.
Companies can leverage our up-to-date alternative datasets as well as our historical data offering to help identify and evaluate market and industry trends for enhanced decision making.
4 years in the market
Our team includes some of the most experienced web data extraction professionals.
Reliable and convenient delivery
Regularly updated datasets are delivered in ready-to-use formats for your convenience.
Dedicated account managers
Get the most out of your data with Coresignal's dedicated account managers.
Parsed, ready-to-use data
Boost your data-driven insights with parsed, ready-to-use data delivered in multiple formats.
Raw, in-depth datasets
Coresignal's raw datasets include 465M member and 50M company profiles.
Clean and accurate records
Coresignal strives to provide you with fresh and accurate data from high-quality sources.
Frequently asked questions
How big is the alternative data market?
According to Grand View Research, the size of the alternative data market reached 1.64 billion at the end of 2020 and is expected to reach a market size of USD 17.35 billion by 2027.
How much does alternative data cost?
The price of alternative data varies depending on the user and the use case; however, according to Institutional Investor, alternative data ranges from 25,000 USD all the way up to 500,000 USD. In addition to purchasing third-party alternative data, companies should build an alternative data team responsible for managing and storing the data.
Who uses alternative data?
The most common alternative data users include VCs, hedge funds, private equity firms, corporations, SaaS companies, and analysts.
How is alternative data used?
In finance, alternative data is used to discover valuable business insights and generate business opportunities. More specifically, businesses and investors leverage alternative datasets for predicting buying behavior, conducting market research, boosting lead generation, and fueling data-driven recruitment.
How are hedge funds using alternative data?
With the recent advancements in AI technology hedge funds are primarily utilizing alternative data to enhance their investment intelligence and generate business opportunities.
What is alternative data analytics?
Alternative data analytics is a broader term that encompasses the various alternative data analysis processes utilized by companies and investors.