“The path to a commercialized web-based service is certainly not as linear as one might expect, especially today.” – Jim Mayes, co-founder of Cignal
Typically, a startup forms with an idea that solves a problem. Then a core team of the company is assembled, a smattering of funds are pulled together to develop a minimally viable product, and so on.
But when you’re dealing with a concept as feverishly in demand and intriguing as a social media sentiment analysis tool that is a predictive model of future stock market movements, then the usual startup timeline gets completely rearranged.
“As soon as we mentioned the concept, we had venture capital guys and angel investors lining up, “says Greg Winn, Cignal co-founder. “And what became very clear almost immediately was that these investors had been searching for several years for a solution exactly like the one we offered with Cignal, and had chased several ideas that went nowhere. And they gave us some explicit advice on the pitfalls to make sure to avoid.”
Despite the cautionary tales from VCs and angels who ultimately lost money chasing stock market social sentiment startups in the past, the guys at Cignal came away from nearly a dozen unsolicited investor pitches knowing it had something valuable on their hands.
Mayes and Winn took the advice and decided to take a step back, further develop the core Cignal leadership team, and build a stronger path to future profitability.
So What Exactly is Cignal Anyway?
To explain what Cignal is, it helps to go back to a study published in February 2011 in the Journal of Computational Science. The study was a joint effort between Indiana University and The University of Manchester entitled Twitter Mood Predicts the Stock Market. It tested the idea that the collective public mood had a predictive value on determining closing prices of the Dow Jones Industrial Average.
The results of the study were extremely promising.
It found that the a certain mood conveyed in tweets carried significant predictive value, allowing the researchers to forecast the daily up and down changes of the DJIA with 86.7% accuracy.
That study went on to inspire a hedge fund focused on social sentiment readings, and inspired Wall Street as a whole to start taking the value of social media more seriously.
But unsurprisingly, it was yet another promising finding that looked like it would be out of the hands of the average individual investor.
With that in mind, Cignal was developed to provide real-time social sentiment readings from which investors and traders – from individual to professional – could make more informed decisions.
But developing the Cignal product was the easy part…
IMAGE: The Cignal Terminal Fuses Social Sentiment and Market Price Movements
Developing the Company
Developing the company turned out to be the tricky part. But Mayes and Winn quickly learned it’s good to have friends in the industry.
“You quickly reach a point where you can either fund your idea through external means from a key investor – giving away a huge amount of ownership in the process – or you can choose to bring people into the company who can both provide missing expertise and also a roadmap to commercialization,” Mayes said. “And that’s what we decided to do – to bring in trusted partners who would be part owners along with us for the entire life of the company, and didn’t have an exit plan, per se.
“The really interesting part – or I should say the biggest surprise – was that we found investment industry partners that we had been working with for years, who we already trusted, and had been trying to develop a project similar to Cignal without adequate development expertise,” Mayes continued. “They knew exactly what they wanted to develop from a capital markets perspective, but simply didn’t have the in-house technical talent to get it done.”
That’s when Cignal expanded from a startup exclusively with developer talent, to one with Wall Street and online marketing talent as well – all pulling toward one goal.
So where does Cignal stand today?
“We’re in a much better place than if we had accepted the early offers we received. There’s no doubt about that,” Mayes said.
The company currently has a minimally viable product commercially available and a loyal customer base that is providing feedback for development. It’s using a lean management structure, has financial professionals constantly testing Cignal’s predictive results, and assets on board that can market the Cignal product to an extremely engaged group of potential customers.
Greg Winn and Jim Mayes will be at Future Insights Live in June to share more of how they got to where they are, and show us what’s next for Cignal.
To learn more about Cignal, visit www.cignal.it.
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