What is Taking Social Finance so Long?

I wish I had all the answers because I have spent a lot of my 40’s working in this sector.

I started Wallstrip (acquired by CBS), invested in AngelList (pretty damn successful and social), invested in Covestor (acquired recently by Interactive Brokers), Robinhood, Chart IQ, YCharts and Datafox which all have at least a small aspect of social in their DNA and product.

Yesterday I read a poorly researched and completely flawed article on the ‘crunchbase network’ piece entitled ‘Why has Social Failed in Fintech‘. I guess TechCrunch has a blog netowork that allows anyone to write blog posts with no worry about facts.

The author points out that finance is littered with graves of social financial startups. If he did the math he would see that if you added them all up it would amount to less spent on one photo sharing app called ‘Color’.

Just because there have been no big successors to Bloomberg in chat, does not mean entrepreneurs and investors should stop trying?

The author fails to point out that social finance has been guarded by antiquated rules of FINRA and The SEC and no other industry that has tried to become more social has faced more regulatory and incumbent pushback.

When we started Stocktwits we had to be creative in how we built a community. We curated from the get go and eliminated penny stocks which tend to bring out the worst behavior in internet trolls. We decided to attack the problem by allowing users to be ‘pseudononymous’ in order to get as many smart people sharing ideas. Ideas which lead to trades and investing drive markets.

While the author called us the leader (thanks), he went on to make up just about the rest:

In the stock market, StockTwits is the leader in social. But it has 400k monthly users versus CNBC’s 11 million. It’s been stagnant since 2012 and has failed to expand its model outside the U.S. In a recent bust-up, it bagged a high-profile executive from CNBC to be its CEO, only to see him quit and return to CNBC in less than a year.

To be clear, Stocktwits has over 1.2 million monthly users (Quantcast) and is growing faster than ever. We have never planned to take on the rest of the world because of the growth ahead of us but 10 percent of our audience is international. CNBC has been around since 1980 and in their first 6 years did not grow as fast as us. John Melloy is the man we hired to replace me, but he did not quit Stocktwits to return to CNBC. A little research would have helped here.

Justin who leads our Stocktwits team added this comment to the post:

Actually StockTwits has 1.2M monthly users if you want to do an apples to apples comparison to CNBC (which a quick look on Quantcast could at least get you to a better number than what you published). So we’re actually only one order of magnitude away from the size of CNBC (and catching up) at a MUCH smaller fraction of the cost, and have gotten to that audience size in much less time. CNBC started in 1980.

So one could say that social finance is failing, but others could say it’s just getting started.

Fintech investing is exploding. Anyone who struggles growing or raising money, blames it on the failed startups before. That’s weak mustard. Social finance and investing won’t be as important until it can be tied to order flow like Bloomberg has inside the terminal. In the meantime, the smart social finance/investing companies are managing their burn rates by staying small and being creative with revenue and distribution for growth.

Social has NOT failed in Fintech. With a few regulatory changes and more pressure from startups, a whole new mobile investing ecosystem will explode. It will be bigger than anyone ever imagined and it will be tied to social. I will continue to probe with investing dollars and my time thank you.

Update – Just today Robinhood was voted best design by Apple who thanked Robinhood for making trading so easy. It’s just a matter of time before the API’s beat the regulators as investors/consumers will eventually get what they want.

2 comments

  1. Shane121 says:

    The use of “failed” in the title is probably too buzzfeed-ish.

    Many thanks for the rebuttal. And agree that FinTech “will” be social and “will” be a success. But to date no one has created the LinkedIn of Investing.

    For me, our common shared goal as FinTechers is to help people save more and invest better. After all, it’s about the money.

    Separately, you raise a great point that the regulatory environment is a key drag on this. I did not highlight it, in the article. But it is clearly a barrier.

    In terms of the Quantcast figures could you please share the correct screenshots, them I’ll get the article updated. Attached is what I see in my account. I can’t get to a 1.2m figure.

    Really appreciate the help in getting the article and data correct.

  2. Pawel Rzeczkowski says:

    “investors/consumers will eventually get what they want” This is the right way to look at it!! Investors/consumers!! This is where it is at! I could not agree more, social finance is only beginning!!

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