Thasos Group seemed to be doing everything right.
Part of the booming $7 billion alternative data industry, the company collects location data from cellphones to help hedge funds make money.
Founded in 2011, Thasos was worth $42 million, had ties to MIT, and boasted a blue-chip CEO whose prior company Sense Networks was once named the The Next Google" by Newsweek. Thasos was also part of Bloomberg's newly launched alternative data marketplace, meaning it had a stamp of approval from the data juggernaut.
But Thasos struggled to make money selling to its main financial services clients and in August was forced to fire two-thirds of its staff, sources tell Business Insider. Its CEO and cofounder Greg Skibiski also stepped down.
Thasos went from roughly 40 people at the beginning of August to less than a dozen weeks later. Skibiski chose to step down and transition into a "non-executive chairman" role, a Thasos spokesperson told Business Insider, and will still be involved in "managing the day-to-day operations of the firm."
Skibiski even tried to pivot to selling to real-estate firms as a last-ditch play for more sales. The decision also frustrated employees, according to a source familiar with the matter, as they internally lacked the expertise to dive into the new field.
Thasos said the firm has recently been "broadening the verticals to which they sell," and "have paying customers" in the commercial real estate space.
"Financial services remains a significant market opportunity," the spokesperson said, and a new CEO will "be announced shortly."
The market is experiencing 'alternative data fatigue'
The problems Thasos faced aren't unique, alternative data industry participants and observers say — while there's no shortage of hedge funds interested in buying data, the market is becoming both crowded and commoditized.
"We may have a bit of an alternative data bubble," Mike Chen, a portfolio manager at PanAgora Asset Management, told Business Insider. "I believe that a lot of the more advanced alternative data users — advanced hedge funds and investors — are probably experiencing what I might call 'alternative data fatigue.'"
Justin Zhen, cofounder of alternative data provider Thinknum, said that the influx of participants in recent years has made it tough for consumers of alternative data to sort through all their options.
Users of alternative data have previously stated how difficult it is to get a competitive edge from the complex data sets, comparing it to sifting through dirt to find only a few gold nuggets. Coupled with the considerable money and resources a firm needs to invest to bring on and test the data before using it in strategies, sorting through alternative data has become a nearly impossible task.
"I think the space has gotten really noisy, especially from a data buyer's perspective," Zhen said. "Two years ago there were two dozen vendors and now there are hundreds of vendors. From the data buyers perspective, the hedge funds and asset managers, it's hard for them to know who the worthwhile data sets are to talk to and bring on."
Investors quickly drop feeds they don't see value in
As a result, investors have gotten more aggressive with how quickly they'll move on from a data set, making life more difficult for the original companies that made the industry buzzworthy.
An influx in the amount of options means data sources might have a limited amount of usage, Nick Tsafos, a partner at EisnerAmper who works with hedge funds on their data strategies, told Business Insider.
"What [hedge funds] are saying is we need data points of the things we are interested in today, and we don't know what we are going to be interested in the future," he said.
Some data points have a shelf life — once they're crowded, hedge funds move on.
For instance, right now a datapoint that can measure tariff impacts on China would be extremely helpful, Tsafos said. But the current interest from hedge funds can dissipate quickly.
At the well-known alternative data conference circuit Battlefin, data vendor numbers have gone up to the point where conference organizers need to find a bigger venue for this year's New York leg. Longtime industry player Barry Star, who runs Wall Street Horizon, a data company that organizes and analyzes corporate events, told Business Insider at Battlefin that roughly half of the young start-ups at the conference won't be back next year.
"A lot of folks out there, they're trying to sell the first telephone," Star said.
Tammer Kamel, the CEO of Quandl, an alternative dataset aggregator that Nasdaq bought at the end of last year, told Business Insider that the entry of S&P and Bloomberg into the space forces everyone to adapt. For Quandl, which was acquired in 2018 by Nasdaq for an undisclosed amount, that means creating their own proprietary data along with licensing exclusive datasets for their platform.
"I like to think it's us staying ahead of the curve," Kamel said. "We were one of the pioneers in this space. … For us to continue in a leadership position, we've got to be on to the next thing."
Some believe there is still money to be made in alt data
To be clear, there are still those that still see plenty of opportunity within the alternative data space. Atit Amin, an associate at venture firm Pivot Investment Partners, told Business Insider the struggles of one company aren't indicative of the entire market. Pivot, which makes early growth equity investments, recently led alternative data player Earnest Research's $15 million Series B.
"I think we are still in the early innings of investment in the alt data space," Amin said. "As long as the move from active to passive continues, it's just going to further the interest in trying to hunt for alpha generating ideas and opportunities. I don't think this is necessarily a black mark on the industry."
A recent survey of 76 hedge funds by law firm Lowenstein Sandler found that 82% of survey participants plan to increase their alternative data spending.
And while Thinknum's Zhen admitted there will be a culling of the herd, it might still take a while. Despite the amount of data providers that continue to pop up, there are also many traditional investors that haven't even dipped their toe in the alt data waters.
"There are really big investment funds, and even some banks, that don't quite know what they are doing with alternative data yet," Zhen said. "That lends itself to a much longer runway for vendors to figure things out. … I think the space is still growing too quickly."