We’re happy to share the latest in AltsTech’s series profiling how investment managers are using AI, tech, and analytics to generate alpha. We’re fortunate to interview Divya Narendra, Founder and CEO, SumZero.
David Teten: Please give us an overview of your firm.
Divya: SumZero is the world’s largest community of investment professionals working with the industry’s most prominent hedge funds, mutual funds and private equity funds. With more than 25,000 pre-screened professionals collaborating on a fully transparent platform, SumZero provides direct access to thousands of proprietary investment reports every year and fosters on-going communication within the network.
The research on SumZero cuts through the noise that pervades the industry and provides its community with in-depth, actionable investment research and data. The platform further enables members to build a track record, expand their networks in relevant capacities, and identify further professional opportunities within the industry.
SumZero offers several ancillary services in support of our research platform. These services include capital introduction, buy-side career placement, media placement and more. SumZero Inc. also owns a hedge fund, SumZero Capital.
David Teten: What are your members’ incentives for sharing valuable information for free…especially since in most cases they generated that IP while working in their day job?
Divya: There are a variety of reasons that relate to why an investor might want to share some of their highest conviction ideas with the community.
When we launched SumZero ~17 years ago, we built the network as a purely reciprocity based program. If you shared one of your highest conviction ideas every 6 months, you would gain access to the ideas that your peers across the industry were sharing. As that database and investor network grew, starting and maintaining your membership became all that much more valuable. Today we have nearly 17,000 investment theses across the platform. That number is not inclusive of updates to investment theses as the investment plays out.
As the network and database grew, a few years back we had a bunch of institutional allocators knock on our door asking for how they could gain access to our network and the research of the managers. It was at that point that we built a reverse solicitation capital introduction program. In short, contributing members can opt in to our Cap Intro program and especially for the smaller managers, they’re able to leverage the research they share as ‘currency’ to join the program. As such, they gain access to hundreds of allocators – family offices, endowments, pensions, etc – and vice versa. Importantly, that high conviction research shares is a bit of marketing for the managers in our cap intro program.
Another leg on the stool is related to personal brand. Sharing research across a highly targeted and relevant network of your peers and potential investors offers you an opportunity to build your personal brand as well as the brand of your firm. I mentioned the Cap Intro program above. That said, there are often investors that are looking for their next role or have aspirations of one day launching their own fund. They’re leveraging SumZero and our network to build their personal brand and their track record across the industry.
More recently, with the launch of our fund, there are now monetary incentives as well as additional marketing and data opportunities that we’ve tied back into the community. SumZero Inc is essentially a 24/7 investment competition. Each quarter, winning ideas are selected by our buyside community. The analyst with the winning idea receives a check. Additionally, they’re invited to join us for a podcast which we help them distribute across the industry (marketing). Finally, those winning managers are also now being invited to join us at our in-person investor events for a speaking role (additional marketing). We just hosted a networking and idea focused event in February with 75 buyside investors and allocators in attendance. We’ll be doing more of the same in the months ahead for active members of our community.
David Teten: Who are your peers/competitors, and how do you differ?
Divya: As it relates to SumZero Inc., some would note Value Investors Club as our closest competitor. The big difference is that members of SumZero are required to go through an application process, and you must have buyside investing experience to join the community, and to even have the ability to contribute research. Also, on SumZero, member profiles are fully transparent. As with LinkedIn, you can click on a name to see a person’s firm, employment history, educational background, as well any research contributed. SumZero also has a unique capital introduction offering, where members can create profiles for their funds and leverage their research to help raise capital. Our cap intro platform contains over 500 allocators representing family offices, endowments, pensions and foundations who are looking to invest in up and coming fund managers.
As it relates to SumZero Capital, LP, no other fund can replicate its strategy. SumZero Capital leverages a machine learning model that is trained on an entirely unique data set, not to mention the model itself is highly bespoke. We’re harnessing the intellectual horsepower of a global community of professional investors, with the latest cutting edge AI technology. This is something that only SumZero is positioned to do.
David Teten: What’s your background? How and why are you in your role today?
Divya: I’m a serial entrepreneur. I was the original founder of a company called ConnectU which I founded at Harvard in 2002. It is the predecessor to Facebook and its journey was chronicled in The Social Network. I also worked at a large spin-off of Harvard Management Company which managed over $3 billion for the Harvard endowment, prior to co-founding SumZero Inc. with one of my college classmates. Launching a fund from the ground up has always been a logical extension of both the social community I’ve created as well as my passion for investing.
David Teten: What are the tools you’re using for capital raising? (I wrote about this in Why Isn’t Sales As Efficient As Online Dating and Fundraising hacks for VC and private equity funds.
Divya: Besides our personal networks, we’ve also started to tap into the network that SumZero has built over the past 17 years. Interestingly, investors have come to SumZero for years, looking for emerging managers. We continue to do work to provide exposure to our network of fund managers to our network of investors. We’re also now able to present the investors with SumZero Capital, LP as an opportunity.
David Teten: To what extent can members scrape your data for their own purposes?
They cannot. We’ve built safeguards into our system to prevent this from happening.
David Teten: What are the tools you’re using for your middle office: tracking, risk management, etc.? What are the strengths and weaknesses of these providers?
Divya: We use NAV as our Fund Admin.
David Teten: What are the tools you’re using for your back office: settlements, records maintenance, accounting, human resources, etc.? What are the strengths and weaknesses of these providers?
Divya: SumZero Capital uses Interactive Brokers as our Prime Broker. They are the most cost effective broker in our industry. We also use NAV as our fund administrator who has done a great job for us so far. As far as accounting, we rely on Quickbooks as well as outside CPA firms.
David Teten: A huge amount of valuable data flows through your pipes. What are you doing to capture that data and mine it?
Divya: We understood from day one the value of our data. Given the backgrounds of our team and the exposure they had to data and AI tools at previous firms, we understood, and believed, I think somewhat early on, that high quality, growing proprietary datasets (like SumZero’s) would become even more valuable in the future as they were paired with powerful ML modeling processes. If done properly, we’d be able to extract value from once latent data and turn it into useful information. This is why we spent years studying our data and why we eventually launched SumZero Capital, LP a year ago.
After more than 4 years of studying and testing our data, in 2024, SumZero launched our own AI-driven hedge fund on top of our investment community. Given our global network, we’ve been able to decentralize the role of the analyst. We’ve turned a machine, leveraging human creativity and trained on over 16 years of proprietary data, into a capable portfolio manager. Importantly, our portfolio manager does not have the capacity constraints of a human portfolio manager, nor does it hold the biases – cognitive, emotional and otherwise – that a human investor would.
As a result, we’ve been able to build a long-biased global equity fund that is agnostic to regions, sectors, market caps as well as analysts and even LLMs. Given this unique structure, we’re also able to offer our limited partners fees that are drastically lower than our competitors across the industry.
Related to our community, we were never going to launch a fund unless we believed it further benefited our community as a whole. Given our structure, we’re able to offer rewards – monetary, data focused and exposure – back to our members as a result of our new fund.
We also want to work towards layering AI tools on top of our data so that it’s easier for our members to extract insights.
David Teten: Can you share any patterns you have identified?
The SumZero community tends to find contrarian opportunities in the markets. When the markets experience large drawdowns, professional investors see opportunities, which gets reflected within the SumZero research database. During COVID, we saw an increase in research submissions on SumZero.
Someone, for example, pitched Samsonite with the thesis that travel would come back and that valuations were at an all time low. Twelve months later, this idea generated outsized returns. Often times, the professional investors on SumZero surface ideas that are not talked about by Wall Street, or Jim Cramer and the mainstream media.
David Teten: What are your unmet technology needs? Places in your firm where you’re seeking a solution and haven’t found an appropriate one? These may indicate room for Versatile VC to build or invest in a startup addressing that need.
Divya: I alluded to it a bit above, but for the first time ever, we want to arm a decentralized, global investor network with AI-backed machines, all interacting with each other – human investment analysts speaking to intelligent machines and machines speaking to humans – together generating views and insights that couldn’t be found elsewhere.
Our AI-driven Portfolio Manager would question, challenge and provide feedback for every single idea shared to SumZero, offering a unique perspective back to the contributing portfolio manager. Unique and differentiated data and insights that might previously only be available at the largest investment firms in the world – where such quantitative expertise is available and where massive investment teams are employed – would now be available to all active members of SumZero’s global community. Ultimately the human analyst will engage in a discussion. Further nuanced views of individual situations will be extracted, providing additional information for the investor and the community. This would not only provide new and differentiated data to our members, but it could help them find blind spots in their theses – improving their investment processes over time.
David Teten: What processes are you focused on improving?
Divya: Right now, our focus is on improving both our marketing tactics as well as our data science capabilities.
David Teten: How can people join or learn more about SumZero?
Divya: For more information, contact szcapir(@ )sumzero.com .
