At Unusual Ventures, we believe modernized data infrastructure and vertically focused AI will drive the next wave of innovation in financial services. While the first fintech wave greatly enhanced the consumer and SMB ecosystems, the most compelling opportunities today are in B2B enterprise solutions that vastly improve productivity through process automation and increase profitability. As we have explored the market, we have found several significant challenges for asset managers that represent urgent pain points for innovative new companies to solve. 

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One of these difficulties centers around how asset managers understand, select, and manage risk for baskets of public equities. Talking to leaders in the asset management industry, we’ve seen the limitations of portfolio analysis and risk assessment with legacy systems along with the sharp increase of thematic investing. There are several tailwinds that are now driving asset managers to consider new solutions:

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1. More than half of asset managers are unhappy with their current data infrastructure, and 98% claim that they have difficulties implementing new datasets as part of their existing framework. 
2. Further, with the rise of AI, asset managers in a recent EY study said that “Data ingestion to drive alpha generating strategies” and “Investment Operations/Financial Advice” were the two areas where GenAI would have the biggest impacts on asset management. 
3. A recent Harvard Business School Study from April 2023 found that using a better, more refined industry classification system could lead to a 2.5% improvement in returns on an annualized basis.

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We’re now at a compelling inflection point where custom indexes and more nuanced investment strategies have grown in popularity, but the foundational technologies employed in portfolio construction have not changed for decades. This is why we are leading a $6.5m seed round into Theia Insights with participation from global leader Fidelity International and Clocktower Ventures. 

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Theia Insights is building a proprietary, self-learning knowledge graph and advanced machine learning models to offer industry classification, factor risk modeling, and portfolio analysis. Current industry classification systems use an outdated “one-to-one bucketing” approach to classifying public companies, meaning one company can only be classified into one industry segment (e.g. Amazon is only a Consumer Discretionary company vs. their numerous business lines). This perspective provides an incomplete or misleading view of their industry exposures by categorizing them within one industry. 

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Unlike traditional systems, Theia's self-learning knowledge graph enables one-to-many mapping, providing granular insights into company activities and exposures. Theia answers the critical question in today’s fluid investment market of “who does what and by how much?” for each public or private entity. With Theia, public market equity funds (Index, ETFs, mutual funds) can better understand the multiple business lines of companies and make better investment selections and risk exposure analysis.

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Part of what excites us about Theia is the strength of the founding team and leadership from founder/CEO, Dr. Ye Tian, a former PhD Research Scientist at Amazon Alexa with a background in natural language processing (NLP) and AI. Ye has assembled a highly skilled team of professionals around her from Nasdaq, Morgan Stanley, Meta, UC Berkeley's Economics Department, Amazon Alexa, and the University of Cambridge's Computer Science Department. 

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We are excited for Theia to emerge as a category winner in the thematic investing and financial infrastructure space by building better industry classification, risk factor models, and portfolio analysis tools with state-of-the-art AI. Driven by a combination of market tailwinds and size, a talented team, and unique product insights, we are thrilled to partner with them on this journey.

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To learn more about Theia Insights, please visit https://www.theiainsights.com/.