Questions & Answers
Why has this system never been done before?
The logical source of the idea could have come from the Data & Information (D&I) publishing industry; however, the D&I industry focuses on centrally distributing “identifiable data” rather than a constant flow of statistics from anonymous sources that can be contacted directly. Networking information with people is a genuine threat to publisher’s business models too, so introduction by these incumbents is less likely. And the right combination of technologies and processes had to come together to make the idea feasible.
What technologies and or processes are deployed that make the StatTrading concept feasible?
Software and Internet technologies had to converge to make the idea feasible, such as the use of secure cloud-based technologies with transmission encryptions. And the new electronic standard (XBRL) for public company filings was critical to producing content that could be used as a starting point for statistical comparatives. Finally, in 2011 StatTrader’s “Information Trading System and Method” was granted a patent. The convergence of these events made StatTrader feasible.
How does StatTrader converge Internet networking, cloud technology and XBRL reporting requirements into its Patent?
Patent # US 8082200 B2 describes an “Information Trading System & Method” that was granted to StatTrader on December 20th, 2011. Our system and method is a process in which a secure location is used to maintain confidential data from which an “exchange” or “non-confidential” portion is derived, profiled and contributed to a central processor. The averages and results of these processed contributions are and then shared with all participants. Public company XBRL taxonomies were used to create a common format for the profiled stats of both public and private companies. This makes all companies public or private easily comparable to groups of similarly profiled companies. Users can see the processed results of all the profiles and introduce themselves to the contributors; allowing them to create a network tied to their databases.
How does StatTrader become the trading center for the Private Capital Market (PCM) similar to a Public Stock Exchange?
An Initial Public Offering (IPO) is when a private company is sponsored by an investment banking firm by effectively creating a public listing of its stock for trading on a public exchange. The Securities and Exchange Commission (SEC) oversees the registration and disclosure requirements related to the company and the investment bankers and brokers trading the security. In StatTrader it is similar but without all the red tape. Sponsors, such as investment bankers or CPAs, can use our system to originate a profile of their clients; we think of an origination as an IPO into the PCM StatTrader network. The sponsor should pack the profile with enough information and stats to solicit interest, but not so much as to disclose anything against their client’s requirements of confidentiality. Once the profile is in the network anyone can track it or send it to anyone else. That is, it freely trades. Anyone along the profile’s trading pathway can connect to the profile’s originator to learn more. At each point of contact, the originator can elect to respond and reveal their own identity; and, may disclose information in accordance with their client’s confidentiality requirements. So instead of stock, we trade stats and create a trading exchange that supports our private contact management system of private capital transfer without having to conform to securities laws requiring public disclosure.
Aren’t you competing with Capital IQ or Dun & Bradstreet?
StatTrader is an analytical and connecting platform, not a data or information publisher. We do not publish content we are a “value added” connector of content providers. Our value add is in the processing of data into stats along with a comparable group; and, we allow anonymous contributors to connect with each other.
We don’t compete with either D&B or Capital IQ; we create a broader reach for their content. One of our member services is that we distribute data and published information relative to the companies and their comparable(s), we help publishers sell their products into new channels. In our distribution service, like any distributor, we facilitate the “breaking of bulk” by efficiently selling smaller portions of their previously bundled database.
Confidentiality, Security & Anonymity
If all the confidential data goes into the site, how do you ensure its confidentiality?
Your secure data is maintained for your exclusive access and benefit under your password protection (like a warehouse for hire). Your access password is created by you and it is encrypted; and, all transmissions back and forth are encrypted. We do not see or distribute any of your data. To provide you assurance of our data security control, we have a control compliance audit report conducted by a third party. The audit certifies a satisfactory control environment as to both the physical security protocol as well as administrative control procedures that ensure compliance with our member agreements.
If it’s all confidential how do you accomplish viewing and connecting?
Your membership agreement only displays what you release into the exchange portion of your database. Each member’s private database has a secure portion and an “exchange” or traded portion. Each portion is under your lock and key, however, your exchange contributions have been linked into our networked profile platform (traded portion) and from that portion other members can invite you to connect. Originators responding to requests will reveal themselves to the requesting member. The originator is always in complete control of the disclosure of their identity and of the identity of the company being profiled.
How does the anonymous name relate to connecting?
You have a confidential and a “traded portion” of your database. The anonymous name is needed for your traded portion so that the company can remain anonymous. Network members can see your anonymous name and use it to initiate a connect request to you as its contributor. Based on the identity and message of a soliciting member, you decide whether to “open the door” to reveal yourself. As always the company remains anonymous.
How does the orange head Icon work differently than the company profile head Icons?
The use of the head icon is used to identify the source as from a “member.” This is distinguished from a StatTrader logo icon that indicates the source is from StatTrader. Orange heads do not appear in the profile platform as they are not a “company” origination. These are simply a way for members to maintain a search for certain types of profiles. When a member completes an orange head profile they introduce themselves to any others members that are originating or tracking company profiles in their area of interest. In this way the opportunities you seek will come to you.
If the data is anonymous, how can you attest to its accuracy?
We do not attest to data accuracy. The data is owned by the secure database occupant; and, StatTrader has no right or ability to access and view data let alone make any assertions about it. StatTrader does however provide process control to manage the validity and quality of the statistics generated from multiple member databases. To ensure quality control over statistics, we comply (for example) to the following policies:
1. Stat entries are contributed to a weighted “rolling” average; therefore, statistical deviation controls are applied to detect unusual entries. Our membership agreement enables us to exclude contributions from members based on our own criteria. Although the stat profiles may list in the profile platform, they may also be excluded from our weighted averages.
2. We randomly verify members’ professional classifications; as such, a filtering by its source allows users to manage quality themselves. Sponsoring professionals such as CPAs for instance have no motivation to fabricate anonymous stats; it simply destroys their credibility when the confidential information is ultimately disclosed.
3. Users can also delete individual entries themselves. So quality is again managed by the user.
Closed deal information is paid for by StatTrader as part of our licensing agreements or as part of a condition in granting credits against purchased services; as such, StatTrader maintains the right to verify the data that supports the transaction stats. But we also make sure our members understand that it is their responsibility to manage the credibility of information because the source of information can be managed and potentially verified by each user.
How do you ensure that companies in the database are not double counted?
This is an important control point particularly for historical stats. Historical stats are “facts” that relate to an exact point in time for a particular company; and to be computed correctly, cannot be entered more than once in the database. Our procedure is: based on the profile and the stat, we apply an algorithm that clusters together likely redundant historical stat contributions. When the user filters their database for the purpose of computing stats, we only use one of the historical entries. We use a protocol based upon the source and the completeness of the originating entry to determine which stat we use.
If it’s anonymous, how can StatTrader 'know' what information or data each subscriber is seeking?
The data is confidential and the StatTrading is anonymous as it relates to the company the stat entry is based upon; however, StatTrader does know the source of statistical originations and trades. In fact, the stats “trading out” of the platform define a “default” for the stats trading back to the platform. So we know the “trader” but we do not know the identity of the company that the stats are based upon. The contributor’s professional identity and the profile they are using to trade stats are used by publishers to suggest a relevant piece of data or information.
Isn’t StatTrader a technological version of something that has always been happening?
The requirement to maintain client confidentiality has always been there and will always be there in a private economy. Yet the need for transparent economic indicators and barometers has always been there too. Traditionally, industrial or professional associations confidentially collected stats from their members and published the anonymous results for use by their members, that’s a limited form of what we now call StatTrading. But when companies and banks began to automate their accounting process, they no longer had the excess capacity to participate in this labor intensive “StatTrading” process. The unscientific nature of this process was always a problem. In today’s electronic age, StatTrader creates scale in sharing statistics, consolidates an infinite permutation of data formats into one format and maintains confidentiality using the Internet to fuel our patented process using cloud based secure technologies. And probably most importantly, we can link you back to the source, so each user can make judgments about the quality of the information by “considering the source.”
Tracking, Trading, Sharing & Connecting
The term “tracking” a company is used interchangeably with “trading” a company. What is the difference?
They both relate to companies that are in your “My Networks” tab. When one of your companies is linking from your private database, we refer to that company as being “originated.” If you got the company from the network, maybe from another member’s introduction, we say you are “tracking” that company. Trading is a generic term used to describe how members circulate both their originated and tracked profiles to other members. Behind every originated and tracked profile you can create a network of people that you want to connect with through that profile. So both activities can be defined as “trading.” So you can “trade” or network around originated and tracked private and/or public companies.
What is sharing and how is that used?
This is an upgrade feature where in the message log you can activate the sending of a Non-Disclosure Agreement (NDA) to a particular user in that company’s network. Rather than a message that user will receive a popup presentation of an NDA (uploaded by the originator). The receiving member can either accept or reject it. If they accept, an electronic receipt of the acceptance is maintained within the message log. The confidential name and confidential data button are then activated for that user. The originator can deactivate disclosure at any time.
Will StatTrader replace the business brokerage and/or investment banking industry?
No, the opposite it is true, StatTrader will help grow the banking and brokerage businesses. StatTrader is primarily a sponsoring model particularly as it relates to selling a business. Although some companies may use the system directly to sell their business, this is not the best or most productive use of StatTrader. For instance, interested buyers are going to want to talk to the originator if they like what they see. So if the originator is revealed and they are in any way connectible back to the company for sale, users may deduce who the company is and essentially usurp the power and secrecy of a private auction. Also, the ability to network a company over several years is the most effective way for sponsors to create a demand for their clients. This is best left to the professionals dedicating their full time activity to creating a market for a company.
As a CPA firm, why would I upload our client’s data into StatTrader? What’s in it for us or for them?
StatTrader does not reap any gain from uploaded data that we cannot access. We provide accommodation for the CPA firm and their clients to leverage the analytics applied to their data and the ability to use the anonymous networking feature to create connections for strategic or financial reasons. The stat network creates a context for discussion between CPAs and their clients, aids in selling new services such as valuation modeling and cost or budgetary consulting. The true benefit to the CPA firm comes however from sponsoring their client’s profile. CPAs can now offer clients a “technology based” service and help their clients buy, sell or finance their businesses. CPAs are clearly the “potentially” biggest direct and indirect beneficiaries of StatTrader.
Is StatTrader useful in evaluating public companies?
Yes, the links and drill downs coupled with easily summarized and compared data is a key feature of StatTrader. The ability to trade public stat profiles is useful in creating an investment club with folks that can augment or complement your investment skills or monitoring scale. Analytically speaking, public companies are typically a “consolidation” of several undisclosed divisions. So these can be evaluated just like a private company. In fact, StatTrader can help “value” each division and compare it to the consolidated public valuation. This is very useful to analysts within public companies. Also, arbitrage opportunities would be highlighted if public markets were valuing an industry sector higher than private markets, or vice versa.
Can I use StatTrader to find a business to buy?
By completing and orange head profile and maintaining that on you dashboard you will be introduced to profilers that may be looking to sell their business or to intermediaries in the business of selling businesses. Another way is by valuing your business through the valuation monitoring platform. In your overview, or with an added pop-up teaser, you can add a little but more about your business and your acquisition requirements. And of course you can do both. You may want to indicate that you are an acquirer candidate within your membership profile “statement” and maybe reference the anonymous profile name of your company in the valuation platform.
Will StatTrader replace the private company business appraisal industry?
To the contrary, we will expand it. The demand for private company appraisals is limited by the capacity and resultant cost of producing appraisals. StatTrader does not eliminate the judgment necessary in an appraisal; we simply improve the efficiency and frequency of relevant information needed to produce an appraisal. We believe StatTrader could change the appraisal industry from a “project” business, to a continuing service. StatTrader dramatically expands the capacity for appraisal production by collapsing the time necessary to complete an appraisal.